10 June 2018
“To level the competitive zero emission market, a carbon price levied on electrical producers proportional to the amount of carbon released creates a way to account for the cost energy production has on the environment.”
In this piece from the U.S. Department of Defense, a broad appeal is made for the importance of nuclear power as a source of carbon free energy and a way to help reduce the risks of increasing climate change. Storage of waste will continue to be a problem, but the article positions nuclear as a potentially important bridging technology to mitigate carbon emissions over the critical few decades to come. Without significant ongoing reductions of GHG, the security risks from climate change will become increasingly manifest, including mass forced human migration and catastrophic severe weather events. Tim Nixon, Managing Editor, Thomson Reuters Sustainability.
When people think about renewable energy, they picture solar and wind farms or vast lakes captured behind solid concrete walls waiting to unleash its energy in the form of carbon free electrical generation. All of these renewable energy sources have one thing in common – they have the potential to reduce worldwide carbon emissions and slow the effects of climate change on the environment. But can these energy sources replace the high capacity electrical generation of fossil fuels, such as coal and natural gas? The answer, for now, is no.
What if we had access to a safe, reliable, and mature technology that can solve our baseline electrical generation needs and produce zero carbon emissions? Shouldn’t we, as good stewards of the environment, fight to maintain this technology to slow the effects of climate change? Barring political and economic considerations, most would agree.
That technology is nuclear. Does that change your calculus for supporting a technology that has zero carbon emissions? Well, it shouldn’t. And here is why.
Believe it or not, nuclear power really is safe. Recent events in human history bring to mind the nuclear power accidents of Three Mile Island in March 1979, Chernobyl in April 1986, and Fukushima in March 2011. Add the influence of Hollywood, video games, and misunderstandings in associating nuclear power generation with nuclear weapons and you get an unhealthy public fear that has stalled the nuclear power industry for decades. Fortunately for us, nuclear reactors cannot detonate like a nuclear weapon. The fundamental physics and engineering will never allow it to happen.
So here we are today, more than seven years since the Fukushima accident and there are zero causalities attributed to released radiation[i]. The resulting earth quake and tsunami that hit Japan caused more immediate deaths, approximately 15,000, yet public opinion views the radiation leaked as much more devastating. In general, the statistics just don’t support any rational public fear of nuclear power. But never the less, this fear still drives politics and economic decisions due to misunderstanding and a lack of known long term effects of low-level radiation dose to people. The political quagmire that ensues makes any support for nuclear power difficult at best and impossible at worst.
But, why should we care? Let’s examine a recent development. Following the wake of Fukushima, Germany agreed to shut down all of its reactors by 2022[ii]. The phase out continues today as renewable energy sources compensate to fill the hole. But not all of Germany’s power will involve renewable energy. Cheap coal in recent years continues to hang on in Germany as the loss of nuclear power plants reduces competition with coal thereby making it economically viable as a baseline generation capability with a high annual capacity factor. This signifies a step backwards in reducing greenhouse effects in Germany. So phasing out nuclear power created a void that has allowed fossil fuel production to fill, thereby stalling any progress in carbon emissions and perhaps further exacerbating global climate change.
The loss of nuclear power can have a profound effect on the environment. Today, nuclear power makes up 20% of US electrical generation, 60% of US carbon free generation, and has an annual capacity factor of 92% which makes it perfectly suited to serve as the foundation of US electrical power generation[iii]. For comparison, most renewable energy sources in the US have a capacity factor between 30% and 40% due to variables in the environment such as wind speed, solar intensity, and regional droughts. The lack of available, mature energy storage makes renewables unsuitable for baseline energy production at this time.
Fossil and nuclear power deliver excellent capacity factors that help drive the baseline electrical generation needed in today’s economy. If nuclear cannot compete, the market will look towards natural gas and coal to fill the hole in electrical generation. Renewable energy currently does not possess the annual capacity to fill that void. Greenhouse gases will rise and climate change reductions will stall or worsen.
Energy markets and government credits and subsidies do not help either. Federal and state governments promoted the development and use of renewable power technologies through the creation of renewable energy credits. These credits provide incentives to electrical generators to offset the cost of developing and bringing to market more efficient renewable energy sources. Electrical distribution companies receive these energy credits by purchasing a percentage of their electricity from renewable energy sources defined by state and federal legislation. The credits reduce cost per megawatt hour to the distributor and make renewables economically competitive with established energy producers such as coal and natural gas. Nuclear power does not qualify under these credits.
Competition from fossil fuels will not go away anytime soon. The boom in shale fossil energy in the US over the past decade continues to flood the world market with cheap natural gas. The economics of shale natural gas continue to keep electrical generation prices low as newer, cheaper gas-fired power plants come on line.[iv]. This flood in resources makes it difficult for some electrical generators to bid into the market and earn enough funds to cover the cost of operations, especially if they do not qualify for credits. Energy demands remain relatively flat making economic conditions even more competitive for electrical generators as renewable energy enters the market[v].
Nuclear power produces zero carbon emissions during generation. In general, most renewable energy credits do not apply to nuclear power even though it produces 60% of US carbon free energy. Unlike other electrical producers, nuclear power companies must plan for the capitalization, operations, and decommission of its reactors by regulation. Decommission includes the cost of re-greening, deconstruction and decontamination of power plant facilities. No other electrical generator fully capitalizes the cost of shut down in their prices. Although power generators must comply with Environmental Protection Agency regulations during shutdown, they do not receive the scrutiny in government oversight that the nuclear power industry receives from the Nuclear Regulatory Commission (NRC). Therefore, the cost per megawatt hour for nuclear remains high compared to other forms of energy production making competition in energy markets difficult.
Nuclear power’s future holds risk and increasing uncertainty. According to the NRC’s website, there are 99 reactors in the US. All will phase out of existence over the next 34 years with the last decommissioning in 2055. Of course, companies continue to submit new plant designs for NRC approval, but almost no new construction exists today, stalled or blocked by legal issues and public concerns. If economic conditions persist and the government does not enact legislation that adequately accounts for the cost of carbon emissions on the environment, the future of nuclear power looks bleak as economics drives industry to other technologies, such as natural gas. Of the 66 operating US nuclear power plants in the US, 24 are slated to close early or are at risk of not meeting their financial obligations through 2021[vi]. US policy makers should look to Germany as an example of what happens to the climate when you remove nuclear from the diversity of a nation’s energy portfolio.
Energy market economics must account for the cost of producing electricity to the environment. The nuclear power industry is already required by regulations to account for its impact on the environment through its planned capitalized cost to decommission. Other energy producers in the industry do not necessarily account for these costs. To level the competitive zero emission market, a carbon price levied on electrical producers proportional to the amount of carbon released creates a way to account for the cost energy production has on the environment.
Federal and State governments should work to levy a solid policy for the electrical generation industry that accounts for carbon emissions and rewards producers of zero emission energy through zero energy credits. A federally lead program can bring unity and consistency to regional energy markets that exist between states. It can rebalance competition for all zero carbon power sources and allow for continued progress in reducing carbon emission across the US electrical power industry. Illinois and New York already approved incentives to sustain their nuclear power capabilities. More states should follow.
Using government incentives to push the energy market towards climate saving initiatives does one thing – it disrupts the free flow of competition and creates favoritism for some energy technologies if not defined inclusively. Removing the incentives does not make sense either if the US goal is to move towards low carbon emitting electrical generation in the future. Therefore, accounting for environmental damage through pricing carbon emissions represents one way to level the energy market and account for climate damage. While the federal and state governments work through policy perturbations of tax and incentive structures to find the right mix, the future of the nuclear power industry hangs in the balance and may be lost to prosperity forever if left to compete under current market conditions.
[vi] Tim Loh, “One-Fourth of U.S. nuclear Plants are at Risk of Early Retirement,” May 15, 2018, Bloomberg Online. https://www.bloomberg.com/news/articles/2018-05-15/one-fourth-of-u-s-nuclear-fleet-is-at-risk-of-early-retirement (accessed May 16, 2018).
Note: The views expressed in this article are those of the author and do not necessarily reflect those of the U.S. Army War College, U.S. Army, or Department of Defense.