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New Jersey’s Nuclear Bailout Explained: First Look

NRDC Expert Blog by Dale Bryk 

Late last night the New Jersey State Senate introduced its controversial lame duck bailout for the state’s nuclear plants. As expected, the proposal is a standalone subsidy that follows almost none of the best practices for transitioning from uneconomical nuclear plants, as set out in our issue brief. It sets a new low for nuclear bailouts, a standard that even Ohio was unable to meet when it took a run at a standalone bailout last year.

The New Jersey proposal includes:

  • No energy efficiency provisions
  • No renewable energy provisions
  • Nothing to ensure that New Jersey develops clean resources to replace its nuclear plants when they do finally close;
  • No improved safety provisions for nuclear waste stored onsite; and
  • No time limit on the life of the nuclear subsidy

The provisions that purport to address worker and community concerns don’t kick in until an unspecified date when the plants are on the verge of closure, setting up consumers to foot additional costs rather than requiring that PSEG take responsibility for protections now.

The proposed program provides a legislatively-determined value for the subsidy of approximately $300 million per year ($0.004/kwh charge on all customers x 75 million MWhtotal electricity consumption in the state), with no indication of the basis for that calculation. If enacted, the proposal will levy a charge of $0.004/kwh on every utility customer in the state, equating to about $36 a year for the average residential customer (who uses about 9,000 kwh per year). 

Rather than following New York and Illinois in defining and valuing “zero-emission credits”based on the value of avoided carbon emissions as set forth by the federal government in its calculation of the social cost of carbon, the bill creates a completely new structure for a nuclear subsidy, characterizing it as a “nuclear diversity certificate program” that also compensates generators for so-called “fuel-diversity” and “resilience” benefits. This calls to mind the misguided Department of Energy (DOE) proposal to bail out coal and nuclear plants (discussed here by my colleague Miles Farmer), which is justified on “resilience” grounds even though DOE never defined the term. In fact, analysis from the Rhodium Group showed no link between nuclear generation and resilience. On-site fuel supply, the ground upon which nuclear proponents have argued it contributes to system resilience, provides little benefit because fuel supply emergencies are responsible for only .00007 percent of system outages. 

The resilience vulnerabilities of nuclear plants have been demonstrated during severe weather events, such as when plants had to be taken offline in Florida during hurricane Irma (discussed by Miles here). 

The proposed New Jersey’s program would require nuclear plant owners to submit data to the Board of Public Utilities demonstrating:

  • The plant is “cash negative on an annual basis” or alternatively “not covering its costs including its cost of capital”;
  • The plant makes a “significant and material contribution to the diversity and resiliency of the energy resource mix” in the state; and
  • The plant makes a “significant and material contribution to the air quality” in the state.

The bill gives the Board discretion to determine whether a plant owner has sufficiently satisfied “the objectives of this act” by demonstrating the above, and does not obligate the Board to issue any certificates.

In an upcoming blog I will provide a more detailed scrutiny of this bill’s provisions. But even a cursory review shows a bill fraught with troubling provisions that raise concerns about grossly overpaying for the values that the state’s nuclear plants provide, and paying for them for a much longer period of time than those values warrant.  

The public policy rationale for providing financial support for nuclear plants is to buy the time needed to craft an orderly transition plan, for workers, communities and the environment. This proposal does nothing to initiate the crafting of such a plan.

Republished with permission from the Natural Resources Defense Council's expert blogs

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