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Trump Paris About-Face Likely To Hurt, Not Help Nuclear, Coal Sectors

President Trump, with his fossil fuel fantasists in tow, made it official Thursday, announcing that he would pull the United States from the Paris climate change accord in order to “make America great again.” The administration’s inability, as well as that of most of the Republican Party in general, to come to grips with climate change is sad, but that will have to wait for a future post. The issue at hand is the decision’s likely negative impact on the U.S.’ already-battered nuclear and coal industries.

For years the nuclear industry has been making the case that it was vital to the country’s climate change mitigation efforts because of its emissions-free generation profile. While accounting for just 20 percent of the nation’s annual electric generation, the industry noted ad infinitum, it was responsible for 60 percent of the carbon dioxide-free emissions (see chart below). In a carbon-constrained world, that would be a valuable attribute. But the Trump administration has now made it clear that it places no value on CO2-free generation sources.

That, in turn, could be a major problem for the industry, as the effort to secure nuclear subsidies—successful so far in Illinois and New York (although now tied up in court), still pending in Ohio, Connecticut and now Pennsylvania—has relied in large part on the sector’s glowing greenhouse gas attributes. In an interesting twist, just before the administration’s head-in-the-sand announcement, Chicago-based Exelon said it would close the 837-megawatt Three Mile Island nuclear reactor in late 2019 because the facility couldn’t compete in the PJM electricity market, which sprawls across 13 states and the District of Columbia. The company largely blamed the market’s structure, including its failure to reward the plant for its emissions-free generation, for its decision to shutter the plant.

TMI, which is located outside Harrisburg, and the eight other nuclear reactors in Pennsylvania (two units each at Beaver Valley, Limerick, Peach Bottom and Susquehanna) produce 93 percent of the emissions-free electricity in the state, Exelon said, adding that this avoids 37 million tons of carbon emissions—taking the equivalent of 10 million cars off the road every year. To fix the problem, Exelon is pushing state legislators either to amend Pennsylvania’s Alternative Energy Portfolio Standard (AEPS) or to establish a zero emission credit program as New York and Illinois have done.

But the argument falls apart when the federal government, from the very top on down, essentially says such generation has no special value, and that is exactly what the administration has just done. If nuclear can’t clear the market economically—and TMI has not for the past three years—and policymakers don’t value its one unique attribute—emissions-free power—how then can you make a persuasive argument to keep the facility open.

Interestingly enough, in traditionally Democratic Illinois and New York, it is the emissions-free nature of nuclear that helped sway the ZEC decisions. In New York, for example, the public service commission warned that “losing the carbon-free attributes” of nuclear would lead to sharply higher emissions in the short term as new natural gas plants were built to cover the load formerly supplied by the state’s reactors. Given New York’s aggressive long-term plans to transition to a cleaner electric system, the PSC said, it made sense to keep the reactors running as an emissions-free bridge to a renewable energy dominated future.

What Pennsylvania’s Republican-controlled legislature and Democratic governor will do remains to be seen, and there are good arguments to be made on both sides. But unless the state’s Republicans have the fortitude to stand up to President Trump and his toadies, nuclear’s environmental attributes no longer have any value.

The same is true for the surprisingly bipartisan efforts on Capitol Hill to expand tax credits and approve other measures designed to spur the development of carbon capture and storage technologies. One such measure, the Carbon Capture Improvement Act introduced this spring in both the Senate and House, would allow companies to use private activity bonds issued by states or localities to finance carbon capture projects. These bonds, commonly used for infrastructure such as water and sewer projects, are tax exempt and have a longer repayment period, lowering a project’s development cost.

I am all in favor of such projects, and I think the GOP missed a golden opportunity at the beginning of the Obama administration to trade their support for some type of climate legislation for significant research and development dollars that would have targeted carbon capture technologies. Such a trade could have done much to give the coal industry a future, but that is water under the bridge now. Today, we have an administration that doesn’t even believe in climate change, let alone carbon capture, so what value is there in offering federal support for such projects. If there is no reason to worry about climate change, which is what the administration is saying by ditching the Paris agreement, then there certainly is no need to waste federal dollars developing technologies to capture carbon emissions.

This is, admittedly, a problem for coal-state Democrats as well, but the onus really falls on the Republicans in the House and the Senate, many of whom are just as much in denial about climate change as the Trump administration.

Here—unlike 10 years ago when coal still had a fighting chance—the reality is that even with a tax credit regime or lower-cost financing, companies aren’t going to be rushing forward with plans to build new coal-fired power plants of any kind and particularly those with costly extras such as CO2 controls—just ask any utility executive.

In a second interesting twist to this week’s Paris developments, Thursday was also the day New Jersey’s Public Service Enterprise Group (PSEG) completed the previously announced closure of its last two “operating” coal plants in the state. The two plants, the 632 MW Mercer facility and the 620 MW Hudson unit, were brought online in 1960 and 1968 respectively, and, just like TMI, no longer could clear PJM’s capacity auctions—in other words the power the plants were offering to the system was too expensive.

As Bill Levis, president and COO of PSEG Power, the group’s generation subsidiary, said in a company release announcing the shut down plan last year: “The sustained low prices of natural gas have put economic pressure on these plants for some time. In that context, we could not justify the significant investment required to upgrade these plants to meet the new [PJM] reliability standards. The plants have been infrequently called on to run.”

Infrequently might be overstating the case. According to the Associated Press, aside from two days this past January, PSEG’s Mercer plant has not generated power for 17 months. It is also important to note that the tipping point in the company’s decision to shutter the plants was that they could not meet PJM’s enhanced reliability standards without significant new investments; investments that the company decided didn’t pencil out. So much for the canard put forward by Energy Secretary Rick Perry and friends that grid reliability can only be guaranteed with “baseload” coal plants; PJM is doing just fine at maintaining the system’s reliability, changes and all.

As Ralph Izzo, president, CEO and chairman of PSEG, and one of the more forward-thinking executives in the utility industry told AP: “We won’t be investing in new coal.”

So where does that leave us? The administration’s action undercuts those arguing to keep open the nation’s existing fleet of economically challenged but emissions-free nuclear plants; challenges the need for future nuclear construction (Why, for example, should the four over-budget, long-delayed reactors under construction in Georgia and South Carolina receive any preferential federal aid if climate change concerns are off the table?); and puts yet another nail in coal’s coffin by obliterating any justification to fund CO2 capture technologies.

Ironic, don’t you think?

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