Policy & Regulation

Calling the Bluff

Much has been made about President Trump’s June 1 decision to back the United States out of the Paris climate change agreement.

BY BRIAN SCHIMMOLLER, CONTRIBUTING EDITOR

Much has been made about President Trump’s June 1 decision to back the United States out of the Paris climate change agreement. While the overriding objective of the Paris agreement – to limit global average temperatures to well below 2°C above pre-industrial levels – is certainly friendly to the nuclear power industry, I’m not convinced the self-set targets and uncertain enforcement mechanisms would have provided substantial support for the beleaguered U.S. nuclear fleet.

Don’t get me wrong. I would have preferred the United States had stayed in the agreement; I just don’t think the continued commercial viability of Beaver Valley or Three Mile Island or Millstone hinges on a document signed in France in 2015. Survival depends on difficult decisions and actions closer to home and nearer in time. And in a high-stakes game of nuclear-survival poker, the industry in increasingly calling everyone’s bluff.

It’s interesting to review studies addressing the challenges faced by the nuclear power industry. In almost all cases, the recommendations are sound and reflect a thorough understanding of the technological, economic, and political forces at play. Where they fall short – understandably in my opinion – is in their lack of attention to psychological and human factors. Barrage me with all the facts and figures you can muster, but there’s nothing like the fear of loss to focus my attention and compel me to act.

Over the past year or so, the Global Nexus Initiative (a collaboration between the Partnership for Global Security and the Nuclear Energy Institute) has released a number of policy memos highlighting changes needed to ensure nuclear energy can maintain a strong role in combating climate change. The reports identify key findings and recommendations in a number of areas, ranging from the role and responsibility of nuclear in addressing climate challenges, to the impact of nuclear suppliers on geopolitics, to the need for stronger nuclear governance structures and innovative policy constructs that “break the mold” and support nuclear power’s ability to achieve a significant reduction in greenhouse gas emissions. The GNI findings also note that institutional and cultural changes may be required in how the next generation of nuclear power is developed, tested, regulated, deployed and managed.

A June report titled Energy Technology Perspectives 2017 from the International Energy Agency strikes a similar tone, contending that existing government policies are not sufficient to meet climate goals. “Policies to support energy technology innovation at all stages, from research to deployment will be critical to reap energy security, environmental and economic benefits of energy system transformations” and to limit the rise in global temperatures to no more than 2°C. The report calls for clear and consistent policy support that includes nuclear power in clean energy incentive schemes and that encourages its development in addition to other clean forms of energy.

I don’t take issue with the findings from GNI and IEA, particularly over the longer term. My issue is that they sound a lot like what we’ve heard in recent years regarding nuclear power.

This is where the bluff calling comes into play.

The U.S. nuclear industry has seen the renewable energy industry skyrocket over the past decade, capitalizing on technological innovation, economies of scale, hard work, and clean energy policies that provide favorable economic treatment. Coupled with the low price of natural gas, nuclear plant owners in certain markets have swung from highly profitable to significantly unprofitable. Most asset owners were willing to absorb such losses for a few years in anticipation of a market turnaround or climate legislation (or some combination of the two), but the red ink is getting a bit thick for corporate boards and shareholders to continue accepting such a strategy.

The industry is now pushing back. Senior executives from Exelon, FirstEnergy, Dominion, PSEG, and elsewhere have all made comments – and taken actions in some cases – about closing their plants absent policy support recognizing (and compensating) their product for its clean energy attributes and ability to create thousands of jobs.

There have already been some winning hands. New York and Illinois passed legislation granting clean energy status to nuclear-produced electricity, thereby saving some nuclear plants in these states for the time being. Not every hand will be a winner, of course. Earlier this year, Connecticut and Pennsylvania postponed legislation, or diluted legislation, that would have provided economic support to their nuclear plants.

A losing hand, however, does not mean you’re out of the game. As demonstrated in New York and Illinois, it may be necessary to call a bluff multiple times to prompt action.

So ante up…and start studying those poker faces.

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