Steam rises from a cooling tower on September 7, 2007 at the Tennessee Valley Authority’s Watts Bar Nuclear Plant in Spring City, Tennessee, 50 miles south of Knoxville.
Chris Baltimore | Reuters
The government is going to spend billions of dollars to keep nuclear power plants open in the United States because they’re losing too much money to stay open otherwise.
Nuclear power plants generate clean, greenhouse-gas free energy, which could help the Biden administration meet its own ambitious climate goal of reducing net greenhouse gas pollution by 50% from 2005 levels by 2030.
The Bipartisan Infrastructure Law President Joe Biden signed in November includes a $6 billion program intended to preserve the existing U.S. fleet of nuclear power reactors. On Feb. 10, the Department of Energy’s Office Nuclear Energy took first steps to begin the process of distributing that money.
That money is needed because multiple nuclear plants are “at risk for early closure” and several others “have already closed prematurely due to economic circumstances,” according to government documents.
“This really traces back to deregulation in the industry,” said George Bilicic, vice chairman and global head of power energy and infrastructure at the financial advisory and asset management firm Lazard.
In the United States, 17 states with nuclear power plants are regulated, and 10 states with nuclear power plants are deregulated, according to the Nuclear Energy Institute.
In deregulated markets, nuclear power generators have to sell their energy on an open market, where distribution companies will choose the most inexpensive energy option that can do the same job. Today, that’s often natural gas.
“One of the key factors that drives the economics of nuclear is just how cheap natural gas is,” Ben King, a senior analyst with the energy and climate division at Rhodium Group, a market research firm, told CNBC in a phone call.
“When natural gas is cheap, it is extremely difficult for nuclear to make the revenue that it needs to remain operational and economic,” King said.
Given current natural gas prices and projections, King and his colleagues have projected that as much as a third of current nuclear energy fleet capacity in the U.S. may retire. The nuclear fleet will decline from about 96 gigawatts at about 60 nuclear facilities in the U.S down to as low as 60 gigawatts by 2030, the firm predicts.
While the $6 billion in the Infrastructure law is helpful to stem a potential flood of closures, it is still not enough, King said. In their modeling, the Rhodium Group pairs the $6 billion with the proposed existing nuclear production tax credit that’s part of the Build Back Better Act, which the Joint Committee on Taxation score estimates to be $23 billion.
“Taken together, they are much more effective at retaining nuclear and keeping the U.S. on track” for its emissions reductions goal, King told CNBC.
Deregulating energy markets was supposed to drive…
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