How Old Nukes Can Help Green New Dealers
(Bloomberg Opinion) -- This is a time of burn-it-all-down politics, and climate change is right in there. Several decades of delay in facing the challenge, and denialism on the part of primarily Republican politicians, have spawned a backlash. Last week’s Democratic climate town halls were notable chiefly for the absence of old debates about carbon cap-and-trade, replaced with more prescriptive proposals (see this).
One issue that causes division within the ranks of climate-change activists is nuclear power. Though it doesn’t emit greenhouse gases, it does produce radioactive waste and carries the potential for rare but potentially catastrophic accidents.
Two candidates, Senators Bernie Sanders and Elizabeth Warren, have different plans for nuclear that encapsulate the debate. Sanders not only rules out building new plants, but also wants existing ones to close. Warren’s position, somewhat garbled in her town hall appearance, is similarly down on new plants. But she targets “100% renewable and zero-emission energy in electricity generation” by 2035, leaving room for existing “zero-emission” nuclear power even if, on stage, Warren talked of “weaning” the country off it.
The U.S. nuclear fleet is old. Of capacity currently online, 42% will be beyond its original 40-year operating license by the end of 2019, according to data compiled by BloombergNEF. Plants can apply for a 20-year extension and, if needed, a further one after that, provided they can demonstrate continuing safe operation. Here is how shutdowns would be distributed over the coming decades, based on age and various license-extension outcomes:
The existing nuclear fleet produced just over half of America’s carbon-free electricity in the 12 months through June. Shutting the bulk of that down in short order looks counter-productive on several fronts.
Renewable power ideally displaces fossil fuels. Shutting down plants that already contribute energy without emitting carbon creates a bigger hole in the power market, which would be filled largely by existing and new natural-gas-fired plants. The latter would create facts on the ground (and political and economic interests supporting them) lasting decades.
And closed nuclear plants must be decommissioned. Closing them en masse would bring this deferred cost to fruition, effectively taking billions of dollars that might better be used for decarbonization.
Many existing nuclear plants struggle already due to cheap shale gas and expanding renewable power. BloombergNEF classifies roughly 28 gigawatts, or more than a quarter of the fleet, as at risk of shutting down due to low or negative margins. Pricing carbon and/or setting more aggressive zero-emission mandates would likely change that.
In a study released last November, the Union of Concerned Scientists estimated setting a $25-per-ton carbon price would push the proportion of nuclear capacity that is profitable from 64% currently to 88%. Setting that carbon price and raising it by 5% each year would, the UCS projects, keep the bulk of the existing fleet open – while also boosting energy efficiency and renewable energy enormously. Sanders has lately been ambiguous about carbon pricing, while Warren affirmed support for it last week. Pricing carbon while shutting down a huge source of power that would benefit from this would be counterproductive.
Promising shutdowns also invites political attack, jeopardizing candidates’ broader climate agenda. Wild as it is, an attack ad currently circulating, which defends subsidies for nuclear plants in Ohio by warning of a Chinese conspiracy, displays a certain cunning by linking the issue with job losses (see this).
Almost two-thirds of nuclear capacity is sited in states where President Donald Trump won the popular vote in 2016 , and the industry employs about 63,000 people – more than coal mining. As much as Green New Dealers place efforts to deal with climate change firmly in the context of a “just transition” for affected communities, selling the promise of zero-carbon energy while actively closing zero-carbon plants creates an opening for their opponents.
It’s important to distinguish all this from encouraging new nuclear plants. This issue is rendered largely moot by new nuclear’s high costs, long lead times and myriad examples of busted budgets (here’s looking at you, Georgia). Tuesday’s news that substandard components may be sprinkled across France’s nuclear fleet doesn’t soothe nerves either (or help budgets).
There is a debate to be had about whether some of the big energy R&D budgets being pushed by Democratic candidates should be allotted to researching new nuclear technologies. These include modular reactors, touted as a way of overcoming nuclear power’s peculiar dis-economies of scale. Like any other technology, though, such proposals would have to compete for funding; in this case, against batteries especially, as cheaper energy storage is a game-changer for renewable power, where economies of scale are quite evident already.
That latter point is the most important one to keep in mind when it comes to nuclear power, old or new. Apart from acknowledging the consequences of carbon, the entire premise of the energy transition rests on well-grounded expectations of renewable-energy costs continuing to fall quickly. Giving that process the economic and political means to flourish should be a priority in addressing climate change. If keeping nuclear plants running helps with that, then it wouldn’t merely advance the cause of Green New Dealers. It would accelerate the decline in energy costs, ultimately switching off the lights at many of those plants anyway.
Source: "Energy Policy by the Numbers, 2019 Update" by ClearView Energy Partners.
Source: "U.S. Energy and Employment Report 2019" by theNational Association of State Energy Officials and the Energy Futures Initiative. These numbers exclude employees engaged in mining, processing and transportation of nuclear fuels (about 9,000 workers).
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.
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