The Nuclear Industry’s Response: Dereg 2.0 and the assault on climate solutions

1. The Nuclear Industry’s Response: Dereg 2.0 and the assault on climate solutions Tim Judson NIRS Executive Director Contact: (301) 270-6477 x14 timj@nirs.org www.nirs.org Twitter: @nirsnet

2. Economic Conditions in the Industry Bad and worsening economic fundamentals • Long-term market downturn • Operating costs rising for aging reactor fleet • Median age = 35 years • Average operating cost hit $44/MWh in 2012 • “Nuclear Renaissance” never materialized • Fukushima exposed inherent safety problems • NRC forced to do something on safety Doing ANYTHING = Rising Costs

3. Wall Street Rethinks Nuclear • Kewaunee closure unexpected • UBS publishes industry analyses • Predicts VY closure • Est. reactor to lose $109 million by 2016 • More firms publish reports • 20+ reactors in economic trouble

4. Fundamental Market Shifts • 2005-2008: Electricity prices rise sharply with gas costs • 2008: Prices hit historic highs ($.21/kWh in NYC Aug. ‘08) • 2009-2012: Multiple factors collide • Fracking boom sets in, fuel price collapses • Great Recession causes slump in commercial energy demand • Efficiency programs and technologies ramp up • Wind and solar: costs decline, supply grows dramatically Fukushima

5. Deregulation 1.0 • Key Features that Benefitted Nuclear • Liability-free Asset Transfers • Stranded cost bailouts • Below-market reactor sales • Tax-free transfer of decom funds • Market Dynamics • Pre-fracking NG market • Rising demand • Low levels of renewables Reactor Closures by Decade 1960s 2 (0) 1970s 8 (1) 1980s 4 (2) 1990s 9 (8) 2000s 0 2010s 5 (5) – so far • NRC Regulations • Relicensing • Power Uprates (5,400 MWe) • High-burnupfuel • 2-year refueling cycles • Risk-informed regulation • Lower standards • Less enforcement 14 yrs., 7 mos. U.S. Nuclear Reactor Closures by Date and Rated Capacity (MWt)

6. Phase-Out vs. Relicensing Status Quo by Decade 2010s 6 6 2020s 14 3 2030s 52 49 2040s 31 42 2050s 1 4 Economics Helping Where Regs Are Not Current License Expiration Dates and Capacity (MWe)

7. Industry Campaign: What They Want Restructure energy policy to support even the most marginal nuclear plants Deliberately vague about specifics • Manufacturing perceived crisis to make bad policies palatable No one solution is enough • Multiple things at multiple levels Overall Goals • New Subsidies for Old Reactors • Lock in Baseload Grid • Block renewables

8. Industry Campaign: Major Actors Largest Nuclear Power Generators • Exelon • Entergy • Others: Dominion, Duke, FirstEnergy, PSE&G Network of Front Groups: • Nuclear Energy Institute • Nuclear Matters • Center for Climate and Energy Solutions

9. Undercut Renewables End subsidies • Wind and Solar Tax Credits Create market barriers • End/Restrict Net Metering • Solar Connection Fees Renewable Energy/Portfolio Standards • Cut back renewable energy goals • Undercut renewable energy credit markets • Switch “dispatch order” to favor baseload Restore demand growth • Roll Back Efficiency Goals/Standards • Indiana and Ohio legislation

10. Deregulation 2.0 Reorganize Markets to Support “Baseload” Power Sources Capacity Markets • Target eligibility to baseload plants • Benefits coal and nuclear equally • Exclude renewables, conservation, and demand response Wholesale Market Reforms • Not totally clear, but now on the table • “Dispatch Order” - make baseload first • Nuclear before wind and solar • Could benefit coal, too • Clearing price preferences • Set price floor for baseload • Prevent “negative pricing” and curtailment fees

11. Other Measures Above-market contracts • Simplest and most palatable, but industry is saying “No thanks” • Locks them into operating uneconomical reactors • Limits “upside” potential if markets rebound Tap into existing clean energy revenues • System Benefits Charges • RGGI funds in CT, MD, MA, NH, and NY New ratepayer subsidies • Modeled on System Benefits Charges, but targeted to nuclear • Emissions, jobs, economic impacts, reliability, etc.

12. What Are They Doing? Multi-level PR Campaign • Op-eds in national, state, local, and legislative media outlets • Hiring former government officials as spokespeople • Using front groups and astroturf strategies • Lobbying: federal, state, regional market regulators Drumming up a sense of crisis • Reliability/Blackouts • Disparage renewables • Local jobs and property taxes • “Economic Engines” • Loss of “vital national assets” • Climate change • “more than 60% of carbon-free electricity” • Giant fig-leaf, greenwash the whole agenda – divide enviromentalists … Make any “solution” seem acceptable

13. Manufacturing a Crisis “Shutting some of the 100 reactors that provide about 20 percent of America's electricity would cause a crisis on electrical grids. You'll have rolling blackouts. It's going to take a significant emotional event to institute change.” – Peter Sena III, chief nuclear officer for FirstEnergy April 9, 2014 Is that a prediction or a promise ?

14. What Are They Doing?: Federal Level End subsidies for renewables • Wind Production Tax Credit • Solar Investment Tax Credit Influence regulatory appointments • New FERC Chair • Regional market change approvals • Preemptive (top-down) orders on market rules • NRC Commissioners • One seat to be vacated this year, possibly two • Post-Fukushima regulations • Enforcement generally • Waste Confidence Rule • Financial Qualifications Rule

15. What Are They Doing?: Illinois Exelon threatening closures of three plants • Clinton • Quad Cities 1 and 2 • Byron 1 and 2 – may be part of “crisis” PR strategy Chicago Tribune: all 11 reactors unprofitable for several years Legislative fix/es under discussion • Above-market contracts proposed by legislators • Carbon-free Energy Credits • Has been proposed before • Directly undercut wind and REC market

16. What Are They Doing?: Energy Markets PJM Interconnection (Mid-Atlantic energy market) • Market Monitor proposals for extensive rule changes • Target capacity market to baseloadgenerators • Exclude demand response • PJM Director issued statement favorable to baseloadargument New England • Entergy pushing NEISO market reforms • Exploiting gas supply crisis even while profiting off it • Indian Point and Pilgrim revenue jumps • Gas transmission constraints problematic last two winters • NEISO concerned about reliability

17. What Are They Doing?: New York Amenable Upstate Politics • Jobs and property tax losses • Coal plant closures already controversial Capacity market reforms • NYISO position may change • New head is former Exelon executive • New downstate capacity zone precedent • Creates $100 million windfall for Entergy at Indian Point • Contrary to state policy on closure and replacement Include nuclear in RPS • Nuclear Matters op-ed in Albany Times Union (April 24) • Also proposed market reforms to benefit nuclear