Thursday, August 15, 2019

In defense of Ohio's bailout of nuclear, and other, generating stations

July ended with Ohio passing an energy bill :
to facilitate and continue the development, production, and use of electricity from nuclear, coal, and renewable energy resources in this state, to modify the existing mandates for renewable energy and energy efficiency savings...
I noticed American pundits hating it.
The bill prevents Ohio's only nuclear generating stations from closing, as previously announced, so I thought it worth my time to investigate it. Unfortunately it's one more subject that demonstrated the shallowness of most energy commentary.

Ohio just passed the worst energy bill of the 21st century announced David Roberts at Vox. Self-described "energy Ronin," Jesse Jenkins responded to the claim the legislation, saving 2 nuclear plants in Ohio, was better than "passing nothing and letting them close," with a flat: "No. Not really." It's a claim that should be revisited in the not too distant future - when Ohio can be compared to Pennsylvania, where no bill was passed to save two nuclear facilities soon to exit operations. I'll plant the seed for that future comparison with some background on what did happen in Ohio - and very briefly at the approach that failed to sway lawmakers in Pennsylvania.

Roberts' article has these bullet points on the Ohio legislative action:
  • Bail out two nuclear plants
  • Bail out two coal plants
  • Gut renewable energy standards
  • Gut energy efficiency standards

Nuclear

If I skimmed the legislation correctly nuclear (and some other generators) will receive up to $9/MWh in credits for their output - with the amount being reduced if the market price is above $46/MWh and disappearing at $55USD/MWh (currently equates to about $73 CAD/MWh).
A fact-based commentary on that price might note most pricing is now set by natural gas so the $9USD/MWh stipend equates to a $22/tCO2e implied cost of emissions (tonne of CO2 equivalent emissions) - which is a little under $30 Canadian dollars per tCO2e.

It's a sad commentary on the state of American commentary that those who claim to support positions on reducing emissions fail to mention implied emissions' costs in their comments.

Regardless, that's the nuclear bailout: it can be perceived as compensating trivial-emission generation for the unpriced negative externality of currently cheap and abundant natural gas-fueled generation. Previous actions by New York and Illinois legislators have tied their funding of threatened nuclear plants directly to a social cost of carbon.

So why the coal bail-out?

Roberts tells a tale of the coal industry's dark money lobbying - which is probably true, but insubstantial. This century almost all new electricity generating capacity built in Ohio is being fueled by natural gas while almost all generators that exited commercial operation were fueled by coal. No state has seen more coal power plants close since 2001 than Ohio has.
The oil and gas industry opposed the legislation - and is lobbying to kill it in a ballot question next year.

In 2016 First Energy, whose assets include the 2 Ohio nuclear generating station, decided to "sell or close" all its power plants in Ohio and Pennsylvania that did not receive regulated rates, claiming "the corporation's unregulated subsidiaries...cannot afford to operate them at today's power prices." In March 2018 FirstEnergy filed to restructure its FirstEnergy Solutions (FES) and FirstEnery Nuclear Operartng Company (FENOC) subsidiaries. The main company had basically shed all the merchant generators for which it found buyers willing to pay a satisfactory price, and the remaining merchant plants were spun off into the now bankrupt subsidiary.

The impact on its 2 nuclear plants in Ohio, Davis Besse and Perry, is relatively straightforward - they lobbied for a price and the bailout addresses that demand. The two coal plants involved in the Ohio legislation are also connected with FES, but the situation is far more complicated. Clifty Creek (in Indiana) and Kyger Creek (in Ohio) are operated by the Ohio Valley Electric Corporation (OVEC). OVEC is owned by a "group of seven Midwest utilities and electric cooperatives" which is reportedly obliged to operate the two plants until 2040 (due to its own internal agreement in 2010 to spread out the cost recovery period related to a decision to spend over $1 billion on pollution controls). The largest owner of OVEC is American Electric Power which, like FirstEnergy, decided to exit merchant generation years ago. FES was attempting to exit the partnership with its bankruptcy, while other owners had already received permission to charge their customers to keep the plants open. It's definitely a hot mess - but one intended to protect multiple utilities.
Those utilities argue the plant is providing fuel security.

Coal fueled 58% less generation in Ohio during 2018 than when it peaked in 2005, while gas-fueled generation rose 1500%. Consumers may have heard appeals to conserve during the cold snap this past January, so the security of supply issue won't sound as alien to locals as it does to professors and other internet commentators.

Most supply in Ohio is from the PJM system, which is far broader than Ohio. Within the broader system Ohio is a net importer to a much greater extent in recent years than it was at coal's peak in 2005.

On the topic of broader systems, critics of Ohio's support for the OVEC and nuclear generators were quick to note FES celebrated the support by announcing it would revoke its notice to close the W.H. Sammis (coal) generating station. Like the OVEC plants Sammis had received a major ($1.7 billion), and award winning, update around 2010. While the support for Sammis is only implied indirectly it was a bigger trigger for criticism as local politicians had appealed to coal-friendly President Trump to support the continued operation of the plant (which is fueled by coal from the company of a major Trump supporter). 

I suspect the accelerated closure schedule for FES's Bruce Mansfield (coal) generating station, just across Ohio's border in Pennsylvania, won't be connected to the bailout, but that too was announced after Ohio passed the bail-out bill.

Regardless, it seems to me if capacity and reliability were genuine concerns keeping older plants capable of generating would alleviate those concerns. Ideally the now-subsidized coal plants would not run if natural gas plants were available - an ideal that would be more likely if instead of subsidizing nuclear power plants a modest $20-$30/tCO2e cost of emitting existed.

Gut Renewable Energy Standards

Many commentators on the bailout are those who always push for ever more ambitious mandates for wind and solar generation. Existing nuclear generating stations benefited from state action creating Zero Emission Credits (ZEC's) in both New York and Illinois. As with the Ohio action, the ZEC's imply a very modest cost of carbon and would thus be unnecessary is a modest charge was attached to emitting greenhouse gases.

Both New York and Illinois initiatives allowed some existing nuclear facilities in the states to continue operating for a decade or so while demanding utilities expand the share of their supply purchased from renewables (wind and solar). In Ohio the companies with nuclear plants were salvaged without paying homage to the variable Renewable Energy Systems religion. As galling as that must be to that congregation, Roberts final point is intended to most enrage the faithful.

Gut Energy Efficiency Standards


Investigating the links in the Vox piece I found the arguments for energy efficiency as weak and poorly researched as I've come to expect from the unquestioning supporters of the negawatt. Working back to find the source of Roberts' claim the gutted energy standards "were set to save Ohio ratepayers $4 billion over the next 10 years" I eventually got to a simple one-page summary with some figures for 2009-2012, and this note:
The customer energy savings data comes directly from utility status reports, which are filed every year with the Public Utilities Commission of Ohio and are available via the PUCO’s online docketing system at http://dis.puc.state.oh.us/. The utilities’ own reports verify annual energy savings and confirm that energy efficiency programs are saving customers money.
If the data is simple to pull together why is a number for 2009-2012 being used?

Maybe because somebody already dove deeper into the numbers and found what I expected would be found: light bulbs.
...Utilities have complied largely by subsidizing retail sales of energy-efficient light bulbs. In 2012, lighting programs accounted for 83 percent of Dayton Power and Light's alleged energy savings, a lower percentage than some other utilities. Among the company's residential customers, lighting was 88 percent of the total.
...Most of those energy-efficient bulbs would have been purchased with or without SB 221. If you buy a subsidized bulb but would have paid full price, the industry calls you a "free-rider." Most other states account for free-riders in their measurement; Ohio does not. (A few years ago, PUCO, with the backing of utilities, ruled that free-riding is a form of saving, claiming that "gross" rather than "net" effects are what matters.) California calculates that about 70 percent of bulb buyers free-ride, and there is no reason to assume that Ohio is much different. 
I went through the claims of savings from the operator of Ontario's e.e. programming in Free-riders of the soft path, and I too found lightbulb programs.

There is some hope that the efficiency-firsters are under pressure, but only if the generation is from desirable generators. A recent report noted the California Public Utilities Commission (CPUC), "has declared that renewable energy has no energy content when calculating whether a program increases energy efficiency."
Of course many won't see a connection between energy efficiency not being good if it avoids consumption of righteously produced electricity and the howling at rolling back the programs and investing the costs in sustaining nuclear.

For many followers of the soft path energy efficiency is good because nuclear is bad.

Unintended Consequences


While the Illinois and New York bills had a veneer of providing a policy framework, both targeted specific sites.
In New York two nuclear plants had been scheduled to close, Fitzpatrick and Ginna, and the state had been told another would join them if no action was taken (Unit 1 at Nine Mile Point).  The 3 units, with a combined nameplate capacity of around 2,072 Megawatts (MW), were saved by the zero-emission credit scheme, which specifically omitted the reactors at the Indian Point site nearer New York City. Soon after the state reached an agreement with Indian Point's operator to close the 2,311 MW site. One could see the overall impact of the legislative as neutral for the nuclear sector.

Illinois faced the closure of Exelon's Quad Cities and Clinton nuclear power stations until passing "The Future Energy Jobs Bill." The home page of website for the act doesn't use the world "nuclear". The leading point in the list of benefits is "...accelerates the growth of wind and solar energy." Elsewhere readers are assured the act will, "Substantially expand energy efficiency programs. The "zero emission standard" requires utilities to source, "approximately 16% of the actual amount of electricity delivered to retail customers in 2014 (This is approximately 20 million ZECs per year )." A ZEC is created by 1 MWh of supply. Illinois has more nuclear capacity than any other state, with its nuclear generators usually producing 97-98 million MWh's annually. Quad Cities and Clinton alone have produced over 20 TWh annually with only one exception since the year 2000. The Illinois "bailout" was essentially restricted to 20% of its nuclear capacity.

Markets continue to threaten Illinois nuclear power plants, and the Ohio bill saving its nuclear, for a while, could be seen as complicit. Capacity in the PJM interconnection has not been scarce, and nuclear power plants have seen declining, or disappearing, capacity revenues. Ohio's protection of existing capacity won't help alleviate that problem. Combined with cheap natural gas the low future prices for output (predicted in forward power curves), the prognosis for unsubsidized plants only gets worse.

Exelon now reports over 6,500 MW of capacity in the PJM system (Dresden, Byron and Braidwood), as being "in economic distress". That's the vast majority of the plants in Illinois not benefiting from "The Future Energy Jobs" legislation.

The next nuclear unit to end its operating life will be at Three Mile Island in Pennsylvania. That state follows only Illinois in nuclear generating capacity and output. FirstEnergy Solution's larger Beaver Valley facility will follow in 2021 unless something prevents it. House Bill 11 exists to do so, but legislators showed little interest in passing it in time to save Three Mile Island.

My criticism of the Pennsylvania bill is that it is only a bill, and that makes it worse than Ohio's bill to save its nuclear power plants because that one is now legislation. That does not mean the Ohio bill is particularly good.

Like New York and Illinois legislation, Ohio's bill subsidizes the lack of a detrimental behaviour - adding to atmospheric greenhouse gas concentrations - instead of punishing the detrimental behaviour itself. That is, in my opinion, the issue, and not that it didn't specifically rank nuclear behind wind and solar and energy efficiency. Bills in other states, including perks for renewables and energy efficiency, extend select nuclear power plants for a limited duration, providing only palliative care that should be of little interest to those hoping for persistent solutions to lower emissions.



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