Profitable nuclear plants don’t need subsidies — put the money toward new technologies
With the passage and signing of the $1.2 trillion Infrastructure, Investment and Jobs Act, comes new government money for certain energy projects. One of these includes $6 billion in federal tax credits designed to help keep nuclear power plants open and running. However, a closer look at the state of nuclear energy in this country reveals that most nuclear power plants, specifically in the Mid-Atlantic and Midwest regions, don’t need federal money to keep from shutting down. In fact, the latest PJM independent market monitor data reveals that most nuclear plants are profitable operations; they will operate a budget surplus in 2021 and 2022 without the need for subsidies.
Federal and state lawmakers should practice responsible due diligence to fully research and understand the issue before making important decisions with taxpayers’ hard-earned money. They should require full transparency of these nuclear companies’ financial books before agreeing to dole out government subsidies and credit programs to nuclear plants.
Instead, the infrastructure bill will lead to a Department of Energy program providing $6 billion in credit to the operations of existing domestic nuclear reactors. The department’s deputy chief of staff, Jeremiah Baumann, said, “It’s designed to support those nuclear facilities that need economic support in order to keep operating.” The problem with that plan is that the facilities don’t need taxpayer money if they’re already profitable. An independent report issued for PJM — a regional transmission organization that coordinates the movement of wholesale electricity across 13 states and the District of Columbia — demonstrates that the nuclear power plants in that region are all profitable. In fact, they are generally expecting 2022 budget surpluses (otherwise known as profits) well into the $300 million range before any subsidies arrive.
Why aren’t lawmakers raising greater scrutiny with these decisions? Why aren’t we asking more questions about unnecessarily subsidizing profitable operations? These businesses should be commended for their success instead of being propped up further with public funds that could be put to use in more effective ways.
It would not be hard for Capitol Hill staffers to understand the potential for corruption here if they did their homework. Just this past summer, a major utility company was fined $230 million for bribing officials in Ohio for bailouts of two nuclear facilities. A year earlier, another company was fined $200 million for an Illinois bribery scheme. Legislators should be cautious about doling out taxpayer money to nuclear operations that can, and do, make a profit on their own.
There are better ways for the government to encourage the use of nuclear power. Instead of grants and credits that operate as favors to existing, profitable operations, the Department of Energy should use these funds to incentivize the development of nuclear projects and technologies. This would be more fair and more efficient than writ-large subsidies to nuclear plants. It could help encourage growth in a much-needed energy sector. Nuclear power is a stable, clean form of baseload power production that is increasingly necessary to complement growing intermittent power sources such as wind and solar.
Financial support should be executed in a responsible and focused way. For example, the Department of Energy could offer grants and credits to domestic industrial operations that want to purchase and build small modular reactors. While Congress authorized $6 billion in credits to existing nuclear reactors, it also canceled funding for a Versatile Test Reactor (VTR), which is essential for safe testing of next-generation nuclear fuels and materials that are crucial to building safer, more energy-efficient nuclear reactors. There is no reason to push taxpayer money on nuclear operations that not only hold their own in the current market system but make a profit for their operators. And it doesn’t make sense to pull key research and development funding that will help ensure the future of nuclear energy technology in the United States.
The last thing federal and state governments should be doing is interfering with market-oriented competition by subsidizing profitable energy operations. That tilts the scale toward existing nuclear plants and enriches existing utility operations. It serves no practical purpose to help the environment or to improve and increase nuclear power output. Rather, the best way to promote the use of nuclear power is to streamline the regulatory process for construction and provide support for new technologies that are coming down the line.
Ellen R. Wald is a senior fellow at the Atlantic Council’s Global Energy Center, and president of Transversal Consulting, a global energy and geopolitics consultancy. She is the author of “Saudi, Inc.,” a history of Aramco and how the Saudi royal family controls this multitrillion-dollar enterprise. Follow her on Twitter @EnergzdEconomy.
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