United States: Pennsylvania Prepares to Join Cap-and-Trade Scheme

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.

State-level policies to support nuclear power have, in part, been impeded by bribery scandals that unfolded last year in Illinois and Ohio, leading to the recent repeal of Ohio nuclear subsidies and the mitigation by Illinois leadership of new proposals to support more nuclear plants. In Pennsylvania, however, a different climate policy battle that could benefit nuclear energy is playing out and North Carolina is poised to follow suit. Backed by environmental groups, Pennsylvania's Democratic Gov. Tom Wolf plans -- through an executive mandate -- to enter the state into a voluntary carbon-emission cap-and-trade scheme, known as the Regional Greenhouse Gas Initiative (RGGI), that promises to increase costs for fossil fuel generators in the state. Although Republican lawmakers this week made progress in advancing legislation to block the governor's executive order, his plan to join the RGGI has so far saved one Pennsylvania nuclear plant from premature closure. Combined with state nuclear subsidies, like in New York, New Jersey and Connecticut, RGGI membership can help improve reactor operating margins. New Jersey and Virginia are the newest RGGI members, although both states enacted legislation to join the program. In North Carolina, the state Air Quality Committee of the Environmental Management Commission on Jun. 15 voted to support a petition for rulemaking put forth by the Southern Environmental Law Center in January to join the RGGI. Because both Pennsylvania and North Carolina are attempting to join the RGGI "through regulatory fiat," the obstacles are more challenging, particularly amid Republican opposition, ClearView Energy Partners analyst Tim Fox said in a Jun. 15 policy note. The more members that join the RGGI -- today comprised of Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Virginia -- the more carbon allowances it can trade and the more influential its carbon-emission reduction goals become. RGGI states promise to reduce emission caps and thus tradable allowances over time, theoretically increasing the value of allowances and the effectiveness of the program in cutting emissions. In the past (particularly after New Jersey initially exited the RGGI in 2011 only to return in 2020), the program suffered from emissions caps that were too high, creating low prices for allowances and having little impact on carbon-emission reductions. In RGGI member state New York, where three nuclear power plants receive state subsidies, net revenues for nuclear energy in the New York Independent System Operator (NYISO) in 2019 exceeded the US average “generation costs for multiple-unit [nuclear] facilities," while net revenues were "below average generation costs for single-unit facilities” although still “adequate to recover the average generation costs,” according to NYISO’s 2019 market report. However, most of this benefit comes from the state’s zero-emissions credits (ZECs), which comprised about 40% of nuclear plants’ net revenues. “Hence, ZECs continue to be critical for the operation of these units,” the NYISO report states. Nuclear Energy Institute Senior Director of Policy Development Matt Crozat called efforts to join the RGGI “more modest” than state efforts "to preserve nuclear" via financial assistant programs, but said it represents “a step toward preparing the state for what could be more transformational changes into the future.” Recent state efforts to directly support nuclear energy have run into trouble after US nuclear operators FirstEnergy in Ohio and Exelon in Illinois were linked to bribery schemes with state lawmakers involving millions of dollars in direct and indirect payments to enact nuclear subsidy legislation (NIW Jul.24'20). Amid the bribery scandal fallout in Ohio, lawmakers repealed nuclear subsidy legislation altogether. While Illinois legislators retain existing nuclear subsidies for Exelon's Quad Cities and Clinton plants, they are advancing a new state energy plan that adds support for Exelon's Byron and Dresden plants, albeit less than the reactor operator requested. This week, those talks stalled over labor issues around coal and gas plant closures, making it more likely that Exelon will follow through with threats to shutter Byron and Dresden in September and November this year, respectively, unless financial support is forthcoming (NIW May14'21). The New Jersey Board of Public Utilities, on the other hand, recently moved to replenish state subsidies for two nuclear plants for another three years and maintain the subsidy level at a de facto $10 per megawatt hour, "which is a pretty good indication I think that the market conditions are stressing these plants," Crozat said. Pennsylvania Cap-and-Trade? Pennsylvania is currently home to two large nuclear plants: Exelon’s 2,317 megawatt Limerick and Energy Harbor’s 1,872 MW Beaver Valley. Energy Harbor, formerly a FirstEnergy subsidiary, in March 2020 rescinded plans to deactivate Beaver Valley this year, attributing the decision directly to the governor's plans to enroll the state in the RGGI. This "will begin to help level the playing field for our carbon-free nuclear generators," the company said in a March 2020 statement. But this week, Republican state lawmakers and a handful of Democrats pushed back against Gov. Wolf's mandate by introducing a bill that would require legislative approval for the state to join the RGGI. On Jun. 14, the state Senate approved the measure. Wolf's October 2019 executive order directed the state Department of Environmental Protection to join the RGGI, commencing a lengthy bureaucratic process. Final rulemaking is scheduled to go before the state Environmental Quality Board this summer. With plans to finalize Pennsylvania's RGGI membership by the end of the year, Wolf, also on Jun. 14, joined Democratic lawmakers in introducing alternative legislation to direct funds generated from the RGGI to environmental justice, economic transition plans for communities around closing power plants, and workforce development in the state. But Wolf's plan to enlist the state in the RGGI faces heavy opposition from the politically influential gas lobby, particularly in Pennsylvania, a prominent natural gas-producing state. “You have this challenge of saying, 'Okay well, if I'm going to increase the cost of producing electricity from natural gas in Pennsylvania, well, what's going to happen?'" Crozat said. “That's created a pretty decent political battle within the state of Pennsylvania and legislature there.” As the state Senate bill to thwart Wolf's plans moves to the state House, it faces an uphill battle to accumulate Democratic support for a veto-proof majority, and there are obstacles beyond that. "Gov. Wolf is term-limited, and he will be leaving office in November 2022," according to ClearView's Fox. "While a Republican governor would seem likely to revisit the rule, we would also caution that a Democrat might not support it. In addition, RGGI opponents have said they would pursue judicial review." Jessica Sondgeroth, Washington US State Nuclear Financial Assistance Plans State Financial

Security Risk , Nuclear, Nuclear Fuel, Policy and Regulation, Nuclear
Wanda Ad #2 (article footer)
Grossi steps up IAEA role at Zaporizhzhia; Japan extends reactor operating limit; Constellation acquires minority stake in South Texas Project for $1.75 billion.
Fri, Jun 2, 2023
China's Ministry of Ecology and Environment has granted key environmental approvals for four newbuilds, all in China's southern Guangxi Autonomous Region.
Fri, Jun 2, 2023
Warming ties between Iran and its Gulf neighbors are helping de-escalate regional tensions. But US sanctions and nuclear jitters risk spoiling the party.
Thu, Jun 1, 2023