How Policy Saved America’s Nuclear Power Plants

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Nuclear energy has been on shaky ground across the United States for the last decade, but recent federal and state policies have come to its rescue.

Nuclear power plants have been reliable workhorses over the last half century, churning out high volumes of air pollution-free electricity. However, the rapid rise of low-cost renewables and periodic availability of low-cost natural gas cut into nuclear facilities’ profit margins, causing dozens to consider an early shutdown.

Several states stepped in to keep their nuclear plants online, citing the benefits they provide for clean air, reliable power, and local jobs. Congress then passed two pieces of legislation in 2021 and 2022 to throw the remaining plants a lifeline, and the Biden administration is now implementing these laws.

Together, these policies have already saved 22 reactors, with some financial support not even beginning until 2024. These laws will keep America’s existing nuclear fleet online through at least 2032, allowing time for state clean electricity targets to ramp up while energy storage comes online, each providing longer-term price support for plants that are able to continue meeting high safety standards.

The federal policies also include funding to build up the next generation of modular, more flexible nuclear plants. These could help complement renewables and storage technologies in cleaning up our electricity system.

A nuclear power phase-out would have been a shot in the arm for fossil fuel power, worsening air and climate pollution while raising consumer costs. Policymakers put these fears to rest, acting in time to save most of the U.S. nuclear fleet and lay the foundation for advanced nuclear technologies.

The clean energy race

Nuclear power plants provide roughly half of the U.S. clean electricity supply and a fifth of total electricity. They have historically played a central role in limiting climate and harmful air pollution from the power sector, buying time for other sources of clean energy to fall in cost.

On one hand, we’re now seeing a rapid deployment of low-cost wind and solar resources, which is cleaning up the U.S. electricity system. On the other hand, this trend has driven down power prices, reducing the revenue nuclear plants can earn, resulting in a dozen reactors retiring prematurely.

Many more nuclear power plants signaled they may need to follow suit.

In 2018, the Union of Concerned Scientists—long opponents of nuclear power—recognized the emissions risk of early closures and changed course. They found a third of nuclear plants were likely uneconomic or scheduled to shut down, to the detriment of climate and public health.

Every nuclear power plant that retires—or diverts power to another purpose like bitcoin—will cause fossil fuel power plants to fill in that supply gap. Even though we are adding wind and solar at record pace, we cannot afford to lose these clean energy sources if we want to hit our 2030 clean energy goals on time.

Allowing nuclear to retire would slow or reverse progress toward a safe climate future at a time when it must be accelerated.

Policy to the rescue

States were first to recognize the peril their nuclear power plants were in, passing legislation to keep them afloat. Beginning with New York in 2016, six states stepped in with programs designed to top off revenues from what nuclear power plants could earn in power markets and make them “whole.” These laws saved 20 reactors from an early demise.

However, nuclear power plants are located across the country, and help hasn’t always been available. Recognizing this, Congress created a $6 billion relief fund in the bipartisan Infrastructure Investment and Jobs Act (IIJA) in November 2021, which was meant to preserve the existing nuclear fleet and its jobs through 2031.

The first round of funding of up to $1.1 billion brought the Diablo Canyon Power Plant in California back from the brink. Pacific Gas
GAS
& Electric had agreements to shut down the two reactors in 2024 and 2025, but this new financial injection led PG&E and California’s state government to change course. PG&E is now applying through the Nuclear Regulatory Commission to extend the reactors’ license to operate by 20 years, contingent on meeting strict safety requirements.

This relief fund is a critical safeguard to avoid early retirement for the nation’s most at-risk reactors, but it alone doesn’t stop the bleeding for the rest of the fleet. However, in 2022, President Biden’s Inflation Reduction Act (IRA) created a tax credit available through 2032 for all existing reactors, designed to top off power plant revenues without overpaying and causing any taxpayer waste.

These two federal programs have barely started—the former only issued its first award, and the latter doesn’t begin until 2024—but they’ve already shored up the fleet’s next decade of viability. This is reflected in expert forecasters’ outlooks, with the National Renewable Energy Lab predicting no nuclear power plant retirements from economic reasons. Investor confidence has also risen, with Constellation announcing its purchase of an ownership stake in the South Texas Project Electric Generating Station.

As it stands, no U.S. nuclear plant has announced plans to retire since the IIJA’s enactment.

Rising state and utility ambition on clean energy and electrification bodes well for the continued longevity of the existing U.S. nuclear fleet, as greater demand for clean power will mean more buyers for nuclear energy, whether through direct contracts or increased clean energy credit prices. Higher energy storage penetrations will also provide price support by soaking up excess wind and solar in hours that would otherwise cause nuclear power plants to operate at a loss.

Paving the way for advanced nuclear

The vast majority of U.S. nuclear power plants came online before 1990. Since then, a range of factors has stymied development of new conventional reactors. A nuclear renaissance is probably dependent on developing more advanced, modular, flexible reactors better suited for a renewables-heavy grid and providing funding to redevelop supply chains and domestic expertise.

The same two recent federal laws offer significant such support. The IIJA includes a suite of provisions that boost research, development, and demonstration projects for new nuclear reactors, such as funding the Advanced Reactor Demonstration Program and reducing investor risks associated with the U.S. Department of Energy’s (DOE) Loan Program.

The IRA expanded eligibility of an existing tax credit—responsible for much of the success of wind and solar over the last decade—to include new nuclear facilities. This provides an investment subsidy of up to 50% of capital costs or a production subsidy worth up to double the maximum available to existing reactors.

The law also includes additional funding through two programs at DOE’s Loan Programs Office: One could support up to $250 billion in financing for the replacement or repurposing of existing fossil fuel infrastructure with lower-emitting resources, and the other authorized for $40 billion in loan guarantees for demonstrating new clean energy technologies.

A crisis averted

Nuclear power has played and continues to play an important role in cleaning up the grid, keeping climate and harmful air pollution at bay while supporting local economies. The success of renewables threatened reactors’ viability, but ultimately, states, Congress, and the Biden administration acted in time to protect the nuclear industry from financial ruin.

While some reactors fell through the cracks in the 2010s, policy has shored up the fleet for the next decade. Thereafter, existing nuclear power plants that continue to meet high safety standards will benefit from a more favorable clean energy economic environment, and these same policies will have tilled the soil for the next generation of advanced reactors.

Today’s nuclear power plants won’t safely last forever. We need to plan for a future beyond our aging plants that still achieves a net-zero emissions economy. But the bridge funding that policymakers have provided will preserve this carbon-free resource as we build the grid of the future.

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