A Lifeline for New York’s Troubled Nukes?

February 2016

On January 25, 2016, the New York Department of Public Service Staff issued a white paper on the Clean Energy Standard (CES), as part of a REV-related proceeding (Reforming the Energy Vision). As directed by Governor Andrew Cuomo in late 2015, the white paper addresses four policy objectives of the CES, which are to:

  1. Increase renewable electricity supply to achieve the 50 by 30 goal (i.e., 50% of electricity used in NY to be generated by renewables by 2030)
  2. Support construction of new renewable generation in New York
  3. Prevent premature closure of upstate nuclear facilities
  4. Promote the progress of REV market objectives

The policy objective to prevent premature closure of the upstate nuclear facilities is in direct response to the November 2, 2015 announcement by Entergy declaring their intention to close the James A. FitzPatrick Nuclear Power Plant on January 27, 2017. Entergy maintains that FitzPatrick will be closed regardless, indicating it is too late for the CES program to take effect. Other nuclear facilities that could benefit from the proposed CES are R.E. Ginna (currently operating under a Reliability Support Services Agreement through April 2017) and Nine Mile Point 1 and 2.

The scheduled plant closure is a result of worsening economic conditions for nuclear generation, as it competes with lower cost options such as natural gas. In order to encourage the nuclear generators to continue providing emissions-free electricity, the white paper proposes “creating a market to recognize the value of fully licensed nuclear power plants that face financial difficulties… which is not adequately captured in the energy market today.”1 Zero Emission Credits (ZECs) would be created and earned by eligible nuclear plants. Similar to renewable energy credits, ZECs would be traded on the market to provide qualifying nuclear plants with financial support for their cost of operations. As with the renewable energy credits, Load Serving Entities (LSEs) will be required to procure a predetermined amount of ZECs to demonstrate compliance with the CES.

Key Details

  • In total, FitzPatrick, Ginna, and Nine Mile Point 1 and 2 provide approximately 16% of New York’s energy, and their closure is estimated to increase CO2 emissions by 15.5 million metric tons per year2
  • The shutdown of FitzPatrick, in combination with other planned retirements and shutdowns, would leave New York with a resource deficiency starting in 2019, and requiring 325MW of new capacity3
  • The maximum price per ZEC will be set annually by the Public Service Commission as the difference between anticipated operating costs of the units and wholesale prices
  • The ZEC obligation of the LSEs will be set in proportion to their annual retail electricity sales
  • The New York Public Service Staff maintains that the Commission setting a price of solely the environmental attribute is independent of the actual wholesale price of energy, and thus within its jurisdiction
  • The Staff white paper is being further developed through stakeholder comments and technical conferences with an order expected in the first half of 2016

Implications

  • The CES and tradeable ZECs would provide a revenue stream to eligible nuclear generators that may stem the tide of nuclear plant closures in the Northeast
  • The ZEC provides a quantifiable measure of the environmental benefit of emissions-free electricity produced by nuclear generators, albeit at a capped value based on operating costs rather than a specified value for avoided carbon dioxide emissions
  • The CES approach is similar to renewable portfolio standards market structures used in neighboring states, potentially enabling regional participation
  • Timing will be critical; Entergy has already indicated that the CES program “will not be in place in time to change the outcome for FitzPatrick,”4  while Staff indicates that the quantity of ZECs mandated are based on the assumption that FitzPatrick and Ginna continue to operate5

More Information

SNL Financial:

NEI: NEI, Cuomo Agree: Carbon Rules Necessitate Preservation of Nuclear Power Plants

RTO Insider: New York Would Require Nuclear Power Mandate, Subsidy

This report is part of the Nuclear Minute series. To view all featured Minutes, please click here.

Contributing Author: Chris Sturgill

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