Yet another state will support nuclear power plants with subsidies as New Jersey regulators last week officially approved a zero emissions credit (ZEC) program that both gas-fired generators and environmental groups had fought.

Three nuclear units are set to receive $100 million annually over the next three years following the New Jersey Board of Public Utilities (BPU) 4-1 vote approving the program.

“We have a moral obligation to our fellow citizens to do everything we can to decrease carbon emissions,” said BPU President Joseph L. Fiordaliso. He pointed to fuel diversity, grid resiliency, the state’s decision last year to rejoin the Regional Greenhouse Gas Initiative and the state’s economy as reasons for the board’s decision.

PSEG Nuclear LLC owns the Hope Creek Nuclear Generating Station and has a joint stake in the two units at the Salem Generating Station along with Exelon Corp. The facilities generate more than 1,000 MW each, account for 90% of its carbon-free energy and provide more than 30% of the state’s electricity. Fiordaliso also said closure of the plants would cost up to 1,500 jobs.

Passed by the state legislature and signed into law by Democratic Gov. Phil Murphy in May 2018, the program will cost ratepayers $0.004 per kilowatt-hour consumed and be effective for three years until it’s reviewed again by the BPU.

The state joins New York and Illinois, which have enacted similar nuclear subsidies that have been met with strong resistance from the natural gas industry. But so far, courts have upheld challenges to the programs, and the U.S. Supreme Court recently denied an appeal brought against them by gas-fired generators represented by the Electric Power Supply Association (EPSA).

Connecticut has passed similar legislation to aid Dominion Energy's Millstone Power Station, while the battle over out-of-market subsidies heats up in shale-rich Pennsylvania and Ohio, where lawmakers are considering legislation to support plants operated by Exelon and FirstEnergy Solutions Corp.

EPSA CEO John Shelk told NGI ahead of the BPU’s vote that it was likely to be a "pretty monumental week" for the wholesale power markets. The Supreme Court denied EPSA’s appeal early last week. While Shelk said his organization feels it has a better shot of defeating subsidies in Ohio and Pennsylvania, where the gas industry has a stronger presence, he warned that “ramifications for gas markets” are still “pretty profound” given the advances subsidies have made in other states.

Most of the market in New York and New Jersey in particular is now reserved for nuclear and renewables, he said. Shelk added that the natural gas industry should "absolutely" be concerned about the ZEC programs. But he also noted that state and federal interest groups representing the industry have increasingly stepped up to fight the subsidies. 

"They've been very engaged, and they need to continue to be engaged, because natural gas will lose market share unfairly and uneconomically if these state subsidies proliferate the way they could," Shelk said.

The New Jersey Sierra Club also panned the ZECs, calling them the “biggest sellout in state history” that will come at the expense of renewable energy.

PSEG hailed the decision, saying the BPU “just saved the people of the state hundreds of millions of dollars in what would have been higher energy costs, thousands of jobs lost and tons of environmentally damaging air emissions.”

Ahead of the vote last week, the company had filed to deactivate the plants absent the subsidies. In order to qualify for the ZECs, operators must demonstrate anticipated plant shutdown and a significant contribution to New Jersey’s air quality.

An abundance of low-cost shale gas has allegedly made it difficult for many nuclear power facilities to compete. As the subsidies advance and as the Supreme Court has declined to hear gas-fired generators’ appeal, EPSA is now turning its focus more closely to the Federal Energy Regulatory Commission for guidance, where PJM is in a closely watched proceeding about how it should best accommodate subsidies for power sources as more states in its territory adopt or consider them.