Legislation has been introduced in Pennsylvania to support nuclear power plants that face stiff competition from natural gas in the wholesale markets by requiring electric distribution companies and suppliers to purchase credits from the facilities.
House Bill (HB) 11, introduced by Republican state Rep. Tom Mehaffie, who co-chairs the Nuclear Energy Caucus, and 19 other lawmakers, would add a third tier to Pennsylvania’s Alternative Energy Portfolio Standards (AEPS) to include nuclear power as a qualifying resource. Mehaffie said the bill would help to better value nuclear energy in the state, which provides 42% of its electricity and provides 93% of its zero-carbon electricity, according to a report released by the caucus late last year.
The legislation follows similar measures to subsidize nuclear power in other states, including Connecticut, Illinois, New Jersey and New York. Without it, Mehaffie said Pennsylvania’s five nuclear power plants are in jeopardy of closing. Exelon Corp. and FirstEnergy Corp. have already announced plans to shutter both Three Mile Island and the Beaver Valley Power Station in the coming years.
“We’ve been working together with industry experts for many months on a comprehensive policy solution that levels the playing field for nuclear power while being mindful of consumers and taxpayers,” Mehaffie said.
ClearView Energy Partners LLC estimated that the Tier III credits could be worth nearly $500 million in annual revenue for eligible facilities. The AEPS requires that 18% of electricity supplied by state distributors and suppliers come from alternative energy sources by 2021. Mehaffie noted that the law currently recognizes 16 other forms of electricity generation, including wind, solar and waste coal.
The bill could be a tough sell in Pennsylvania, the nation’s second largest gas producing state, where volumes exceeded 6 Tcf last year. Abundant gas supplies have driven down electricity prices, leading more generators to burn gas, while renewables also continue to make strong gains.
There are more than 20 gas-fired facilities under construction or being upgraded in the PJM Interconnection, the grid serving all or parts of 13 states and the District of Columbia, including Appalachia. In a blog post on Monday, the Marcellus Shale Coalition pointed to data released by the Energy Information Administration showing that nearly one-quarter of all the growth in the nation’s gas-fired power additions came in Pennsylvania last year.
“We maintain our view that nuclear assistance proposals face incremental headwinds in states with a significant natural gas production industry such as Pennsylvania,” ClearView analysts said in a note to clients on Tuesday. “We also believe that the continued exclusion of any provisions that would explicitly support renewable energy resources diminishes broader appeal.”
Republican state Sen. Ryan Aument, co-chair of the nuclear caucus, has indicated that he plans to introduce similar legislation. ClearView said that bill “could include other provisions designed to attract broader support.”
The Environmental Defense Fund panned HB 11, saying it falls far short of imposing strict limits on carbon pollution from the power sector.
Mehaffie said the state has to act quickly, given plans to close two facilities there and broader trends in the wholesale energy markets that have shifted dramatically to favor gas and renewables. The legislation also comes at a time when PJM is in a closely watched proceeding before FERC about how it should best accommodate subsidies for power sources, as more states in its territory adopt or consider them.
PJM on Monday called on the Federal Energy Regulatory Commission to make a ruling in that proceeding as its capacity auction is scheduled to go ahead in August. Regularly scheduled each May, the auction had been postponed in anticipation of the ruling on the matter, which was expected in January.
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