Incentives for nuclear power plants being advanced in various parts of the country appeared to gain ground Monday when the U.S. Supreme Court denied the Electric Power Supply Association’s (EPSA) petition challenging state subsidies for the facilities in New York and Illinois.
The EPSA primarily represents gas-fired power generators. The trade group’s CEO John Shelk told NGI that if the subsidies continue to take root in states like New York and New Jersey, a majority of the power market would be reserved for renewables and nuclear energy.
He warned that the gas industry should be concerned about demand for its volumes in the long-run, something he said stakeholders are clearly aware of as they continue to push back against legislative support for nuclear resources.
Legislation has been advanced or enacted in Connecticut, Illinois, New Jersey and New York, with lawmakers in gas-rich Pennsylvania and Ohio most recently introducing measures in recent weeks to provide incentives to better value the zero-emissions characteristics of the seven plants in those states.
After the Supreme Court’s denial, Shelk said the battle now shifts to FERC, where PJM Interconnection 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.
The Federal Energy Regulatory Commission has acknowledged in that instance that the wholesale market is threatened by subsidies. FERC has sent mixed signals, though, filing a brief in the U.S. Court of Appeals for the Seventh Circuit in the Illinois case that said the state’s zero emission credit (ZEC) program does not interfere with interstate auctions and does not preempt federal laws.
But the Commission also said in the filing that “if such programs, in fact, impair FERC jurisdictional wholesale electricity markets, the solution lies with the Commission, not with the courts.” Shelk said he’s hopeful that FERC might move quicker on the PJM proceeding now that multiple courts have weighed in on the matter in one way or another.
A major sticking point for EPSA is FERC’s jurisdiction over the electricity markets under the Federal Power Act, specifically the Commission’s oversight of auctions to purchase electricity. The state subsidy programs, EPSA argues, unlawfully interfere with that jurisdiction and are therefore preempted by federal law.
Lower courts in New York and Illinois have upheld ZEC programs adopted two years ago to prop-up five nuclear facilities owned by Exelon Corp. EPSA had asked the Supreme Court to use the U.S. Court of Appeals for the Second Circuit’s decision in New York as the basis for review of any appeal. It requested that the justices hold the Seventh Circuit’s decision in Illinois in abeyance pending a decision on the other case.
In any event, stakeholders are growing impatient as they wait for FERC to decide on the PJM proceeding. The grid operator postponed its annual capacity auction in May in anticipation of the ruling, which was expected in January. But as FERC has yet to act, PJM recently said it would move forward with the auction in August.
PJM coordinates electricity in all or parts of 13 states and the District of Columbia, including in Illinois, New Jersey and Appalachia. Low cost gas has propelled the fuel to the top of the power stack in recent years, making it difficult for nuclear facilities to compete.
Gas-fired electricity output last year exceeded coal-fired generation for the first time in PJM history. Gas units accounted for 30.6% of PJM’s generation mix in 2018, while coal accounted for 28.6% and nuclear units provided 34.2%. Fossil fuel also accounts for 66% of New York’s generating capacity, according to the state’s independent system operator.
Shelk added that his organization would at this point support carbon pricing in the areas where subsidies are being advanced, saying that the nuclear industry is doing nothing to help the climate by undermining other power sources. He pointed to the Regional Greenhouse Gas Initiative, a market-based program among states in New England and the Mid-Atlantic, as an example of how well gas competes in efforts to cap and reduce carbon emissions.
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