WASHINGTON (Feb. 7, 2017) – Though market forces and external regulatory factors have combined to retire roughly 10 percent of the American nuclear power fleet, the facts don’t justify subsidies or other policy interventions specifically to save the energy source, according to a new policy study by R Street Electricity Policy Manager Devin Hartman.
Hartman cites “increased capital investment requirements, higher operating costs and reduced revenues in wholesale electricity markets for nuclear generators” as reasons for nuclear’s tough times. He notes that six reactors have closed in the past five years, while 19 others either have announced their intention to close or are ‘at-risk’ of closure.
The blowback prompted by these dramatic developments has seen some nuclear advocates calling for policy interventions to stem the tide of closures, but Hartman argues that “nuclear-specific interventions to promote fuel diversity, local economic development and grid reliability lack economic merit.”
“To whatever extent market design fails to account for certain reliability attributes, that failure concerns reliability service procurement alone, not an inherent need to procure a certain type of fuel or technology,” Hartman writes. “Any such failure should be corrected via market-design reforms, not out-of-market compensation. Furthermore, there is no evidence of an imminent threat to bulk reliability to justify interim subsidies.”
Ultimately, a balanced approach is key and would include a consistent, market-based emissions-reduction policy, rather than the kinds of ad hoc climate policy we tend to see proposed by politicians and regulators.
“The most important message for policymakers is to stay disciplined. The notion that the economic and environmental consequences of nuclear retirements are ‘incredibly detrimental’ is overblown. By contrast, the adverse consequences of out-of-market policies to prevent nuclear retirements are potentially severe,” Hartman writes.
R Street is a nonprofit, nonpartisan public policy research organization whose mission is to promote free markets and limited, effective government. It has headquarters in Washington, D.C. and five regional offices across the country. Its website iswww.rstreet.org.