You are here

New York's nuclear fork in the road: subsidizing old reactors is a dead end

Nuclear Monitor Issue: 
Tim Judson and Michael Mariotte – Nuclear Information & Resource Service

Thirty years ago, New York Governor Mario Cuomo was asked about the future of nuclear power. The future of nuclear power, he replied, "is Chernobyl." He prevented the Shoreham reactor on Long Island, for which construction was basically completed and it had even been tested at very low power, from ever operating.

But while Cuomo stopped Shoreham, he didn't go after the Indian Point nuclear plant – close to New York City – in the same way. And he said virtually nothing about New York's upstate nuclear reactors, even though, if the future of nuclear power was Chernobyl, that would seem to apply everywhere, not just on Long Island.

A generation later, Mario Cuomo's son Andrew is now Governor Cuomo. Andrew wants to end the use of coal in the state, and he is insisting on a clean energy plan that New York attain 30% of its electricity from renewables by 2020, less than five years from now, and 50% renewables by 2030. For a large, industrial state, that is by any measure an aggressive plan.

And the current Gov. Cuomo has made clear he wants Indian Point closed and he is doing just about everything a Governor can do to close those reactors.

So far so good, but where Gov. Mario Cuomo essentially ignored New York's upstate reactors, Gov. Andrew Cuomo has embarked on a new crusade – not to close them, but to ensure they continue operating at any cost. And that cost, which is part of a new "Clean Energy Standard" proposal released by the staff of New York's Public Service Commission, could become very high.

The state's utility regulators propose that New York will establish a renewable energy standard to reach 50% renewable energy by 2030, but it's packaged with a massive subsidy to nuclear power plants to try to prevent four of the state's six reactors from closing during that time.

Two upstate reactors, Ginna and Fitzpatrick, announced last year that they will be closing within the next year or two because they are no longer economically competitive in New York's marketplace. Gov. Cuomo seems determined to try to reverse those decisions, and to provide extra protection – in the form of subsidies from already burdened New York ratepayers – to nuclear power. Even though he still wants to close Indian Point.

If the proposal ends up being implemented as the state's Public Service Department is proposing, the nuclear subsidies could end up costing New Yorkers US$2–6 billion (€1.8– 5.4b) by 2030. And that is just the extra cost of subsidies, above and beyond the market price of electricity. Between buying the reactors' electricity and paying subsidies, New Yorkers would spend a total of at least $18 billion (€16.1b) on the four reactors, rather than on renewables and efficiency. And that is assuming the reactors' operating costs don't rise, and that the state wouldn't need to guarantee them a profit margin to continue operating.

The wide range of our estimate is because the cost of the subsidies would depend on two factors:

  • The cost of operating the reactors, which is rising. That is the main reason the industry is pushing so hard for subsidies.
  • The market price of electricity.

The gap between nuclear costs and energy prices could very well get wider by 2030. On the one hand, reactors are getting more expensive to run as they get older, and New York has some of the oldest and most uneconomical reactors in the world. Nuclear operating costs have been going up by about 5% per year on average, for over a decade now. On the other hand, energy prices have been trending lower in New York and around the country for nearly a decade, even with occasional spikes. If nuclear costs and energy prices continue going in opposite directions, $6 billion could be an underestimate.

Here's how the regulators are proposing it would work:

  • Each year the reactors' owners would tell the Public Service Commission what each reactor's "going forward costs" are projected to be, and how much money they could expect to make selling the power each reactor generates.
  • The reactors' owners would be paid the difference between the "going forward costs" and the projected sales revenue, by selling "zero emissions credits," or ZECs, to utilities and electricity retailers in the state.
  • The utilities and other retailers would be required to buy credits according to their proportion of the state's total electricity consumption. That is, if a utility's customers represent 10% of total electricity consumption in New York, then the utility would have to buy 10% of the total number of ZECs.

Keep in mind, New York still wants to close the two reactors Indian Point. The subsidy would, ostensibly, only apply to the four reactors in Central and Western New York, on the shore of Lake Ontario: FitzPatrick, owned by Entergy, the same company as Indian Point; and Ginna, Nine Mile Point 1 and Nine Mile Point 2, owned 50-50 by Exelon and Électricité de France (EdF), the American and French nuclear giants. (Well, technically, Nine Mile 2 is still 18%-owned by the Long Island Power Authority, but Exelon and EdF control the other 82%.)

Entergy says the subsidy is too little too late to keep FitzPatrick from closing at the end of the year, and is promising to fight to have Indian Point included in the subsidy scheme. If the company wins, it could be a lose-lose-lose for the state: New Yorkers get socked with higher electric bills to subsidize old, dangerous, and dirty reactors; the state loses its fight to close Indian Point by subsidizing all of the equipment upgrades the reactors need to maintain their water permits; and there would be less money and market share to invest in long-term emissions reductions by expanding renewable energy and efficiency.

The New York subsidy would be essentially a blank check: the only cost control would be the Public Service Commission's review of the reactors' projected operating costs each year. Even if Exelon and Entergy didn't fudge the numbers, if the costs of the reactors continue to go up more than energy prices do, so would the subsidies.

At the same time, there is nothing to prevent reactors from closing if their owners decide they just aren't making enough money. And in that case, the subsidies would have been a huge waste of ratepayer dollars: a corporate giveaway for however long Exelon and Entergy were willing to take it, while generating more nuclear waste, risking nuclear accidents, and diverting ratepayer dollars from efficiency, renewables and long-term investments in emissions reductions. In addition, Exelon has already indicated it believes the state will have to provide an additional incentive to continue running uneconomical reactors: a guaranteed profit margin, over and above the operating costs. Read, even greater subsidies.

Whether now or later, New York is going to need to ramp up efficiency and renewables enough to take nuclear's place. Since Ginna and FitzPatrick are already poised to close because they are no longer economical or competitive, why not just let them shut down and invest the resources in cheaper renewables and efficiency that will be needed to reduce emissions in the long run, anyway?

As we showed in a report we published last fall (see Nuclear Monitor #813), renewables and efficiency are so much cheaper than nuclear that New Yorkers could do more than replace FitzPatrick and Ginna: for the same cost as the reactors, New York could develop even more renewables and efficiency, close additional fossil fuel power plants, reduce total carbon emissions, keep nuclear workers employed, and provide a just transition for the reactor communities. That's the path Gov. Cuomo should choose. To pave the way to a real clean energy future, one in which we have good jobs, live in healthy communities, and our children are safe.

Indian Point 1