Today, the New York State Department of Public Service (NYSDPS) will consider a motion to establish a large-scale renewable program and a clean energy standard that will result in a price floor for wholesale electricity prices from zero or near zero emission power sources.
Nuclear advocates from New York, along with supporters from around the country are gathering to attend the meeting and encourage the NYSDPS to adopt the proposed change in market structure. I drove up from Virginia yesterday and had dinner last night with a group that included people from Illinois, California, Ohio, Vermont and New York.
We had a blast getting to knew each other; many of us have been communicating for years without actually meeting face to face. We’re expecting an interesting and perhaps exciting day. I confess that I took leave before the poster creation session; long drives aren’t quite as easy as they used to be.
What’s at stake?
If adopted, the action will interfere with both planned and accidental temporary market conditions that would otherwise serve to permanently eliminate valuable sources of reliable, clean electricity. If large chunks of reliable production capacity were allowed to be driven out of the market, the result would be a lengthy period of higher prices and dirtier air.
The supply/demand balance would shift to a supply-constrained situation that gives producers more pricing power than consumers. The plants that are threatened with closure each produce more clean electricity every year than all of the non-hydro clean energy sources that have been built in New York over a period of several decades. Even if an aggressive build program were implemented, it would take several years to build enough new capacity to replace the output of the already built and operating plants.
Unless the new sources were also nuclear powered, they would not be able to produce the same quality of frequency and voltage stablized, on-demand power currently provided.
Even “energy efficiency”, which some people claim is even better than generating the power that customers want to purchase, has intermittency issues that are rarely discussed. For example, a high efficiency air conditioner only helps reduce power consumption during hot summer days. It doesn’t run any pumps, turn on any lights or power grocery store freezers during the dead of winter.
Many points of view
Not surprisingly, the public comments and filed document folders for matter master number 15-01168/15-E-0302 at the NYSDPS are brimming with documents, some that express strong support for the new plan and its zero emission credits and some that are quite disappointed that their pet technologies will have to continue competing in a market that is adequately supplied by capable power generating plants heated by a diverse mix of heat sources that includes both natural gas and uranium.
New York has one of the cleanest electricity generating systems in the United States, with more than 50% of its annual generation from nuclear, hydro, and wind. Each of those sources produce on-going CO2 emissions that are substantially less than 20 grams of CO2 per kilowatt-hour.
However, the current structure of the electricity market is working to permanently eliminate the contributions from most of the state’s nuclear plants. Since the Great Recession, natural gas in the US has been in an oversupply condition, leading to prices that are so low that drilling activity has fallen by a factor of four over the past two years.
The natural gas oversupply condition has been exacerbated by an enormous build-out of mostly industrial scale wind projects supported by tens of billions in federal subsidies under programs like the Recovery Act. When the wind is blowing, natural gas burn rates fall, making suppliers willing to lower prices to attract customers to take their continuously produced product or to store it for later use.
Because of this temporary condition — which will finally be alleviated as the economy experiences an actual recovery, new users for cheap gas enter the market and exports via both pipelines and liquified gas shipments increase — wholesale electricity prices are generally too low to cover the fixed costs of owning a licensed nuclear plant in the United States.
Those costs have risen substantially since 1996, when wholesale markets were restructured, as the Nuclear Regulatory Commission has irregularly imposed costly new requirements in response to distantly related events like 911 and Fukushima. Even the NRC admits that many of the new requirements do little or nothing to improve public safety.
Capacity markets provide a small supplement that works for sources that are cheap to keep in standby, even if they are very expensive to run and cause far more pollution per unit of power generated, but they are insufficient in the case of plants that run virtually non-stop for many months at a time.
At this point, the NYSDPS proposed solution seems to be the best available option for keeping nuclear plants running through the temporary period of natural gas oversupply so that they will still be available to restrain price increases as the market works to rebalance supply and demand.
It will be interesting to see how this turns out. I hope to be able to provide some live commentary on Twitter during the public meeting and will certainly produce a follow-up report about the rally that is planned to occur before the meeting starts.