Tuesday, February 24, 2015

What FERC Does–and What It Can Do For Nuclear Energy

We haven’t written much about FERC, the Federal Energy Regulatory Commission, because, though it is important to energy markets and electricity transmission, it’s work, by and large, is not specific to any specific source. What it does impacts all energy generators – well, perhaps not equally, as we’ll see, but let’s say so for convenience. Let’s say it’s generator-neutral, at least when it comes to transmission.

Here’s the commission’s description of itself:
The Federal Energy Regulatory Commission, or FERC, is an independent agency that regulates the interstate transmission of electricity, natural gas, and oil. FERC also reviews proposals to build liquefied natural gas (LNG) terminals and interstate natural gas pipelines as well as licensing hydropower projects. The Energy Policy Act of 2005 gave FERC additional responsibilities as outlined and updated Strategic Plan
There’s a lot more at the link – FERC’s mandate is pretty broad - and I guess you could say it has a special, NRC-like interest in hydroelectric plants. One of the things FERC does not do: “Regulation of nuclear power plants … .”

But where FERC’s oversight of energy markets intersects with the Environmental Protection Agency’s Clean Power Plan, it intersects with nuclear energy. In fact, in this realm, FERC is key:
FERC will play as important a role as EPA in achieving the objectives of the Clean Power Plan—reducing carbon emissions from the electric sector by 30 percent from 2005 levels by 2030. That goal will be much more difficult to the extent that additional nuclear power plants are closed prematurely due to economic stress caused, in part, by flawed market design.
This is not special pleading. All energy policy – all policy  - is determined by balancing competing and sometimes conflicting goals. If FERC wants to ensure energy diversity and an ample electricity supply, then fine, but it must also account for what the nation wants to do in terms of carbon emission reduction. As it happens, nuclear energy answers to diversity, ample supply and emission reduction – it’s a trifecta of energy policy goals.
There were several reasons for the shutdowns that have occurred—including low natural gas prices, and low growth (or no growth) in electricity demand for several years as the U.S. economy emerges from recession. But these plants’ economic situation was also stressed by out-of-market revenues made possible by federal and/or state mandates, by price suppression that occurs in the energy markets, and by capacity markets that do not fully value the attributes the nuclear plants provide.
FERC last week held the first in a series of technical conferences on the Clean Power Plan, so it’s taking the issue seriously and could effect reforms to ensure that low emissions generators are properly valued. How?
Through its oversight of market design and market policies and practices in the nation’s organized markets, and with appropriate changes to capacity markets and energy markets, FERC could help avert additional [nuclear facility] shutdowns, beyond those that have already occurred. In so doing, FERC would also prevent potential degradation in reliability of electricity service.
These quotes come from a letter sent by NEI to FERC in response to that first meeting. You can read the whole letter here (smallish pdf). Do read the whole thing to get a fuller understanding of the issue. But this is, for many of us, the key bit:
EPA’s proposal is designed to reduce carbon emissions by 30 percent from 2005 levels by 2030, and that goal cannot be achieved without preserving the nuclear power plants that provide approximately 20 percent of America’s electricity, and 63 percent of America’s carbon-free electricity.
Maybe if FERC and its stakeholders could figure out something different, that would be one thing. But there is no other thing - the financial stress put on nuclear plants has the clear potential of precipitating a ruinous outcome. FERC doesn’t – can’t – want that. It’s not just a nuclear energy issue; it’s an existential issue.

NEI has a press release up about this. It’s called “FERC Has Important Role in Achieving EPA’s Clean Power Plan”. Boy, does it ever.

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