Tuesday, January 12, 2016

The 2016 State of the Union and Nuclear Energy Policy

Alex Flint
The following is a guest post by Alex Flint, NEI’s Senior Vice President of Governmental Affairs. For a Q&A with him on the nuclear energy industry’s legislative priorities for 2016, click here.

Tonight, President Barack Obama will deliver his eighth State of the Union address. For the first time, House Speaker Paul Ryan (R-WI) will sit behind him to his right, thinking “I could do that.” Of course, behind him to his left, Vice President Joseph Biden will be thinking the same thing but with the sorrowful knowledge that his time has passed. Finally, in front of him, at least a dozen U.S. Senators, some of whom are currently running for President, will also be thinking, “I could do that.”

The pomp and circumstance is always a bit fun. I always look around to determine which member of the cabinet doesn’t attend — it’s a nasty little Cold War flashback, but at least someone is thinking about these things.

Also, some of the Supreme Court justices seem less enthusiastic than they used to be about sitting through the entire speech. It’ll be interesting to see if they all show up.

Meanwhile, the president will use his considerable oratory skill to take some credit for his accomplishments over eight years. I’m sure enactment of the Affordable Care Act will take center stage along with some unexpected accomplishments like the restoration of relations with Cuba.

President Obama at 2014 State of the Union
I’ll be quite surprised if his administration’s effort to address climate change doesn’t receive second billing right after healthcare reform. When the Supreme Court ruled in 2007 that the EPA had the authority under the existing Clean Air Act to regulate greenhouse gasses, it set the stage for what was to come. I credit two people; Carol Browner and John Podesta, successive assistants to the President and formidable Washington power players, with recognizing the opportunity and knowing which levers of government to pull to affect major changes in our energy economy.

Carol Browner
Under Browner’s leadership, the administration engaged in a major effort to pass climate change legislation. When that failed, it was the quieter but skillful leadership of Podesta that led the administration to address the issue without legislation. To my way of thinking, it was Podesta, realizing the Congress was hopelessly divided on the issue, who determined that the president’s agenda could be advanced without Congress through rulemaking and international obligations. The result was the EPA Clean Power Plan and the Paris Agreement which will result in even further changes in the U.S. energy sector.

I say “even further changes” because a dramatic transformation of the electricity sector is already underway. Energy Information Administration data shows massive shifts in the way we generate electricity. The use of coal is down 20 percent, natural gas generation is up 27 percent, nuclear is pretty steady but down 2 percent, and wind is up 200 percent (yet still produces only a small fraction of U.S. electricity).

John Podesta
I do think the President has to be cautious about taking credit for all this change. True, his Clean Power Plan and the Paris Agreement lock in these changes and compel more, but that is mostly prospective. To date, the revolution in U.S. natural gas production is by far the biggest energy game-changer in recent decades. Frankly, the increased natural gas generation of electricity pushed a lot of coal-fired power plants out of the market and kept electricity prices low so that the President could impose strict limits on greenhouse gas emissions without raising consumer prices and creating a political backlash. Imagine that; one of President Obama’s most significant accomplishments made possible by the U.S. oil and gas industry. It sounds amazing, but I think Podesta saw it coming and, being the consummate Washington insider, knew it gave the president room to advance his climate agenda.

In this context, something needs to be said about the President’s support for nuclear energy. My overarching impression is that really smart administration officials including Browner, Podesta, and even the president himself, know nuclear energy must have a large role (and I would say the largest role) in providing low-carbon electricity. That is why the administration has been somewhat supportive of five new nuclear plants being built during the President’s term in office. They know they need the clean electric generation.

Yet nuclear energy doesn’t fit the political model they’ve constructed in which regulations reduce coal generation, the government encourages renewables, and natural gas expands to fill the gap. So, for the time being, nuclear energy is the under-appreciated workhorse – except perhaps at EPA.

Most likely, when the president discusses his climate accomplishments, the congressional response will be partisan, telling us that broad energy and climate legislation remains years away. That means the ball remains in the White House’s court. Podesta is now chairman of Hillary Clinton’s campaign, and I wonder what his role will be on a potential Hillary Clinton White House. (I’d say something about potential GOP insiders, but that field is just too crowded to sort through right now).

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