Do we need more nukes?

Should a green energy strategy include new nuclear generation? Several applications for licenses for new nuclear plants in Texas are pending at the Nuclear Regulatory Commission. Luminant (formerly TXU Generation) has forecasted that the cost of new nuclear units will be $2,500 to $6,000 per kW. That compares to a Texas-specific study of likely costs for renewables made last year that predicts wind, geothermal, fuel cell and solar projects can each be constructed in a kW cost range of $1,900 to $4,000. Add the uncertain future cost of long term storage of nuclear waste and the nuclear green light may turn red.

However, the question of whether Texas should proceed with more nuclear power should not simply be a question of future cost. We need to consider whether the financial commitment of billions of dollars in new transmission to tap millions of dollars spent on West Texas wind generation would become wasted if we proceed with more nukes. Nuclear generation is designed to run 24 hours a day, not simply at times of high demand. Why would there be any need for off-peak power from wind turbines if we add a couple more large scale nuke plants to the grid? Having committed to a wind generation agenda several years ago, should not Texas policymakers encourage generation options that complement that strategy rather than undermine it?

Furthermore, the billions of dollars being spent on West Texas transmission will not facilitate the transmission of nuclear energy. The most likely placement of new nukes will be where nukes currently reside -- at Comanche Peak and the South Texas Project. A critical ingredient for nuclear power generation is water, and lots of it. Water is scarce in West Texas and becoming scarce throughout the state. Forty percent of all the fresh water in the state is devoted to electric power generation from fossil fuels. Can we afford to devote more fresh water for a nuclear generation agenda?

-- Geoffrey Gay

The Quick Effects of Senate Bill 769

Senate Bill 769 – the first major piece of legislation from the 81st Legislature signed into law by Gov. Rick Perry – allows electric utilities to gain more rapid recovery of storm restoration costs through the use of securitization. Although promoted as a way to address recovery costs associated with Hurricane Ike, it’s written in a much broader fashion and so can be used by utilities to recover costs associated with a wide array of major "weather related events" in the future.

While the legislature wanted to insure grid reliability and expedited cost recovery, the rush to get this authorization of piecemeal ratemaking to the Governor resulted in utilities obtaining the right to estimate certain costs and continue to earn a return on hundreds of millions of dollars of abandoned and useless assets until their next comprehensive rate case. The Governor signed the bill on April 16 and already CenterPoint Energy and Entergy Texas have filed applications seeking Ike cost rate surcharges of $677.8 million and $577.5 million respectively.

Hurricane Ike made landfall in September of 2008 and carved a wide path of destruction through Texas. In the end, Ike was the third costliest U.S. hurricane of all time.

-- Pat Jackson

EPA Issues Proposed GHG Finding

It’s been slightly more than two years since the United States Supreme Court ruled in Massachusetts v. EPA that greenhouse gas emissions were pollutants under the Clean Air Act. In a delayed response (it took a change in Administrations) the EPA issued its long awaited Proposed Endangerment Finding for Greenhouse Gases (GHGs) under the Clean Air Act last Friday.

Whether the proposed finding will lead to regulation of GHGs as pollutants under the Clean Air Act isn’t clear. The other possibility being considered in Washington is the Waxman-Markey Bill which was released in discussion draft form in late March. The Waxman-Markey Bill would establish a cap-and-trade program for GHGs and specifically prevents the EPA from using the Clean Air Act to regulate greenhouse gases. The Obama Administration is said to prefer cap-and-trade legislation to EPA rulemaking and likely is using the threat of EPA regulation as leverage to get Congress to act.

Any EPA rule will have to undergo a comment period, and the betting is that no matter what rule they come up with, someone won’t like it.

If this endangerment finding does result in a EPA rule to regulate GHG emissions under the Clean Air Act, lawsuits are likely to quickly follow. If it spurs forward cap-and-trade legislation, who gets capped and who can trade carbon credits will greatly impact an entity’s costs and revenues depending upon which side of that dividing line it falls on.

--Paul Gosselink

Greenhouse Emissions National Reporting Rule

The EPA took the first step toward establishing cap and trade legislation or a GHG regulation on March 10, 2009 by proposing the first comprehensive national system for reporting emissions of carbon dioxide and other GHGs produced by major sources in the United States. This rule was published in the Federal Register on April 10, 2009 and comments must be filed by June 9, 2009.

The rule is designed to establish an inventory of all GHG emissions in the U.S. In other words, in order to figure out what needs to be capped and at what level it needs to be capped the government needs to know what is out there.

This rule will affect approximately 13,000 stationary sources or approximately 85% of all such sources in the U.S.. The rule will require that the following types of facilities will have to report:

1. A facility which will emit greater than 25,000 metric tons of GHGs (huge catchall category)
2. Suppliers of fossil fuels
3. Manufacturers of motor vehicles

Because power producers are unpopular and their emissions are easy to quantify, they are the most likely industry to be capped in the first phase of a cap-and-trade program. The reporting rule would provide the background information to set a cap and to distribute allowances to the power producers, probably on a mega-watt capacity basis (where the amount of GHGs that each power company would be allowed to release would be based on the amount of electricity that it can generate). In later phases, this same information would be used to determine how much the other kinds of facilities could release.

An interesting aspect to the rule is that it will require reporting to begin in the year 2011 for emissions that occur in the year 2010. This means that a final rule will need to be passed in the next eight months – an unusually fast pace for federal rulemaking.

--Paul Gosselink