Utilities may not have to close coal plants after all
On June 29th the US Supreme Court threw out EPA’s coal emissions regulations that if implemented would have forced many utilities to close older coal-fired plants.
The new emissions controls are aimed at mercury and other toxic pollutants which are not removed from stack emissions by current air pollution controls.
Had the regulations gone through, they would have stimulated several responses from utilities.
First, they would have closed older coal-fired plants that were too costly to upgrade to meet new emissions standards. Some utilities, such as Ohio’s First Energy, have already done so.
Second, it would have set off a construction boom in gas fired power plants to make up for the lost generation capacity. TVA is already going down this road.
Finally, it might have opened the door for some utilities to look more closely at small modular nuclear reactors (SMRs) as replacements for coal fired power plants. First Energy, TVA, and Ameren were among the utilities investing time in exploring this option.
The court ruling will require EPA to reconsider the regulations in light of the cost-benefit issue. if it comes forward with new regulations, which are less costly to industry, they will also surely be less stringent in their effects on utilities. Some coal-fired plants will still likely close, and be replaced by gas plants.
Less demand for SMRs
However, less pressure on utilities to give up coal plants altogether due to new emissions controls will also reduce interest in SMRs as replacements for them.
In the absence of action-forcing mechanisms of one kind or another, few utilities are going to shift from fossil to nuclear just because the science of global warming is established fact.
Some energy analysts, and investors in SMRs, believe that once the regulations came into effect, some utilities might be interested in SMRs to replace coal fired boilers at existing sites since all the other infrastructure was already in place.
SMR designs range from 50-300 MW and some vendors plan to offer duplex or six pack configurations which easily match smaller coal fired plants in terms of power generation capacity.
However, two of the early leaders in the field, B&W and Westinghouse, more or less stopped all development work in 2014 citing a lack of customer interest.
This latest development may affect the remaining vendor, NuScale, which is proceeding towards submitting a design to the NRC for safety review sometime in 2016. NuScale’s work is being supported by a cost sharing agreement with the Department of Energy.
EPA still may come forward in the future with a new set of stringent regulations, based on new calculations. If it does, the pressure may be back on to shift from coal to SMRs, but that scenario is still likely to take place sometime in the future.
NuScale and other SMR developers may be watching EPA closely to see what it does to re-issue the coal emissions regulations. If the agency does come forward with a defensible and strong set of new standards, they may yet provide an incentive for utilities to consider SMRs.
History of the Court Case
The New York Times reports industry groups and some 20 states challenged EPA’s efforts to regulate the emissions. The court said the agency did not properly account for the costs of regulatory compliance relative to the costs that would be imposed on utilities. .
The NYT notes that industry groups said the government had imposed annual costs of $9.6 billion to achieve about $6 million in benefits. The agency said the costs yielded tens of billions of dollars in benefits.
The decision, Michigan v. Environmental Protection Agency, No. 14-46 was a setback for environmentalists.
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If the EPA has to now revisit the cost-benefit rationale of mercury emission rules for power plants, does that set a legal precedent for the nuclear industry to challenge the EPA’s costly and overly conservative radiation regulations for nuclear power plants?
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What are the criteria for the required cost-benefit analysis? My understanding is that the regulation has not been voided but just requires the EPA provide a reasonable cost-benefit analysis for consideration based on the agencies mandates. That shouldn’t be too hard as long as the mandates don’t include some vague language such as ALARA. It would be impossible to create a complete and perfect cost-benefit analysis that could encompass every possible benefit or cost. Possible benefits: save a $1 more medical costs, save additional life, add one additional job, save on hour of life span for one additional American or foreigner, save one additional animal, save a couple more ameba, save two additional brain cell, increase average IQ by 0.001, change the plant emission color, sound or smell, reduce trauma from fear, improve public confidence in the industry, etc. Possible cost: increase electrical cost $0.01 Kwh, cost impacts unfair to lower income families, lose a job, high energy demand consumer products may increase in cost, have to put captured toxic products (poisonous forever) in coal’s Yucca Mountain equivalent, industry may export energy jobs to neighboring countries, etc. I personally would like to see a non-biased cost-benefit analysis done by both agency and industry on nearly all regulation to expose each parties biases. I also understand that someone has to eventually separate the crap from an honest assessment and make the hard decision.
Note that the NRC has issued an RFC tying together three challenges to LNT-based policy. A successful challenge to LNT-based policy would make a huge difference to the nuclear industry.
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Not good news for nuclear power. In 2016 there will be either:
1. Republican President/Republican Congress – the EPA will back off the ruling, coal will resume being king, nuclear will be second fiddle.
2. Hillary as President/Democrat Congress – EPA and its ruling will get new emphasis but nuclear will be even worse off as Hillary is as antinuke as Obama.
In Hillary Clinton’s entire political career she has only one statement on the record about nuclear energy that I can find with a Google search. it is a vanilla statement about “the energy ix” of existing plants. That’s not much to go on. However, when Bill Clinton was President he presided over the cut off of funding for the Integral Fast Reactor and the budget ax was swung by current Sec of State John Kerry while he was in the Senate.
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Dan, as I wrote you by email, I think this is a very important post about the Supreme Court, the EPA, and coal regulations. Thank you for writing it.
However, I think that jumping from this ruling to the future of SMRs is a leap too far. Right now, coal is duking it out with new natural gas, or with natural gas/renewables, not with new nuclear. New nuclear is happening in some areas, but it is not one-to-one replacement of coal plants.
SMRs are one potential type of new-nuclear. The force that is impeding SMR deployment can be stated in two words: regulatory approval.
I was at the Boston Nuclear Matters/Bloomberg meeting which Rod Adams reported upon in a recent blog post. The amount of money that NRC would require to begin licensing new types of reactors is beyond what any company can realistically provide. To quote Rod’s post: “Three out of four of the members of that panel agreed that the current structure and funding model for the Nuclear Regulatory Commission makes it virtually impossible to develop, license and build anything other than a large light water reactor in the United States.” The three panelists who agreed on this statement were people involved in designing and hopefully building new types of reactors (including NuScale SMRs): the one panelist who differed was a man from Lightbridge. Lightbridge is developing a new type of fuel for large LWRs. This panelist believes that the NRC can effectively review and license the new fuel type.
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Reform of the NRC’s regulatory thicket relative to SMRs is worth while. However, first there has to be basic market demand for the technology. That won’t happen as long as coal is king.
The SCOTUS ruling merely reverses the D.C. Court of appeals decision and sends the case back to the lower court to be redecided. The EPA will crunch the numbers, assuming they haven’t done so already, and clearly demonstrate the cost benefit of the regulation. Though the regulation is temporarily suspended, it appears that the higher court’s ruling, combined with the abundance of natural gas, will have little effect on utility decision making regarding new sources of electric power generation.
EPA failed to satisfy the legislative mandate to calculate costs. The agency did fine on benefits. Low priced natural gas will continue to have the attention of utilities regardless of the outcome of the case. However, not all utilities are willing to place all their bets on gas. We’ll have to see. In the meantime, the marketing pitch that SMRs are replacements for older coal plants may not carry as much punch.
Agree with Meredith’s comments above – a bit early to start throwing wet blankets on an emerging technology based on one (seemingly) not even final court ruling.
Not a wet blanket, just a reality check.
The reality is utilities will make decisions to build new generation for a variety of reasons – new carbon standards being one; fuel diversity being another; anticipated load growth; need for carbon-free generation etc. Here in Washington state, EPA regs were not needed to force the closure of the only operating coal plant by 2020. The state legislature did that.
I think your “reality check” is a bit out of date about reality. Back in the day when I was at EPRI, it was indeed a nuclear-versus-coal rivalry. Now, newly-built plants are almost all natural gas plants, with a few nuclear builds. The choices are nuclear versus natural gas, in my opinion.
Which means (as I said above) that the regulatory hurdles for new nuclear are important. However, this EPA ruling isn’t important (for nuclear). It would have been important — thirty years ago.
However, I respect you a great deal, and I don’t want to claim that the only possible reason for your comments is that you are thinking about the reality of the past. Perhaps you are actually predicting a future in which natural gas is much more expensive? That day could indeed come, at which point it might be nuclear versus coal, yet again. But if “expensive natural gas” is an important part of your assumption about the future of electricity production in America, I think you should have made that assumption more explicit. Because, today, right now, the plants that are being built are natural gas plants.
I recognize the reality of cheap natural gas. What I think the SMR promoters have not fully factored into their thinking is the tenacity of the coal industry to prevail with utilities in terms of keeping coal plants open. Every coal plant that stays open thwarts a gas build, but it also thwarts an opportunity new SMR to replace just the boiler while leaving the rest of the plant infrastructure in place.
First, the nuclear industry said a carbon tax would open up the market to SMRs. Then, it said EPA’s strict emission standards on coal would do that. Well, neither have come to pass.
Besides, if you read the whole blog post, I don’t throw the baby out with the bath water. I’m just skeptical about hype.
I am also skeptical about hype, so I understand what you are saying.
I see coal (in the Northeast) constantly replaced by natural gas, and your blog post gives other examples of this phenomenon. That is why I think this ruling doesn’t affect the future of SMRs all that much. At any rate, I don’t think we have a major disagreement here. I appreciate this post, as I said before, and thank you for posting it.
This issue is somewhat confusing because the EPA DID perform a cost benefit analysis; one that showed that the benefits (economic as well as public health) greatly outweighed the costs. Subsequent articles on the matter clarified that the whole “issue” was that EPA performed that analysis too late in the process. The significance of that arcane distinction escapes me. Anyway, it seems clear that this will only cause a minor delay, with EPA having to go back and do some more work/documentation. After all, the cost/benefit analyses HAVE been performed, and they justify the new rule.
The fact is that, regardless of when these rules are finally promulgated, no new coal plants are being built, and old coal plants are being retired at a rapid clip. While it’s true that a somewhat slower retirement rate could have some marginal impact on demand for SMRs at some point in the future, I agree with Meredith that the main question with respect to SMRs economic viability is whether or not they will be competitive with (future) natural gas.
The regulatory and fab QA burdens placed on SMRs will have a significant impact on their future competitiveness, which leads us to Marc’s very interesting question. Does this ruling set any kind of precedent, which could be used by the nuclear industry to demand cost/benefit analyses for nuclear regulations? The truth is that, while EPA has almost always performed such analyses to justify its regulations, NRC has almost never done so. (They’re just starting to consider such issues with respect to some of their new regulations only.)
The government’s official policy is that industry should spend ~$10 million to save one human life. I agree that cost/benefit analyses applying that criterion should be applied to the new EPA coal plant rules (the proposed regulation will pass that test by a wide margin.) But all NRC regulations (past, present and future) should also be tested against that criterion. My personal view is that the great majority of NRC regulations would fail the test. My guess is that if you take the cost of the overall body of (all) NRC regulations and divide it by the number of lives saved, the overall cost would run well into the billions of dollars per life saved (or is it infinity, as Fukushima showed that even worst-case meltdowns cause few if any deaths). NQA-1 (fab QA)? Forget it!
The question is whether the nuclear industry would ever have the guts to try and pursue such legal challenges (based on this possible precedent). It has never stood up for itself in the past, which is much of the reason for its current predicament (of high costs).
One final thought, with respect to any precedent. The justices often referred to the requirements of the Clean Air Act. Apparently, the act requires cost/benefit analyses to justify new EPA rules (which may be the reason why EPA has always performed them). Alas, it may be that there are no similar laws that place similar legal constraints on the NRC. NRC can basically do whatever it wants. Thus, there may not be a legal precedent, unfortunately.