Climate change is bad for nuclear power, industry needs a shrinking cap on carbon to survive

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Climate change is bad for nuclear power, industry needs a shrinking cap on carbon to survive
August 26, 2010

Conservatives who oppose clean energy and real climate action typically tout uber-expensive nuclear power as the solution (see Lamar Alexander calls nuclear “the cheap clean energy solution,” renews GOP call for 100 new nukes, which would cost some $1 trillion). CAP’s Richard W. Caperton explains in this Wonk Room cross post how failure to pursue genuine action on climate change – a shrinking cap and rising price on carbon – actually harms the industry (see also “2009 summer heatwave puts a third of French nukes out of action“).

Southeast heatwaveNuclear reactor developers have a compelling reason to support a cap on carbon pollution: the effects of climate change could make it to impossible to run nuclear reactors. For example, the Tennessee Valley Authority (TVA) has drastically reduced power generation at the Browns Ferry nuclear plant this summer:

The Tennessee Valley Authority has lost nearly $50 million in power generation from its biggest nuclear plant because the Tennessee River in Alabama is too hot….

“All the radiant heat gets in the river when you have a summer as hot as this has been,” TVA President Tom Kilgore said.

Browns Ferry is located on the Tennessee River in Alabama and uses river water for cooling. To protect wildlife in the river, TVA is not allowed to raise the river’s temperature above 90 degrees. But this year’s record heat have already raised the river temperature to near 90, so TVA can only use small amounts of water, which limits how much power they can produce. In fact, the air temperature has stayed below 90 only three days since June 9, far above the historical norm. In the 1990s, the TVA decided not to build extra cooling towers because they “estimated that the chance of exceeding the 90-degree temperature limit in the Tennessee River was very rare.”

This situation also gives us a stark reminder of how climate change will take money out of consumers’ pockets. TVA has had to buy more expensive power to make up for the lost production at Browns Ferry. They then pass this new cost onto consumers in the form of a fuel cost adjustment. The new fuel cost adjustment will increase consumer bills by $1 to $3. So, if your utility buys its power from TVA, that’s a $3 loss next month due to warming.

Fortunately, a comprehensive climate bill can fix this problem. The U.S. Environmental Protection Agency found that climate legislation would significantly lower the risk of catastrophic climate change. Now we also know that the nuclear industry’s future depends on putting a cap on carbon.

Every piece of proposed energy legislation we saw this year included incentives for building new nuclear reactors, including loan guarantees, production tax credits, accelerated depreciation rules, and changes to permitting. These would all certainly be helpful, but they ignore the biggest incentive for the nuclear industry: putting a cap on carbon emissions.

Currently, coal-fired generation is less expensive than nuclear power, which adds to the risk of investing in new nuclear reactors. Putting a cap on carbon, however, would make coal-fired power more expensive than nuclear power, making it much more likely that an investment in a nuclear reactor will make money.

This dynamic is at play in Maryland, where Constellation Energy has applied for a loan guarantee for a new reactor from the Department of Energy. According to the Baltimore Sun, Constellation’s project is now at risk, whether or not they get a loan guarantee. Project chairman Michael J. Wallace told the Sun, “When we get the DOE loan guarantee, that certainly is a major step forward for us. We then need to go through calculations on all the other variables to see whether this project can go forward on an economically sound basis. And we have to continue to do that over the next several months.”

That is, a loan guarantee is certainly valuable, and is a critical ingredient in the project moving forward, but it won’t ultimately determine the project’s profitability. The project will sink or swim because nuclear power can compete with coal, which will only happen with a cap on carbon.

– Richard W. Caperton