Vol. 3, Issue 1 | March 2018
Whether seeking out information on advanced reactor technology or digging for clues on the future of Yucca Mountain, The News Reactor is your repository for the latest nuclear news and trends. In this quarterly newsletter, NCSL’s Energy Program tracks recent developments in the nuclear industry—tracing the fuel cycle all the way from mining and energy production through to the handling of spent fuel and the cleanup of the federal weapons complex. The News Reactor spans a variety of issue areas, including energy, transportation and the environment, while keeping an eye on federal action and policy implications from the state perspective.
Attendees at NCSL’s Capitol Forum in December in Coronado, Calif., heard a discussion on recent actions related to the future of U.S. nuclear waste storage that included presentations from Energy Northwest and the Nuclear Energy Institute. The session was one of a number of energy-related issues discussed during NCSL’s Task Force on Energy Supply meeting. You can find out more and access slides on the meeting page.
The U.S. Department of Energy’s (DOE) annual National Transportation Stakeholders Forum will take place June 4-7 in Omaha, Neb. DOE hosts the event to communicate with states and tribal governments about the shipment of radioactive waste and materials—in particular responsibilities surrounding the packaging and transportation, emergency management, security, inspection and enforcement, and radiation protection. For more information, contact Kristy Hartman.
Registration is now open for the 2018 NCSL Legislative Summit, July 30-Aug. 2 in Los Angeles. Connect with legislative peers and policy innovators and explore the constantly changing work of state legislatures. From skills training to policy deep dives, you’ll take home ideas you can put into action in your state. In addition, the Task Force on Energy Supply will meet on July 29 followed by the annual half-day Energy Policy Summit on July 30. Sessions will explore energy innovation and whether the U.S. can beat its global competitors, changing electricity market dynamics, electrification and much more. Please contact Kristy Hartman for more information.
It’s fair to say that the new build projects in the U.S. aren’t exactly inspiring others to follow suit. The V.C. Summer two-reactor project in South Carolina has been indefinitely suspended after it ran billions of dollars over budget. Meanwhile, Georgia regulators have given the go-ahead to finish Plant Vogtle’s two-reactor project, which is also significantly over its original budget—by $10 billion, according to some estimates. Opponents have attacked the financing mechanisms enacted in both states to help build the projects: advanced cost recovery, which allows utilities to collect financing costs on a project prior to its completion. South Carolina H.B. 4375, which passed on a 119-1 vote, would suspend charges to ratepayers until the issue has been decided in court. Not only that, but the House voted similarly to remove and replace all sitting regulators on the state Public Service Commission (PSC), in addition to bolstering ethics requirements for the PSC. Meanwhile, two bills in Georgia (S.B. 393 and S.B. 355) would exempt certain customers from paying the tariff or exempt certain costs from being recovered altogether. While Florida doesn’t have a project under construction, H.B. 6071 would repeal a similar law on the books.
New Jersey lawmakers are considering another bill to support the state’s nuclear plants this session—a bill that could be more sweeping than the first. After a focused measure to establish Nuclear Diversity Credits (NDCs) failed during the lame-duck session, a new bill (S.B. 877) has emerged which incorporates a number of ideas from Governor Phil Murphy’s broad clean-energy agenda. The NDCs are still a primary driver in the legislation and could cost around $300 million annually. NDCs are set up similarly to the Zero Emissions Credits (ZECs) in Illinois and New York, and could be used to subsidize the carbon-free electricity from nuclear plants deemed beneficial to the state. In late February, the bill passed out of a joint committee. Public Service Enterprise Group has said its four reactors in the state would likely close without intervention. One nuclear plant that won’t benefit is Oyster Creek, which announced it would shut down in October—one year earlier than scheduled in agreement with the state. Oyster Creek is the oldest operating nuclear plant in the U.S., having come online in 1969. In a deal with the state, the plant’s owner agreed to cease operations by 2019 in order to avoid the costs of building cooling towers.
Another state that has seen a variety of proposals in recent years is Ohio, where lawmakers are again considering a measure (S.B. 155) that would establish a ZECs program. Similar measures failed to gain much traction in previous sessions, but a key date is on the horizon for the owner of the state’s two nuclear plants, FirstEnergy Corp., as a $100 million debt payment is due in April. FirstEnergy has painted a bleak picture for the future of the plants, but has so far delayed making a final decision to announce their closure. However, the bill—along with two others—appears to be in limbo, as the chairman of the Senate Public Utilities Committee has said he doesn’t plan to hold hearings or a vote on them.
Arizona is home to the largest nuclear power plant in the U.S.—the three-reactor, 3,990-megawatt (MW) Palo Verde plant outside of Phoenix—and a number of proposals aim to answer that question. The Arizona legislature has three resolutions in support of nuclear energy up for consideration. Two of the resolutions—H.C.R. 2017 and S.C.R. 1018—have passed their respective chambers and await action on the other side of the rotunda. Both of these resolutions express the state’s support for nuclear power and Palo Verde’s contributions. A third resolution (S.C.M. 1003) calls for federal and state regulators to implement policies that recognize the benefits of nuclear power and to protect them from conditions that could lead to premature closure. At the same time, two rival initiatives aim to raise Arizona’s clean energy standard—one of which would include a carve-out for nuclear, while the other wouldn’t. A commissioner with the Arizona Corporation Commission has outlined a proposal that would require 80 percent of electricity sold by state utilities to come from renewables and nuclear by 2050, along with the deployment of 3,000 MW of energy storage by 2030. A rival proposal—pushing for 50 percent renewables by 2030, without nuclear included—has come in the form of a ballot initiative that would amend the state constitution and will be put to voters in November.
Idaho and Missouri have introduced legislation that could benefit developers of small modular reactors (SMRs). Idaho, in particular, is the site of a proposed SMR project from NuScale Power—one such developer that appears closest to bringing a project online. The company’s timeframe calls for its first plant, which would be located at the Idaho National Laboratory, operational by 2026. Two bills in the Idaho legislature (H.B. 591 and H.B. 592) would provide certain tax exemptions for new capital investments that could benefit the project. The bills have passed the House and are moving through the Senate. Meanwhile, Missouri will consider H.B. 2222, which would create a nuclear power mandate in the state for SMRs—set at 2 percent of electricity sold. However, the mandate has a jobs component and wouldn’t come into effect unless an SMR production facility is operating in the state.
The central question in Connecticut has always been whether Dominion Energy’s Millstone nuclear plant actually needs the money. In an attempt to find a middle ground, in late 2017, legislators passed a measure which would allow the plant to sell its power in more lucrative markets geared at renewables—but only if a state agency finds it’s necessary. To that end, Dominion has provided state regulators with confidential financial information for the first time, although the state says it hasn’t provided evidence that the plant is in danger of closing and in need of increased profits. A report examining Millstone’s financial position suggested the plant would likely remain profitable through 2035. Despite this, Connecticut regulators said in the report that there was sufficient reason to permit Millstone access to the more lucrative market. Their reasoning? The plant is critical to the state and region in terms of fuel security and meeting greenhouse gas reduction targets, and could cost ratepayers up to $5.5 billion to replace the plant’s zero-emission power in the event of the plant’s sudden closure. The state has asked Dominion to provide more convincing evidence of its need for the support. State legislators will review the report for possible action.
In addition to Oyster Creek closing one year ahead of schedule, two other nuclear plants have made news over early shutdowns. Two years ago, Diablo Canyon, California’s last operating nuclear plant, announced its intention to shut down by 2025. In January, the state’s regulators approved a plan that allows for that to happen, though it significantly reduced the amount Pacific Gas & Electric can recover from customers to pay for the plant’s shutdown. In addition, the owner of the Duane Arnold nuclear plant in Iowa announced that the plant may be forced to shut down after its current contract expires in 2025. The plant’s operating license takes it through 2034, but without a contract extension—something seen as unlikely to happen in the current market conditions—it would likely shut down. For more information on the issue of premature nuclear plant closures, the factors driving this trend and what states are doing in response, please read NCSL’s report, “State Options to Keep Nuclear in the Energy Mix.”
While many ratepayers may be happy with the prospect of scrapping cost recovery, the potential buyer of a troubled utility isn’t. Dominion Energy has proposed a $7.9 billion deal to purchase SCANA Corp., one of the utilities in dire straits due to the failed Summer project, and assume the utility’s $6.7 billion in debts. That deal is now in peril as Dominion has said its purchase is contingent on the legislature backing down from its threat to repeal cost recovery. SCANA’s partner in the Summer project could also change hands as a result of the failure. State-owned Santee Cooper has reportedly garnered interest from three companies, including NextEra Energy, in a deal that could be worth up to $16 billion.
While we’re at it, we may as well highlight a couple of other big mergers waiting in the wings. Westinghouse Electric Co., was the first casualty of the Summer and Vogtle projects, filing for bankruptcy protection in March 2017. Toshiba Corp., which owns Westinghouse, announced recently that it would sell the nuclear manufacturer to Toronto-based Brookfield Asset Management in a deal worth $4.6 billion. The acquisition could help Westinghouse move out of bankruptcy prior to the end of Toshiba’s fiscal year. On the nuclear waste side of things, Waste Control Specialists (WCS) has been purchased by an investment portfolio, J.F. Lehman & Co., ending the uncertainty that had arisen under its previous owner, Valhi Inc. WCS asked the Nuclear Regulatory Commission (NRC) to suspend its application review for a high-level waste interim storage facility, pending a proposed merger with EnergySolutions, a company involved in nuclear decommissioning. After a judge blocked the merger, WCS’s future appeared in limbo. Meanwhile, its primary competitor, Holtec International, has submitted an application for its own interim storage facility with the NRC. The application proposes to store more than 8,600 metric tons of nuclear waste at a facility in New Mexico for up to 40 years.
Energy Secretary Rick Perry’s directive to provide cost-recovery to fuel-secure resources like nuclear and coal plants has been unanimously rejected by federal regulators. In early January, the five commissioners at the Federal Energy Regulatory Commission (FERC) rejected Perry’s directive, which would have mandated changes to competitive electric markets through a Grid Resiliency Pricing Rule. However, that doesn’t mean the conversation over pricing is over. This has, after all, been the central question facing states with at-risk nuclear plants, and several states have decided to implement policies aimed at stemming the financial losses to keep these plants operating. Now, a number of market operators have filed their own proposals with FERC to change the way markets compensate certain resources. For example, ISO-New England and PJM Interconnection have each filed proposals to change their capacity markets to account for the subsidies received by certain generators, while PJM has also issued a price-formation proposal that would raise prices in order to provide incentives to “inflexible” units, like coal and nuclear. It appears the debate over how to price electricity is just heating up.
After finding itself on the chopping block during the tax overhaul passed by Congress in December, the nuclear industry secured a significant win in February when the nuclear production tax credit (PTC) was extended in a budget bill. The PTC is viewed as imperative for the Vogtle project to be completed. Due to the delays in construction, the project would have come online too late to benefit from the original PTC, which required units to enter commercial operation before 2021. The recently passed budget act, H.R. 1892, allows reactors entering service after 2021 to qualify for the PTC—set at 1.8 cents per kilowatt-hour over eight years. The open extension means that, as the law currently stands, proposed projects like NuScale’s SMR project in Idaho—scheduled to be operational by the mid-2020s—could also benefit.
Not only is the PTC a big political win for NuScale, but the company has had a number of regulatory victories in recent months as well. After the NRC accepted its 12,000-page design review application, the agency also approved a key safety feature for the company’s reactors. The NRC agreed with NuScale’s contention that its design eliminates the need for its SMR plants to maintain redundant connections to the power grid for safety operations, as the company’s design would make the reactor safe even without backup power. It’s the first company to receive such an approval. In addition, a recent DOE report identifies SMRs as potentially powerful tools in adding resilience to the nation’s grid and critical facilities. It recommends that the Tennessee Valley Authority’s proposal to build SMRs at Clinch River could provide Oak Ridge National Laboratory with clean and resilient power, and also recommends allowing federal agencies to enter into power purchase agreements with SMR generation for up to 30 years.
President Donald Trump’s administration has issued a new nuclear weapons policy, marking a significant shift away from disarmament and toward modernizing the weapons that still exist. Officials argued that the shift is necessary to counter Russian attempts to modernize their nuclear arsenal, even while staying within the terms of a treaty between the two countries. The new U.S. policy commits to countering the Russian efforts by deploying more novel tactics and technologies, including new low-yield nuclear weapons that would modernize the country’s nuclear weapons program. The price tag could reach beyond $1.2 billion, according to the Congressional Budget Office. Meanwhile, the head of the National Nuclear Security Administration, Frank Klotz, retired from his post in late January. The semiautonomous agency, housed within DOE, oversees the nation’s nuclear stockpile, and is charged with updating and maintaining the arsenal. Klotz had been on the job since 2014. The Trump administration nominated Lisa Gordon-Hagerty, a nuclear expert who has worked at DOE, as Klotz’s replacement. She received Senate confirmation in February.
DOE has announced another reorganization, including a separation of the department’s energy and science components, and changing roles for DOE undersecretaries. DOE will once again have three undersecretaries, responsible for energy, science and nuclear security. The change reverses a shift confirmed by former Energy Secretary Ernest Moniz to establish a single undersecretary for science and energy—a move intended to increase collaboration and synergy between the two areas. The Office of Science funds the research conducted at universities and runs 10 of the 17 DOE national labs, while the Office of Energy focuses on energy policy, applied technologies, energy security and reliability. The Office of Environmental Management, along with the Office of Legacy Management, will be housed under the Office of Science.
A collaboration between the Los Alamos National Laboratory and the National Aeronautics and Space Administration (NASA) could bring nuclear power to the red planet. The Kilopower project aims to develop a small, reliable power source for extended stays on the surface of Mars or other scientific missions in deep space. Their choice: a “space-qualified nuclear reactor,” which is currently undergoing testing in Nevada. The prototype reactor is designed to generate up to 1 kilowatt (kW) of electricity, but can be scaled to a capacity of around 10 kW—with an assortment of these reactors used in tandem, like emergency generators. With these, manned missions would be able to charge electric vehicles, supply drinkable water and breathable air. Testing is expected to be completed on the prototype in March.
The French nuclear powerhouse Areva Group has been undergoing a significant restructuring, as it split its nuclear reactor business from its nuclear waste management business. A part of that transformation has included the renaming and rebranding of the new companies. Areva’s nuclear reactor business was renamed Framatome after it was sold to Électricité de France, the government-owned utility and reactor operator. In addition, Mitsubishi Heavy Industries and Assystem, a French nuclear engineering company, have purchased minority stakes in Framatome. The remainder of Areva, consisting of its waste management and nuclear materials development operations, has been renamed Orano. Its activities will focus on uranium mining, conversion and enrichment, used fuel recycling, nuclear logistics, decommissioning and engineering. Meanwhile, France has committed to reducing its reliance on nuclear power. The country generates 75 percent of its electricity from nuclear plants, but the current government has said that it won’t do so if it means increasing carbon emissions—something that has happened in Germany since it prematurely shut down its nuclear industry following the Fukushima disaster.
France and China announced a number of cooperative agreements in early 2018 to strengthen nuclear collaboration. China General Nuclear signed an agreement with the French Alternative Energies and Atomic Energy Commission to focus on collaboration in the areas of nuclear reactor technologies, advanced fuels and materials, and the nuclear fuel cycle. The agreement also enhances collaboration in the nuclear supply chain and concept development for generation four reactors. In addition, Orano has signed a memorandum of agreement with China National Nuclear Corp. (CNNC) for the construction of a $12 billion used fuel processing and recycling facility in China. The announcement came during a visit from French President Emmanuel Macron, although there appear to be some obstacles to the deal being finalized. One of those issues is the record-low cost of uranium at the moment. The news came shortly before Chinese regulators approved CNNC’s merger with China Nuclear Engineering and Construction Group. The move actually constitutes a re-merger of the two companies in an attempt to streamline the state-owned industry to improve efficiency. They first split in 1999 during a government-led restructuring. The combined company holds around $100 billion in assets and employs more than 150,000 people. Stay tuned for updates regarding the new company’s name.