Other states experiment with New York’s nuclear subsidies

As the first state to implement subsidies to support struggling nuclear power plants through zero-emission credits, New York has caught the attention of other states confronting similar challenges.

New York had been facing the threat of three unprofitable upstate nuclear power plants potentially closing, in part due to cheap natural gas. Gov. Andrew Cuomo’s administration touted the more than $7 billion in subsidies as a way to meet the state’s clean energy goals, keep the plants open and save more than 2,000 jobs. Energy consumers will be paying for the subsidy as an additional fee on their energy bills over the next 12 years and efforts to block the subsidies have stalled in the state Legislature.

New York’s strategy to save its dying nuclear power industry is now spreading to other states, alarming opponents of the plan.

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NRG Energy, which has three natural gas plants and an oil plant in New York, has joined with others to file a lawsuit in federal court against the subsidies in Illinois and New York. “These things are spreading like the plague,” said David Gaier, a spokesman for NRG Energy. “Our position is we will fight these nuclear bailouts wherever and whenever they emerge.” Ohio, Pennsylvania, Connecticut and New Jersey are other states where similar legislation is either under discussion or has already been introduced.

Dean Ellis, a senior vice president for regulatory and government affairs at Dynegy, which owns one gas plant in New York and has joined the lawsuits, also warned about a “contagion” of such policies. “They’re using the New York playbook to justify subsidizing their reactors in those other states.” He suggested that upstate job concerns led New York to rush to approve the proposal, rather than safety or environmental worries.

In both Illinois and New York, Exelon Corp. operates the nuclear power plants in question and the company defended public financial support for its plants. “In the absence of coordinated federal policy to address climate change, states ... can serve as incubators for innovative policies to address complex economic, environmental and energy challenges, as was recently and successfully demonstrated in New York – and following in its footsteps Illinois – with the adoption of programs to support zero-emissions nuclear plants,” an Exelon spokesperson said in a statement.

In April, New York’s Clean Energy Standard went into effect, which mandates that 50 percent of the state’s electricity come from renewable energy sources by 2030. It marks a transitional period for the state’s energy production, as the Indian Point nuclear power plant in Westchester County will go offline by 2021 and a small wind farm off the coast of Long Island was approved earlier this year.

“There is a little bit of irony that the guys who are trying to keep old coal plants alive are simultaneously arguing about the need to keep nukes alive because of protecting the environment.” – Karl Rábago, executive director of the Pace Energy and Climate Center

State Chairman of Energy and Finance Richard Kauffman said in a statement that the closure of the upstate nuclear plants would have resulted in a spike in carbon emissions, just like Germany has experienced following its nuclear shutdowns. “(The program) gives time for the state to build renewable energy from wind, solar and hydro to achieve the mandate of 50 percent of electricity consumed to come from renewables by 2030. We would fall well short of these goals ... if we suddenly lost the emissions-free power now provided by the federally licensed nuclear power plants in upstate New York,” he said.

Industry experts pointed to the pressures of cheap natural gas and New York’s ambitious carbon reduction goal as greater context for the subsidies and New York’s role as a pioneer. “I think New York was the first (state) to figure how to translate this carbon reduction goal into something that actually is a market signal through a zero-emission credit,” said Matt Crozat, senior director for business policy at the Nuclear Energy Institute.

Darren Suarez, director of government affairs at The Business Council of New York State, said that New York “has put the issue on the front burner for many states and it certainly has set a path that many states have looked at.” He added that another factor that set New York ahead was its empowered state Public Service Commission.

“Illinois started the conversation earlier, but Illinois required legislation and the same is true for Connecticut,” Suarez noted, as it will for Pennsylvania. “In Pennsylvania one of the things you certainly see as a result of New York's adoption of a program … there's considerable concern from consumers … about the cost of what a nuclear subsidy would look like. Maybe having the legislature involved in that process (in New York) would have helped to provide more transparency in that process.”

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Karl Rábago, executive director of the Pace Energy and Climate Center, noted that Illinois had directly cited the New York approach. In New York, he said he was willing to go along with the subsidy as a path toward building up other zero-emission energy sources before eventually shutting down nuclear power plants.

But in states like Illinois and Ohio, “there is a little bit of sort of irony that the guys who are (also) trying to keep old coal plants alive are simultaneously arguing about the need to keep nukes alive because of protecting the environment,” he said. “Leaders don't always get to choose their followers.”

While he expressed concern that the legal challenges could set a problematic precedent for states’ abilities to determine their energy policies, he also said he would not want to see New York as a model to “bail out the nuclear power industry.”

Crozat noted that a recent report by the National Conference of State Legislatures highlighted New York as an example. “That sort of became the way that the New York approach became well understood across legislatures in the country, which speaks to kind of the trailblazing role that New York took on this one.”

Charging and recharging

INDIAN POINT

While Gov. Andrew Cuomo championed new subsidies to keep upstate nuclear power plants open, his administration announced a deal in January to close the Indian Point nuclear power plant by 2021 due to its proximity to New York City. Some state lawmakers and local officials criticized the agreement, citing the loss of jobs and taxes. Others questioned whether there will be enough replacement power to maintain the reliability of the state’s electrical grid without significantly raising rates. In the face of criticism, the Cuomo administration in February announced the creation of a task force to explore the closure’s impact on local communities.

RELATED: How will New York replace Indian Point?

CARBON PRICING

In January, Cuomo also pledged that the state would cut greenhouse gas emissions by 30 percent between 2020 and 2030, and called on the Regional Greenhouse Gas Initiative – a multistate effort to reduce carbon emissions – to follow his lead. But in recent months, discussions about a carbon pricing scheme at the state level have gained steam in reaction to the controversial move to subsidize three upstate nuclear power plants. In comments submitted to a Federal Energy Regulatory Commission conference last month, the trade group Independent Power Producers of New York suggested “adopting a market-based approach that provides a single, market-wide carbon price” as one potentially fairer alternative to the Cuomo administration’s current approach.

CONSTITUTIONALLY CLEAN?

Ahead of a ballot question before voters this fall on whether to hold a state constitutional convention, environmentalists and like-minded lawmakers are making an early push for an environmental bill of rights during the legislative session. The proposed constitutional amendment is sponsored by state Sen. David Carlucci and Assemblyman Steven Englebright, and supporters have cited the water contamination crisis in Hoosick Falls as one example of why the amendment is needed. It has passed the Assembly but remains in committee in the state Senate and has drawn opposition from business groups.

WHAT GOT DONE

One bipartisan victory in the state budget this year was passage of the $2.5 billion Clean Water Infrastructure Act, which will fund capital investments in drinking water and wastewater infrastructure. The budget also maintained $300 million for the Environmental Protection Fund and included $900 million for the NY Parks 2020 initiative that would modernize the state park system.

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