Nuclear Subsidy Costs Rise Again as State-Projected Savings Fail to Materialize

Our electricity rates are going up again this year to bail out unprofitable nuclear power plants in upstate New York. On April 1, 2021, the cost of New York’s nuclear bailout will go up by a scheduled $49 million to a total of $590 million per year ($1.6 million per day). Every electricity consumer in the state pays for the bailout, including residents, businesses, and municipalities. This program is on track to cost New York’s electricity customers $7.6 billion from 2017-2029.

We need accountability. We were told the price would go down over time, but it’s going up. We were told that people who did not want to pay for nuclear subsidies would be given an option of getting 100% renewable energy instead, but no such option is even in the works.

It’s time to reconsider this undemocratically enacted nuclear subsidy. Instead of subsidizing Exelon, the highly profitable owner of the subsidized nuclear plants, we should put our money into basic human needs, renewable energy, and energy efficiency.  

Background

Four years ago, New York electricity customers began paying for a $7.6 billion deal that the Cuomo administration made behind closed doors with nuclear plant owner Exelon. The deal was that Exelon would keep four “economically struggling” nuclear reactors open, and New York consumers would pay a massive subsidy to make those reactors profitable. This was a deal that great numbers of New Yorkers opposed, but it was pushed through nonetheless, partly based on misleading claims about costs.

Two of the four upstate nuclear reactors (Ginna and FitzPatrick) in the deal were losing so much money that only hundreds of millions of dollars per year would save them. The deal promised that consumers would pay nuclear subsidies for 12 years, based on a formula that adjusts every two years. During the 2017-2018 period, the price was set at approximately $483 million ($1.3 million per day). By default, the deal is designed so that the price will go up every two years, and it can only go down if there is a major increase in wholesale electricity prices.

Analysis performed by Alliance for a Green Economy (AGREE) and the Nuclear Information and Resource Service (NIRS) predicted that the price would go up in 2019 (we were right) and again in 2021 (we were also right) because we did not find evidence that there would be a major increase in wholesale electricity prices. Prices have been flat or declining for years, and policies set in place by the Cuomo administration are likely to reinforce this trend. Nonetheless, the Cuomo administration based its calculations of the nuclear bailout cost on the premise that market prices would rise dramatically, pushing down the cost of the nuclear bailout over time.

The Cuomo administration projected that in 2021, the cost of the bailout would go down to $253 million per year, instead of going up. This was a misleading error (a difference of $337 million annually), and it underscores the need for accountability now for this bailout.  

What Does Accountability Look Like?

First, the Cuomo administration should make good on its August 1, 2016 announcement that people would have the option to buy renewable energy rather than nuclear energy. This commitment was made by Audrey Zibelman, Cuomo’s appointee at the time to Chair the Public Service Commission, right before the Commission voted to approve the Governor’s bailout deal. She said the Commission and NYSERDA would work to create a 100% New York-produced renewable energy option that people could buy, and that people who opted for that option should not have to pay for the nuclear bail out. The promise of the creation of that option was then reiterated in a press release put out by the Cuomo administration that same day.

Second, New York should begin a process now to reconsider its 12-year commitment to nuclear subsidies. The next price adjustment for nuclear subsidies will be in 2023, when the cost is scheduled to rise again by another $68 million per year. At that point, the $23.83 per MWh price of the subsidies will likely be well above the price at which New York is procuring renewable energy and energy efficiency. For instance, the 2019 solicitations for renewable energy run by NYSERDA resulted in subsidy prices of $22.43 per MWh (wind and solar combined) and the agency’s website says the 2020 solicitation resulted in renewable energy credits costing 40% less than the year prior (though they have not yet published the price). Prices are coming down for renewable energy while the price of nuclear subsidies is going up.   

The primary political rationale for the nuclear bailout was to save the jobs of the approximately 2,000 nuclear workers at the nuclear plants in Oswego and Wayne counties. The nuclear bailout costs approximately $3.6 million per job saved. Meanwhile, in New York the energy efficiency industry employs over 100,000 people and the solar industry employs more than 10,000 people. With over 1 million residents and over 140,000 businesses currently behind on their energy bills, it’s a good time to rethink where our money goes. Investing in energy efficiency to bring down climate emissions and customer costs, building the renewable energy economy, and meeting our basic needs should be our priorities.

Exelon is considering whether to apply to extend the operating licenses of Nine Mile Point Unit 1 and Ginna, the two oldest nuclear reactors in the country, for another 20 years past their current 2029 expiration dates. Exelon will require the subsidies to be extended in order to justify extending the licenses. The company is also seeking to spin its nuclear fleet off into a new corporation, which it is currently calling “SpinCo”. SpinCo will be looking for investors for the upstate nuclear reactors, which are unprofitable without subsidies. Securing long-term subsidies for the upstate fleet, even beyond 2029, will likely be Exelon’s goal in order to execute this spinoff. If Exelon, the largest nuclear power company in the U.S., does not see a future for itself in continuing to own and operate old nuclear power plants, that is a strong indicator that they are not a good long-term investment. 

Now is a good time for New York to review the costs of the nuclear bailout, consider its options for phasing out these subsidies, and continue working to replace nuclear plants now with renewables and efficiency so that we do not wind up with even more costly nuclear subsidies beyond 2029.  

 

ADDITIONAL RESOURCES:

The Upstate Nuclear Reactors, which sit on the shore of Lake Ontario, continue to pose a safety and environmental risk to the Great Lakes and Upstate New York.

  • See this Fact Sheet about the upstate nuclear plants
     
  • In 2018, AGREE released a report detailing specific recent safety issues at each of the Upstate nuclear plants
     
  • In 2020, the Onondaga Nation, Haudenosaunee Environmental Task Force, and American Indian Law Alliance released this Red Paper, detailing the impact of the upstate nuclear reactors on the environment and their cultural and spiritual obligation to be stewards of the original lands and waters.

 

Analysis by Alliance for a Green Economy and others have found that the subsidies for the upstate reactors are entirely unnecessary for ensuring grid reliability or the achievement of the state’s greenhouse gas reduction goals:

  • In 2015, an analysis by Alliance for a Green Economy and the Nuclear Information and Resource Service found FitzPatrick could be replaced by energy efficiency and renewable energy while providing worker retraining, wage support, and property tax support at lower cost than subsidizing the plant’s continued operation.
     
  • In 2016, the New York Independent System Operator (NYISO) found FitzPatrick could close without any threat to electricity reliability.
     
  • In 2016, NYISO, found that Ginna could close after RG&E completed a transmission upgrade. Ginna received millions of dollars in customer subsidies under a 2-year agreement to stay open during the transmission upgrade, and RG&E customers also paid for the transmission upgrades. 
     
  • Exelon Corporation never submitted a retirement notice for either of its Nine Mile Point reactors as public evidence that it was headed toward closure. Yet, that plant receives the lion’s share of the nuclear subsidy.
     
  • A 2016 analysis by Dr. Mark Z. Jacobson at Stanford University and Dr. Felix Cebulla of the German Aerospace Center found that New Yorkers could save $5.2 billion on their electricity bills over the next 12 years if they invested in onshore wind and utility-scale solar instead of nuclear subsidies.
     
  • An article by Amory Lovins of the Rocky Mountain Institute in 2017 describes how closing expensive nuclear plants and investing in energy efficiency would provide cheaper electricity, increase grid reliability, and reduce carbon.