Why are some governments giving taxpayer handouts to nuclear power plants?
Recent proposals to subsidize financially-distressed nuclear plants illustrate how much pressure states are under to produce zero-emission electricity, even as cheaper and more effective ways to provide clean energy become available.
Last winter, and to the delight of utility executives, a bipartisan majority in the Illinois State Legislature offered them a generous gift they had long sought: a $16.4 billion bailout to keep a pair of nuclear plants in operation.
The executives had lobbied hard for this, warning of the loss of 4,200 jobs and carbon-free electricity if the money-losing Clinton and Quad Cities nuclear plants closed. The two plants, owned by Chicago-based Exelon Corporation, were in jeopardy of closing because they were losing a combined $100 million a year due to the increasing availability of cheap natural gas and renewables.
With less than an hour remaining in the legislative session, the state legislature passed the Future Energy Jobs Act, a multi-billion-dollar bailout that provides taxpayer subsidies to keep the nuclear plants operating for at least another 10 years. The cost of power for Chicago-area ratepayers has increased 16 percent since May due to higher capacity charges coupled with the nuclear subsidies. Power rates will go up at least an additional 5 percent next May based on capacity charges that have already been set. For consumers in a typical suburban Chicago household, the increases will boost their annual electricity bill by at least $140.
The ripple effects from the bailout may well lead to future increases on top of the new surcharges. Subsidizing the two nuclear plants has the unintended consequence of potentially harming the owners of unsubsidized, competing power plants. The PJM Interconnection, an organization that sets the rules for wholesale power markets, is contemplating changes that would compensate the owners of natural gas and coal plants. Simply put, households and businesses in Illinois could be paying twice to keep the same nuclear plants open.
What has yet to be determined is how much electricity bills will rise as a result of the bailout. They’re already on the upswing due to earlier changes PJM made to reward nuclear plant operators and owners of other “base-load” plants that run most of the time for their reliability during periods of intense heat or cold.
And the same basic story applies at a broader level. Nuclear subsidies are expected to raise the electricity bills of New Yorkers by $7.6 billion over 12 years, thanks to the bailout of three nuclear plants in upstate New York…..