Until states submit their individual implementation plans, it is not clear what role nuclear will play in the Clean Power Plan. The Environmental Protection Agency says that existing nuclear plants do not count toward state emissions levels – only new construction or stations that have undergone new uprates. This has only exacerbated the industry’s current holding pattern as it awaits the final installed costs of the five new nuclear units under development in the U.S.

“Nuclear power represents 63 percent of carbon-free electric generation in the U.S., so it has a significant role in meeting the Clean Power Plan requirements,” said Mike Wadley, Vice President and Director of Business Development for Black & Veatch’s nuclear business. “States are currently in the analysis stage, and will be formulating their implementation strategies. New nuclear power can be an effective tool for the states to meet their Clean Power Plan objectives.”

Nuclear Industry Awaits State Implementation Plans

The carbonless credit that might be attributed to nuclear in counting reduced emissions will depend, to a large extent, on how the states meet the requirements of the Clean Power Plan.

“The Clean Power Plan is not utility-driven as much as state-driven,” Wadley said. “The EPA has given the charge to the states to come up with a compliance plan. They didn’t give that charge to the utilities.”

Compliance will be mapped through the State Implementation Plans that are due to the EPA – at least in preliminary form – by September 2016. The Clean Power Plan does not give the states a free pass in counting their full complement of nuclear generation against their emissions budget, although at the same time, the Obama Administration recognizes that a share of nuclear is vital if the carbon reduction goals are to be met.

“The EPA has laid out a two major options – the states can go with mass-based or rate-based plans,” says Neil Copeland, Director, Black & Veatch’s management consulting business. A mass-based plan sets a limit on the overall tonnage of CO2 going up the stack while a rate-based plan sets a limit of so many pounds of CO2 per megawatt-hour.

“EPA is generally trying to push people to use a regional mass-based approach,” Copeland said. “Outside of new coal, utilities can pretty much build or retire whatever they want, and if necessary, could complement this new and existing generation with an allowance price, as is currently in place in California and the Northeast. The main thing utilities need to know is there are emissions limits that need to be met along the way to a final value in 2030 and beyond.”

When utilities get into a rate-based program, it gets more difficult. Because then, the types of units installed have an individual compliance rate placed specifically upon the generator, Copeland said.

If several states enter into a mass-based agreement, emissions allowances can be traded among these states, similar to other environmental regulatory programs. Emissions credits can be traded among states that select the same type of plans – mass-based states will trade together as will the rate-based states.

“The only states that I think are really considering a rate-based plan are Georgia, South Carolina and Tennessee, and that’s only because they have new nuclear units coming in – 5,000 megawatts of new capacity,” Copeland said.

Credit Available for Nuclear Uprates

Under the Clean Power Plan, states don’t get credit for existing nuclear capacity or license extensions, which a lot of facilities have gone through, noted Jon Gribble, Associate Vice President and Director of Operating Nuclear Plant Projects for Black & Veatch.

“New uprates following implementation of the plan, on the other hand, get credit. That’s new capacity,” Gribble said.

An uprate, or increase in a nuclear plant’s capacity, can be achieved because many plants were built with extra operating margin for full capacity, Wadley said. An uprate is essentially a remodeling, he explained. Utilities have to work around the existing structure, such as making modifications to the steam turbine or changing valves. This is basic work done in power plants all the time, but in the nuclear environment, these modifications require regulatory approval.

Complicating matters, four nuclear units have closed since 2013. Several more are at risk of closure because of competitive pressures, primarily from low-cost natural gas. It would be a mistake if this stymied the growth of nuclear. Natural gas may be relatively cheap now, but prices can be volatile, and while subsidies may be keeping a lid on renewable energy costs, they could disappear at some point, Wadley said.

“The Midwest has a huge carbon footprint,” Gribble said. There are potential opportunities for nuclear in that region but current cost of ongoing new nuclear in the U.S. places new nuclear out of reach for most Midwest utilities.

“The cost, process complexity and time to get a construction and operating license is hefty, let alone even contemplating the amount of capital necessary for the actual generating unit,” Gribble said. “A lot of utilities in the region don’t have a large enough market capitalization to build a plant by themselves.”

Compliance Timeline

Another concern is the compliance timeline, Gribble said. Full compliance with the Clean Power Plan needs to be achieved by 2030. It can take seven to 10 years to obtain a combined construction and operating license for a nuclear plant and at least five years for construction. Therefore, starting the process today would put new capacity outside the compliance envelope needed to count in the CO2 reductions.

Some utilities started the process long before the Clean Power Plan was announced. In June 2015, the U.S. Nuclear Regulatory Commission approved the combined construction and operating license for the Fermi 3 nuclear plant in Michigan, in which Black & Veatch played a key role in the application process, Wadley said.

While a decision to start construction has not been made, Wadley noted that nuclear operators in Texas, Florida and Virginia have continued the licensing process, which gives them options for proceeding with development in the future.

“People are working through the process now, they just haven’t decided to break ground right now,” Wadley said.

In the meantime, the industry is watching the progress of four units under construction – two at Plant Vogtle in Georgia and two at the Summer Station in South Carolina, Wadley said. “The industry is anxious to see how the construction projects come to closure,” he noted.

At the fifth new U.S. plant, Tennessee Valley Authority said on Dec. 15, that it completed loading fuel into the Watts Bar 2 unit and will begin power ascension testing. The Nuclear Regulatory Commission issued an operating license to the new plant in October 2015.

Story by Samuel Glasser, Black & Veatch 

Published originally on Black & Veatch Solutions