Energy Markets Need Reform, Not Subsidies

How many industries can withstand a more than threefold increase in regulatory costs in a decade? Few, if any. Yet that's the reality for nuclear power plants. An American Action Forum (AAF) report finds the annual cost to comply with nuclear regulations increased to $2 billion up from $629 million between 2006 and 2015.

Overregulation, along with “green energy” subsidies are two significant reasons for the decline of America’s coal and nuclear plants. Fortunately, policymakers can bring fairness to the energy market with commonsense reforms.

AAF’s 2017 review found that the average nuclear plant has an annual regulatory burden of $60 million.

“Broadly, nuclear regulation is at a crossroads,” says the report. “Plants are shutting down faster than they are being constructed, and unlike other industries, nuclear is forced to subsidize its regulator (Nuclear Regulatory Commission).”

Assuming minimal annual costs of $30 million and using a profitability analysis by the Congressional Research Service, AAF calculated that the percentage of profits that regulatory costs consumed at 26 plants ranged from 12 percent to 1,289 percent.

Three Mile Island, whose potential closing draws much coverage, has 95 percent of its profits consumed by regulatory costs, according to AAF. Other Pennsylvania nuclear plants far better: Beaver Valley, 39; Peach Bottom, 19; Susquehanna, 18; and Limerick, 17.

Part of the problem, according to AAF, is that a 21st century industry is operating under a 1970s regulatory regime that doesn't account for improvements in plant safety. For example, AAF says that Nuclear Regulatory Commission standards assumes a serious nuclear accident occurring once in 10,000 years while modern plants pose a risk of only one occurrence in 20,000 years and advanced designs as little as one in 100 million years.

As for coal-fired generation, U.S. Environmental Protection Agency (EPA) regulations are responsible for 75 percent of the closings or announced retirements since 2010, according to a January 2018 American Clean Coal Council (ACCC) report.

The 610 plants that have been or will be retired by 2030 represent nearly 35 percent of the nation’s coal fleet operating in 2010, says ACCC. Additional retirements are expected to be announced in the next couple of years.

The Wall Street Journal reports that the EPA estimates the annual cost of anti-acid-rain measures in the U.S. will reach $65 billion in 2020. These regulations remain in effect even though a congressional report found land use and forestry practices are more likely to damage ecosystems.

More widely publicized was the Obama administration’s willful attack on coal plants through CO2 restrictions that would cost billions more with immeasurable effects on the environment.

Instead of subsidies, political leaders interested in “saving” coal and nuclear would do well to inject more reason into industry regulations.