A study conducted by the Union of Concerned Scientists and applauded by the Nuclear Energy Institute claimed that 21 of 60 nuclear plants in the United States are at risk of early retirement largely due to inadequate rates of return and lower pricing of other competing generation types. To combat early retirements, many states are establishing nuclear subsidy programs to compensate financially challenged nuclear plants for the environmental attributes of their electricity. One state in particular, New Jersey, whose nuclear plants provide up to 40% of the state’s electric capacity, has made progress toward establishing a mechanism to support financially challenged nuclear plants through approval of a Zero Emission Credit (ZEC) program. The ZEC program allows eligible nuclear plants to recover costs of $0.004 per kilowatt-hour for up to four years. The process New Jersey has established for nuclear generators to be considered for subsidies under the ZEC program, as well as the potential implications of such programs, is described below.

Applicants must:

• Be licensed by the U.S Nuclear Regulatory Commission through 2030
• Answer questions and provide supporting documents, studies, certifications, and/or narratives
• Demonstrate a significant and material contribution to New Jersey air quality (minimizing emissions)
• Demonstrate anticipated shutdown of the plant within three years due to its financial situation
• Certify that the facility does not receive any subsidies from other entities or agencies

Application review process:

• New Jersey Board of Public Utilities will establish two teams, one to determine if nuclear generating stations qualify to apply for ZECs and another to establish a rank-ordered list of nuclear plants qualified to receive ZECs
• New Jersey Division of Rate Counsel and the independent market monitor for PJM, two prominent skeptics of awarding large subsidies to nuclear plants, will be granted intervenor status and access to confidential financial data regarding the economic viability of the plants and will be included in the decision process
• Organizations granted participant status include the New Jersey chapter of the AARP, New Jersey Large Energy Users Coalition, PJM Providers Group, and NRG Energy
• Decisions to award subsidies to qualified nuclear plants will be made by the New Jersey Board of Public Utilities at the mid-April 2019 meeting

Implications

A major implication of the potential closure of 13% to 26% of our national nuclear capacity is the estimated 4% to 6% increase in carbon emissions nationally that would result by 2035. As states establish carbon-reduction targets, it becomes increasingly challenging to see how such targets will be met with the looming threat of early retirements.

More Information

Utility Dive: 35% of US nuclear plants face early retirement: Union of Concerned Scientists

Utility Dive: New Jersey moves ahead on nuke subsidies, approving ZEC application process

State of New Jersey Board of Public Utilities: NJBPU Approves Zero Emission Credit Program and Application Process for Nuclear Power Plants

NJ Spotlight: BPU comes up with game plan for deciding if nuclear plants quality for subsidies

This report is part of ScottMadden’s Regulatory & Nuclear Minutes series. To view all featured Regulatory Minutes, please click here. To view all featured Nuclear Minutes, please click here.

Additional Contributing Author: Rizwan Aslam