On May 29, 2014, the Illinois House, under pressure from the state’s largest utility Exelon, which is also the nation’s most nuclear-dependent utility, passed a resolution (HR 1146) that urged state agencies to prepare reports that would show just how super Exelon’s reactors are and urged FERC and the EPA to take steps to ensure that Exelon’s uneconomic reactors will stay open anyway because they are just so super.
The resolution is full of silly statements, half-truths, and Exelon-serving verbiage (for example, the resolution even cites the controversial and thoroughly disputed November 2013 letter from four pro-nuclear climate scientists which urged environmentalists to support nuclear power–but not the old reactors now in use, those scientists want development of “safer” reactor designs), but the House made its point, and the state agencies are busy working on those reports.
More recently, as we reported last week, Exelon, which has publicly said that at least five of its Illinois reactors are uneconomic (Quad Cities 1-2, Byron 1-2, Clinton), wants a rate increase that would put $580 million more in its pockets each year to keep these uneconomic reactors operating (although the utility admits it might close one or more of them anyway even with the rate increase). They are uneconomic because they can’t produce electricity as cheaply as competing power sources in the region, especially wind and natural gas, while the twin-threat of more cheap solar and greater energy efficiency provide an additional competitive challenge to these reactors.
So far, despite the House action, no legislator has stepped up to publicly back Exelon’s rate increase request, which would amount to an 8% increase for northern Illinois customers and even higher for those downstate.
Enter the Nuclear Energy Institute (NEI) to save the day for Exelon. This week, the NEI released a new report, The Impact of Exelon’s Nuclear Fleet on the Illinois Economy, touting all the benefits of Exelon’s reactors.
Some of these alleged benefits border on the silly as well: for example a listing of many of the charitable contributions made by the reactor operations to local communities–although in the aftermath of Ferguson, some may question the decision of Byron management to donate “$30,000 to the Ogle County Sheriff’s Department to purchase an emergency response vehicle and tactical weaponry and gear.”
But there is a glaring hole, one big enough to drive a caravan of carbon-spewing Hummers through, in both NEI’s and HR 1146’s reasoning and conclusions. Further, the numbers used in NEI’s report and HR 1146 don’t match and don’t add up. And when we’re dealing with economics, numbers do matter.
First, the numbers.
HR 1146 says Exelon’s reactors (all 11 of them, not just the five in question) directly employ 5300 permanent people and an additional 1300 temps per year for a total employment of 6600 people and annual payroll of $750 million/year. NEI’s report says only 5900 permanent and temporary people work for Exelon each year. A difference of 700 people is a lot. Even if they were all lower-paid temporary employees (not likely) according to HR 1146, which attributes payroll of “over $200 million year” to the temps, that would amount to more than $100 million less in payroll that the resolution states.
The resolution claims the economic activity from Exelon’s reactors create 13,000 additional jobs in the state; the NEI, using standard multipliers often used in public relations campaigns for endangered industries, asserts the multiplier effect adds 21,700 jobs to the state–again, a huge difference with the overage this time on NEI.
NEI also argues that Exelon’s nuclear fleet pays $290 million in state and local taxes; HR 1146 has a considerably lower number: $178 million.
The numbers are also somewhat off on exactly what Exelon generates: HR 1146 claims the reactors generate “over half” of the state’s total electricity generation and “over 92%” of its carbon-free generation. NEI puts those numbers at “about 48%” and “about 90%” respectively. Actual 2012 numbers put the figure at 46% of the state’s electricity.
As Exelon’s execs at least–and apparently NEI and the Illinois House agree–it is “beyond dispute” that Illinois’ carbon reduction goals under the EPA’s upcoming Clean Power Plan cannot be met unless those reactors are running full steam ahead.
Most importantly, NEI says that Exelon’s reactors generate $8.9 billion of total economic output annually, which contributes $6.0 billion to Illinois’ gross state product each year. And, according to NEI, if the five reactors were to close early, the impact on the state would be significant: “In the first year, the lost direct output in Illinois would be $2.4 billion and the lost secondary output would be another $1.2 billion. The losses increase each year thereafter and reach $2.8 billion in lost direct output and another $2.2 billion in lost secondary output in Illinois by 2030. Over that period, Illinois’ gross state product shrinks by $2.5 billion in 2016 to $3.3 billion in 2030 because of lost output that cascades across virtually all sectors.”
HR 1146, perhaps wisely, didn’t attempt to quantify the economic impact on the state if the five reactors close early. Because the impact might be far less than NEI argues–in fact, a strong argument can be made that the net impact on the state would be positive, with substantial economic growth.
And that’s the glaring hole in the NEI report, and what HR 1146 missed entirely.
The glaring hole
NEI and HR 1146 seem to be operating under the assumption that if the five reactors were to close, from an economic basis, that would be the end of the story.
But if that’s true, it means that the power from these five reactors is simply not needed at all, because the assumption is that nothing would arise to replace that power. And if the power isn’t needed, Illinois ratepayers are being asked to fork over $580 million/year to Exelon for something they don’t need and won’t use.
If the power is needed, however–and probably some of it, though likely not all is needed, then new generation and new energy efficiency measures will arise to take the place of the retired reactors.
That new generation–most of which, if current national trends hold and there is little indication that they won’t hold, will be solar and wind power, and those plus energy efficiency measures will account for substantial economic activity. Nuclear power is a capital-intensive industry; renewables are a labor-intensive industry. Already, there are more people working nationally in each of the two main renewable industries than in nuclear power, a disparity that continues to grow every year.
So when it comes to jobs, there is little doubt that deployment of solar and wind power to replace that nuclear power would be a boon for the state, with far more jobs created than lost. Already, more than 21,000 Illinoisans work in the renewables industry–far more than those working for Exelon, and that number would soar with large-scale installation of new solar and wind. And those solar and wind power jobs would have a similar multiplier effect as claimed for the nuclear jobs. To accommodate the solar and wind power and its variable nature, the grid would have to be improved–that would not only be a smart long-term investment positioning Illinois well for the future, but would create still more jobs.
As for meeting the state’s carbon reduction goals, clearly solar, wind and efficiency can handle that task easily and more economically for ratepayers–since even Exelon admits these failing reactors can’t compete with the lower-cost renewables. And if the power in question isn’t even needed, then even more dirty reactors and coal plants could be closed, which would allow even more clean renewables to be deployed meaning even greater carbon reductions. On a national scale, closing reactors itself helps reduce carbon emissions since the requisite nuclear fuel chain is responsible for meaningful carbon releases–even though those releases are not captured in the state-by-state approach mapped out by EPA’s Clean Power Plan, one major flaw of the plan.
NEI and Exelon also conveniently forget to note that closing reactors doesn’t mean a sudden loss of all nuclear-related jobs or economic activity. The reactors must be monitored closely for years and must be decommissioned–which would send large decommissioning funds now held by Exelon into the state’s economy (although there is some legitimate question as to whether those funds are large enough to handle the full decommissioning task).
Exelon wouldn’t have needed to go any further than its own Zion reactor complex north of Chicago to figure out the economic impact of decommissioning. According to Exelon’s contractor, Zion Solutions, decommissioning of that two-reactor site “would create significant economic benefits for the state and the 7 county region in northeastern Illinois. Over the ten years that the project is estimated to take, direct economic activities would generate approximately $390 million in new economic output, 1,570 man-years of employment, and almost $150 million in employment compensation throughout the Illinois economy.”
In the end, Exelon and NEI’s arguments boil down to this: Illinois ratepayers should pay more for their electricity than they should have to because it’s nuclear–and they think nuclear is special.
And that makes the choice for Illinois starkly clear. The state can, and should, deny Exelon’s rate increases and let the marketplace do its job. That will lead to the shutdown of uneconomic power generators, which was a major purpose of a competitive marketplace in the first place. And that–especially if coupled with a state commitment to clean energy, which could be accomplished by increasing the state’s renewable energy standard (rather than, as Exelon wants, throwing its old reactors into a new standard that includes nuclear, which would stymie investment in renewable energy for decades), would lead to more jobs, more clean energy, more innovation, and a stronger economic future for the state.
The changes wouldn’t be immediate, but it takes far less time and money to build and deploy new renewable energy than any other electricity generation source. And there is no denying there would be some losers: some employees at Exelon’s reactors would lose their jobs and some communities would see a reduction in tax payments. Retraining and placement programs would help alleviate the misery caused by job loss. Policies to encourage new renewable companies to locate in the closed reactor regions would help offset tax losses. Both are the kinds of measures state legislatures know how to craft.
Overall, the economic health of the state would improve. And preventing the threat of meltdown, further radioactive waste generation and routine radiation releases from aging reactors provides benefits that are difficult to measure in economic terms, but certainly exist.
Exelon bet big when it decided to become the nation’s largest nuclear reactor operator. And it bet wrong. Now that the chips are coming in, it wants ratepayers to bail it out–and not only in Illinois: the same kind of policies will be pursued in Exelon’s other states (which should be a clear warning to the mid-Atlantic, where state regulators must decide whether to approve Exelon’s takeover of the non-nuclear utility Pepco).
Moreover, the same kind of bailouts will be sought by other major nuclear utilities too–Entergy, Duke and the like–that also made bad bets that the future would be nuclear. What happens in Illinois may not set legal precedent elsewhere, but it should and will be closely watched everywhere, while closing Exelon’s reactors in Illinois should be a priority for clean energy advocates everywhere as well.
Michael Mariotte, with research by Tim Judson and Dave Kraft
October 2, 2014
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