The Obama Clean Power Plan Nuclear Gap

By Michael Krancer
Follow: @MikeKrancer 

If we want to arrest climate change, all we need are more renewables like wind and solar, right? Not exactly, according to a newly published Canadian report from Hatch Ltd. on lifecycle greenhouse gas emissions (“GHG”). The report was commissioned by the Canadian Nuclear Association and compares lifecycle GHG emissions from nuclear power, natural gas-fired power, and wind power, all the way from fuel extraction through to plant construction, operation, and decommissioning.

Hatch says:

On average, emissions from wind and nuclear are similar within the accuracy of the study for all emissions except GHG emissions, where wind produces distinctly less GHG emissions on average than the combination of nuclear technologies considered.

No surprise there. But wind is an intermittent power source so it needs a back up. Hatch says that in a typical wind-natural gas hybrid, wind makes up 20% of the generation mix, with natural gas generation the other 80%. According to Hatch, the per kilowatt-hour GHG emissions from the wind/gas mix are 385 grams versus nuclear at 18.5 grams. That’s 20 times more GHGs for the wind backed by natural gas scenario.

The Hatch report has been criticized for focusing only on one power generation scenario: wind and natural gas in tandem. But the data is very relevant to us here in the U.S., especially in light of the Obama Climate Action Plan and the pending draft Clean Power Plan. If we have any hope at achieving success in reducing GHG emissions, all renewables and clean energy sources have a role to play, including nuclear power, and we have to get that right by treating them equally.

The Clean Power Plan calls for a near 20% reduction in U.S. carbon emissions from 2012 baseline levels by 2030. But here’s how the Clean Power Plan works—or doesn’t work, in the case of nuclear power. The draft rule sets forth an emissions rate baseline of carbon dioxide (“CO2”) emitted per megawatt-hour of fossil fuel generation. Each state can then lower that rate using the various so-called building blocks provided in the draft rule, which include: (1) tweaking fossil plants to be more efficient; (2) changing dispatch patterns of power sources so lower GHG plants are used more frequently; (3) using more zero and low-emitting sources like renewables (wind, solar, and geothermal) and nuclear; and (4) implementing energy efficiency measures. The draft rule allows for a 100% credit for all existing wind, solar, and geothermal sources, but only a 6% credit for nuclear. There’s no room at the inn for the other 94% of nuclear.

It’s puzzling why the Clean Power Plan is drafted this way given the key role that experts say nuclear will need to play in getting us anywhere close to the goal set forth in the Plan itself. In fact, the Energy Department has scenarios that project the retirement rate of nuclear as high as 33%. Even the Clean Power Plan’s own 6% figure for retirement would increase atmospheric emissions from 200 million to 300 million tons in the next ten years.

Nuclear power is the work-horse of power supply and of zero-carbon generation. Nuclear plants operate around the clock in all weather, providing nearly 20% of the nation’s electricity supply and comprising about 63.3% of all clean (zero-carbon emissions) energy, which is more than all other clean energy sources put together.

In formulating the final rule, the Environmental Protection Agency would do well to take a look at the Hatch Report, seriously consider its findings, and put nuclear on par with other zero-carbon generating sources.

To read more on this topic by Mr. Krancer, please click here to read his full article published in Forbes on October 27, 2014.

Big SCOTUS Win for EPA on Greenhouse Gases

By Michael Krancer
Follow: @MikeKrancer 

No matter how you slice it (and we are all still studying it), yesterday’s Supreme Court omnibus decision on greenhouse gas (“GHG”) regulation (the lead case being Utility Air Regulatory Group v. EPA, No. 12-1146, decided June 23, 2014) is a huge win for the core of the President’s Climate Action Plan and the Environmental Protection Agency’s (“EPA”) implementation of it through the final Rule for new power plants and the proposed Rule for existing ones.  Though the case does not directly involve those Rules, the result, rationales, and line-up of the Supreme Court Justices convincingly show that the pair of power plant Rules rest on solid legal ground.  The bottom line is that the seven Justices have forcefully upheld the legality of control and regulation of GHGs from power plants under the Clean Air Act.

What the Justices struck down was something the EPA never wanted anyway, i.e., to subject every Dunkin’ Donuts to GHG regulation.  The EPA won the day on GHG regulation of so-called “anyway” sources, i.e., those already subject to Clean Air Act regulation.  Power plants are the quintessential “anyway sources.”  By any fair account, that’s like the EPA “giving the sleeves off their vest.”

And the main opinion giving the green light to GHG regulation of “anyway sources,” like power plants, was written by Justice Scalia.  This is the same Justice Scalia who has been the “great dissenter” in Clean Air Act cases.  He dissented in the landmark Massachusetts v. EPA case in 2007, which upheld the EPA’s position that GHGs actually are “air contaminants” under the Clean Air Act.  He likewise dissented in the recent Homer City Generation v. EPA case, which upheld in toto the EPA’s Transport Rule.

So ignore all the rhetoric you are hearing from some corners crowing that this is a “setback for the EPA” on GHG regulation.  It’s nonsense.  For those folks, yesterday’s decision is the cue for “Dandy Don” Meredith’s famous crooning of “♫ Turn out the lights, the party’s over. ♫”

EPA’s Clean Air Act Litigation Scorecard and What It Portends for Carbon Emissions Reduction Regulations

By Michael Krancer
Follow: @MikeKrancer 

The Environmental Protection Agency (“EPA”) is running the table in the courts on its key Clean Air Act initiatives: (1) the MATS Rule; (2) the Transport Rule; and (3) the Soot Rule.

  • On April 15, 2014, the D.C. Circuit upheld the 2012 Mercury and Air Toxics Standards (“MATS” Rule) in White Stallion Energy Center LLC v. U.S. Environmental Protection Agency, No. 12-1100.
  • On April 29, 2014, the U.S. Supreme Court reinstated the Cross-State Air Pollution Rule (“Transport Rule”) in U.S. Environmental Protection Agency v. EME Homer City Generation, LP, No. 12-1182.
  • On May 9, 2014, the D.C. Circuit affirmed the EPA’s discretion to tighten standards on particulate matter from coal power plants, refineries, manufacturers, and vehicles (“Soot Rule”) in National Association of Manufacturers (NAM) v. EPA, No. 13-1069.

The MATS Rule. The D.C. Circuit, by majority decision, upheld MATS, which requires coal- and oil-fired power plants to reduce emissions of mercury, arsenic, chromium, and other air pollutants.  The court gives wide latitude to the EPA’s discretion to act under the Clean Air Act.

The Transport Rule.  The “Good Neighbor Provision” of the Clean Air Act requires the EPA and individual states to prohibit upwind states from significantly contributing to the nonattainment of National Ambient Air Quality Standards (“NAAQS”) in downwind states.  42 U.S.C. § 7410(a)(2)(D)(i).  The D.C. Circuit, in a 2 to 1 decision with a vigorous dissent, vacated the Transport Rule on several technical grounds.  Per Justice Ginsburg, the Supreme Court reversed.  The court gives a very wide berth to the EPA’s discretion and judgment calls under the Clean Air Act in accordance with the landmark Chevron U.S.A. Inc. v. NRDC decision.  The court plainly rebukes the two-judge majority of the D.C. Circuit for not doing so.

The Soot Rule.  The D.C. Circuit upheld the EPA’s decision to revise the annual standard for particulate matter in order to address what the EPA believes to be a public health threat.  After considering NAM’s arguments, the court again decided in the EPA’s favor, basing its decision on the wide discretion that courts must give to the EPA in its decision-making under the Clean Air Act, especially when making science-related judgments.

With the EPA’s two big greenhouse emissions reduction rules on the brink of coming out, i.e., the final rule for new power plants and the proposed rule for existing power plants, what do we think the courts might do?  In the investment industry, it is said that “past performance is no indication of future results.”  In the legal business, it’s the opposite.  The challengers are starting this series down three games to none—and arguably down by two goals in the first period of game four.  First, the Supreme Court and D.C. Circuit have sent clear messages that the EPA will be given wide deference when it comes to the Clean Air Act.  Second, the new greenhouse gas rules come with the backdrop of the Supreme Court having already ruled in Massachusetts v. EPA that greenhouse gases are “contaminants” under the Clean Air Act, along with the D.C. Circuit having already upheld the EPA endangerment finding (with that decision now pending for review in the very Supreme Court that decided the Transport Rule case)—thus compelling the EPA to act on greenhouse gases.

Odds, anyone?

Read about the three recent Clean Air cases and what they mean in more detail in Blank Rome’s Client Alert by clicking here.

The National Climate Assessment and the Nuclear Energy Solution

By Michael Krancer
Follow: @MikeKrancer 

The White House released on Tuesday the long-awaited Third National Climate Assessment, Climate Change Impacts in the United States (“Assessment”), required by Congress.   It contains some stunning findings and does not mince words.   In the words of John Holdren, the White House Science Advisor, this is the “loudest alarm bell to date” on the need for climate action change.

The Assessment is the result of a prodigious and significant scientific exercise.  It is the product of the 60-person Federal Advisory Committee of distinguished scientists and other experts who oversaw the development of the Assessment, and an intense peer and public review process.  The bottom line is that climate change is here now, and time is running out to do something about it.

As can be predicted, the Assessment has received some push-back from the Cato Institute and others.  But regardless of whether one can nit-pick the 800-page report, one thing is for certain—we can do something about climate change here in America right now.  We can make sure our existing nuclear generation fleet remains intact and healthy.

Nuclear power is the zero-carbon workhorse of our electricity generation fleet.   Every time we lose a healthy nuclear plant, we are shooting ourselves in the foot on carbon emissions.  Climate scientists are telling us how critical it is to maintain our nuclear power capabilities in the face of the challenges that the National Climate Assessment talks about.  This important point should not be lost on those who call themselves environmentalists or “Greens.”  We simply will lose the battle to climate change if we surrender on nuclear power.

Germany is an object lesson.  For purely political reasons, Germany suddenly announced the closure of its nuclear power plants.  The result: carbon emissions from Germany are booming and Germany has gone from an electricity exporter to an electricity importer virtually overnight.  The irony: neighboring France has a healthy and safe nuclear power sector and Germany will import power from it.

The release of the Climate Assessment coincided with the Monday roundtable event in Philadelphia of Nuclear Matters. Nuclear Matters is a bipartisan effort co-chaired by former Senators Evan Bayh and Judd Gregg whose mission is to foster discussion and inform the public about the clear benefits that nuclear energy provides to America; raise awareness of the economic challenges to nuclear energy that threaten those benefits; and to work with stakeholders to explore possible policy solutions that properly value nuclear energy as a reliable, affordable, and carbon-free electricity resource that is essential to America’s energy future.

I contributed an op-ed article to The Philadelphia Inquirer that points out those benefits, with a particular focus on how they impact the Commonwealth of Pennsylvania.  Click here to read my op-ed.

A prime issue for nuclear power is the “free rider” problem.  Nuclear power provides the clear, simultaneously delivered benefits of: (1) extraordinary high reliability both with respect to the plants themselves and to the grid; (2) zero-carbon emissions power; and (3) being an economic engine of direct and indirect employment. However, distortions in the marketplace fail to place any market value on those critical, irreplaceable, and unique features of nuclear power.  I have discussed these points in more detail in my op-ed, and in an article I wrote for Forbes.com, which can be accessed here.

So if the National Climate Assessment offers sobering prospects, the potential of the U.S. and world nuclear power fleet provide off-the-shelf promise and good news, and even an antidote.  Our challenge is to make sure that we make the right policy decisions so we don’t poison the antidote.

Obama Energy Official: Nuclear Plants Essential To Our Carbon Reduction Goals

By Michael Krancer
Follow: @MikeKrancer 

Peter Lyons, the Department of Energy’s (“DOE”) assistant secretary for nuclear energy, outlined the Obama Administration’s reasons for supporting nuclear power in the United States at the Platts 10th Annual Nuclear Energy Conference earlier this month.

Lyons, who is also a former Nuclear Regulatory Commission member and science advisor to the former Senator Pete Domenici, emphasized that nuclear power is a key contributor to our country’s goal of reducing greenhouse gas emissions (“GHG”). Moreover, he sounded the alarm that the growing list of perfectly healthy and well performing nuclear power plants being shut down for political and/or commercial reasons, or being slated for shutdown, is a serious climate-change threat.

He stated that he is gravely concerned that the loss of existing healthy nuclear plants will cost us dearly in terms of increased carbon emissions. The DOE studied a scenario where 30 percent of the county’s 100 reactors would be shut down. If those closures were to go ahead as per that scenario, there would be no way to meet our goal of cutting GHG emissions and, in fact, GHG emissions from the U.S. would skyrocket. Unsurprisingly, Lyons supplied that the DOE regards many of the nuclear plant closures currently on the calendar as premature.

The bigger problem, Lyons added, is that the market presently has no mechanism to sensibly recognize the value of carbon-free power generation, particularly nuclear power. He stated: “When well-run, clean [nuclear] energy sources are forced out of the marketplace due to a combination of reduced demand, low natural gas prices and market structure…our markets are providing the wrong signals.”

Nuclear power accounts for 20 percent of the electricity generated in the U.S. and for 64 percent of all zero-carbon emission sources. But many nuclear power plants are seeing their profits squeezed these days. There’s very little growth in the demand for electricity, thanks to energy efficiency, demand response, and a hobbled economy. Low gas prices have further reduced energy prices—and the profitability of the existing nuclear fleet.

Nuclear plants aren’t subsidized like other non-carbon-emitting energy plants are. Solar and wind are doubly subsidized; they receive direct taxpayer dollars—about $12.1 billion in the last round of the renewal of the Production Tax Credit. And in about 30 states and the District of Columbia, Renewable Portfolio Standard laws mandate that consumers buy a certain amount of wind and solar power.

Meanwhile, the U.S. has recently seen the closing of viable plants like Wisconsin’s Kewaunee, which in 2008 had won a license extension to 2033, and Vermont Yankee, which in 2011 had its operating license extended for 20 years. Replacing these two plants, even with new, highly efficient plants that burn natural gas, will lead to millions of tons of new carbon emissions. Many other plants are in danger of closing early as well.

This is terrible news for our GHG reduction goals. Just look at the case of Germany when it rushed to shutter its nuclear plants after Fukushima. The result: an estimated whopping increase of 15 million tons in GHG emissions if the gap in power demand is replaced by natural gas burning plants, and 30 million tons if the gap were to be filled with coal-fired plants.

How might policymakers and business people seek to prevent something similar from happening here? Lyons suggests measures that would help the markets recognize the value of carbon-free power generation—a carbon price or a cap-and-trade mechanism, in other words. A Stanford Woods Institute for the Environment review of survey data has shown that the public would favor those measures. The CDP, a U.K.-based environmental data group, recently reported that most big companies are ready, too.

For further insight from Michael Krancer on this issue, please read his recently published Forbes.com article by clicking here.

Report: Big Companies Ready for EPA Climate Change Regulations

By Michael Krancer
@MikeKrancer 

First came the news that a majority of the American public and many big investors are increasingly open to curbing the effect of global warming and supportive of mitigating carbon emissions by government action. Now comes a new report from the CDP revealing that many of the largest U.S. and global companies are ready for it, too.

The CDP, which released its report last week, analyzed data from many of the biggest companies headquartered in the U.S. or doing business here. They included oil giants like ExxonMobil, Chevron, BP, and Shell, and industrial behemoths like GE, DuPont, and Duke Energy, just to name a few. The CDP found that many are planning their fiscal futures around a price on carbon. A price on carbon—whether through a simple tax or a market-based cap and trade type system—is the most likely mechanism regulators would use to reign in greenhouse gas (“GHG”) emissions and, ultimately, climate change.

This is a big deal both politically and from a business standpoint. The CDP (formerly the Carbon Disclosure Project) is an international, not-for-profit organization that provides the only global system for companies and cities to measure, disclose, manage, and share vital environmental information. The CDP works with institutional investors with assets of $87 trillion. The study is based on the CDP’s annual voluntary disclosure process. The conclusion: a broad, diverse group of American and global companies have accepted a price for carbon and incorporated it into their normal business planning.

The CDP says companies fully expect an eventual regulatory approach in some form that addresses climate change. Accordingly, companies are using a price for carbon to plan for identifying revenue opportunities, risks, and to incentivize the achievement of maximum energy efficiencies to reduce costs and guide capital investment decision.

What happened to the claim that business opposes a price on carbon or a carbon tax? While some politicians call any effort to control carbon a “job killer,” lots of big companies are apparently saying “get over it.” The New York Times published an article on December 5 analyzing some of the political ramifications. Its take was that coalitions are shifting, and that business leaders, even those who count themselves as conservative Republicans, have sensed the direction of climate change policy in America and have decided to prepare to profit from it. They’re voting with their business plans.

The kicker is that no company thought that any business disruption would result from achieving GHG reductions or from carbon regulatory regimes. That may come as an inconvenient truth—so to speak—to politicians and pundits who’ve labeled efforts to control carbon job killers. It’s becoming increasingly clear that big business is not afraid of a regulatory regime for carbon. In fact, most companies are planning for it and even see opportunities for growth.

This also may have very significant legal ramifications because the politics are shifting at an interesting time—the Environmental Protection Agency (“EPA”) is about to promulgate its new rules for requiring states to apply the “best system of emissions reduction” for existing power plants. Just a short time ago, the nine densely populated Northeast and Mid-Atlantic states that make up the Regional Greenhouse Gas Initiative (“RGGI”) submitted comments to the EPA regarding those upcoming rules. RGGI is a proven and effective system of carbon emissions control that raises revenue for participating states to boot through its auctions. The gist of what the RGGI states said is that membership and participation in the RGGI would satisfy the “best system of emissions reduction.”

For further insight from Mike Krancer on this issue, please visit his Forbes.com article by clicking here.

Memo to Policymakers: Americans Want Greenhouse Gas Cuts

By Michael Krancer
Follow @MikeKrancer 

Energy policymakers should heed the results of a survey released last week by the University of Stanford: a surprising majority of Americans across the political and geographical board are hungry for action on climate change.

A new analysis of 21 scientific surveys reflecting public opinions in 46 states showed that a large majority of Americans now believe that global warming is manmade and that the government should reign in greenhouse gas emissions—especially at power plants.

“Majorities in every state surveyed said the government should limit greenhouse gas emissions” and “in particular, by power plants.”  This includes eastern coal states like ours, Pennsylvania, as well as Ohio, Indiana, Illinois, and Michigan.  The story is the same in states like Texas, Mississippi, Alabama, and South Carolina.

This is big news for policymakers, especially for those seeking to be or to remain elected as policymakers.  New coalitions are forming; there is no Red State-vs.-Blue State or geographical divides on this issue any more.

The study was conducted by Stanford University’s Jon Krosnick and his colleague, Visiting Scholar Bo MacInnis.  Their findings were presented to the congressional Bicameral Task Force on Climate Change in Washington, D.C. on November 13. (Read more from them here.)

Krosnick says he often hears legislators declare that there is divided opinion about climate change, and that many constituents are still skeptical it exists.  But those officials, he says, are basing their opinions on ad hoc constituent phone calls and emails.  As anyone who has been in politics knows, it is always dangerous for an elected official to draw opinions or conclusions based solely on those forms of outreach.  Indeed, Krosnick’s empirical findings show that large majorities of base constituencies across the board feel differently—and they want action.

Krosnick’s data is not just an anomaly.  A 2012 nationwide poll found that 87% of registered Democrats polled believed that global warming was happening, and so did 53% of Republicans.  (www.businessweek.com/news/2012-07-18/record-heat-wave-pushes-u-dot-s-dot-belief-in-climate-change-to-70-percent.)  While the Democrat numbers were unsurprisingly higher, the bottom line is that a majority of Republicans are in tune with doing something about carbon emissions.

Big investors are mirroring the citizen concern—no surprise since investors, whether individuals, pension funds, or mutual funds, are made up of folks like you and me: citizens.  In October, a coalition of 70 global investors with $3 trillion in funds called on the world’s largest carbon emitters to assess risks under climate action and “business as usual” scenarios.  That initiative, dubbed Carbon Asset Risk (“CAR”), was coordinated by Ceres and the Carbon Tracker Initiative, with support from the Global Investor Coalition on Climate Change. (www.ceres.org/press/press-releases/investors-ask-fossil-fuel-companies-to-assess-how-business-plans-fare-in-low-carbon-future.)

Americans have some pretty concrete notions on how we should be dealing with this issue.  For example, they would welcome government efforts to curb emissions from power plants.  Wide majorities also favor market-based solutions like a cap and trade.  A price on carbon would be a similar market-based measure.  A recent report by the CDP shows that businesses, including big oil and energy companies, are already there.  They are planning on a price for carbon and they see no disruption to the economy if one were established by a regulatory regime.

Indeed, market-based mechanisms such as RGGI (Regional Greenhouse Gas Initiative) carbon auctions have been up and running quite successfully in the Northeastern United States since 2008, raising many millions of dollars for participating states’ coffers to boot.  With the EPA’s blueprint for states to choose how they will control emissions from existing power plants coming down the pike next year, we may now have the perfect match of citizen, investor, and business will to make these market-based mechanisms work.

For further insight from Michael Krancer on this issue, please visit his Forbes.com blog by clicking here.”