Posts Tagged policy
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My first reaction was “Wow! Did I just read that correctly?!”
It was one of those “ah-ha moments” when a seemingly mundane statement leapt out of the page and whacked me on the forehead. This time the catalyst was a twitter reply from Chris Pragman (@ChrisPragman) who describes himself as an “Avid Podcast listener, Engineer, Nuclear Power, Fire Protection, and beer geek with a long commute!”
You see, I had posted a tweet earlier in the day about the cost to taxpayers of some “green energy” jobs. There’s a new wind farm in Oregon called Shepherds Flat that received federal cash grants totaling $490 million under the guise of job creation. For that grand sum the Shepherds Flat project will create 35 new jobs. The math is easy; $14 million per “green energy” job. Our tax dollars at work!
This tidbit about Shepherds Flat was part of a larger report by the Energy Tribune that among other things compared the relative size of US government subsidies to various energy industries. The report by Robert Bryce calculated subsidy dollars per unit energy produced and concluded the renewable energy industry receives 6.5 times more federal government subsidies than the nuclear industry, and 12 times more than the oil and gas industry. That fact really didn’t surprise me considering the billions of dollars in grants, production tax credits, and favorable depreciation rules the government lavishes upon anything branded with the “renewable” label. Then Chris asked a great question, “What do they consider nuclear subsidies?”
When I dug into that question I learned the Congressional Budget Office is tasked with tracking the amount the government spends subsidizing various industries, and they publish their findings periodically. There it was on page 3: $900 million in “subsidies” for the “favorable tax treatment of nuclear decommissioning funds.” Hmmm. What could that be?
You see, every nuclear plant owner is required by federal law to set aside funds to ensure there’ll be enough money to pay for decommissioning the plant when the time comes. Typically plant operators add to the fund each year and over time the fund grows until it’s used. The NRC monitors each fund and will require plant owners to make additional payments if they think they’re behind. These funds are essentially forced savings accounts that add to each nuclear plants annual operating expenses.
So what’s the “favorable tax treatment?” It turns out Title 26 of the United States Internal Revenue Code requires interest or other investment earnings of nuclear plant decommissioning funds to be taxed at “only” 20%. Maybe I’m alone in this, but being required by law to set up a fund, then being taxed on that fund’s growth hardly fits the definition of a “subsidy!” Other sources of energy are not required to set up such funds – they carry the potential future costs of dismantling equipment as liabilities on their balance sheets. In the case of nuclear plants they’re forced to set aside capitol in government mandated and monitored funds, then the government takes 20% of the fund’s earnings.
Anyway, in 2009 the CBO calculated this “favorable tax treatment” to be worth $900 million, and they called that a “subsidy.” That’s quite a different kind of subsidy from the cash grants, tax credits, and accelerated depreciation enjoyed by the renewable energy industry. Personally, I have a tough time viewing this as a subsidy at all.
Chris, thanks for asking the question! I learned something new today, and maybe some of you out there did too.
Happy Birthday to This Week in Nuclear!
On Dec 27 This Week in Nuclear will turn seven years old. I would like to express my heartfelt “thanks” to all of you who have supported and continue to support the blog and podcast!
Spain’s electrical supply industry is caught in a decade long death spiral of failed energy policy, over-reliance on imported fuels, and massive debt. Their new taxes on nuclear energy, an attempt to reduce utility debt, are likely to worsen their economy.
Spain imports fuel for about 51 % of their electricity production in the form of coal and natural gas. Payments for these imported commodities contribute to a debilitating trade imbalance. Nuclear energy makes up the lion’s share (47%) of Spain’s domestic energy production. Their eight nuclear energy facilities add tens of thousands of jobs and billions of euros per year to the national economy while reducing the need for imported coal or gas. At the same time Spain’s nuclear plants provide reliable, predictable energy without greenhouse gas emissions.
The amount of renewable energy generated in Spain has increased considerably over the last several years. In fact, in 2012 wind energy production exceeded nuclear energy production for brief periods when demand was low, some nuclear plants were out of service, and wind conditions were nearly optimal. Unfortunately, Spain’s methods of encouraging investment in renewables have contributed to their current financial crises. The Spanish electricity industry is carrying $32 billion of debt, putting serious strain on an already faltering economy.
Spain began deregulating their electricity supply system in the late 1990′s. Their approach was eerily similar to the failed California experiment; they removed price controls to allow power generators to compete among themselves, but they limited rates paid by customers. As wholesale energy prices rose utilities were unable to recover the higher costs through higher rates to customers. The result was predictable: electric utilities began loosing money on a grand scale. Since 2005 annual “energy deficits” have been in the billions of euros per year. With slight-of-hand economics, the Spanish government allowed utilities to “bank” their annual deficits against future earnings. Unfortunately those future earnings never materialized and deficits ballooned.
A the same time Spain (like California) began a heavily subsidized renewable energy program that included “feed-in tariffs” which guaranteed wind and solar generators above market prices for all of the energy they could produce. Consequently utilities were forced to buy wind and solar energy at inflated rates, but were not allowed to recover the costs because of those same price controls. Solar and wind energy investors raked in billions of euros per year while the utility deficit grew even faster. By some accounts electric utility debt in Spain now stands at $32 billion.
These out-of-whack energy policies cost Spanish workers dearly; for every renewable energy job created more than five existing jobs were lost and unemployment soared to over 20%. According to the Canada Free Press:
For each megawatt of wind energy installed, 4.27 jobs were lost, and for each megawatt of solar energy installed, 12.7 jobs were lost.
Eventually it became clear the Spanish government would have to act to curtail the exploding debt and rescue the utilities from bankruptcy. Earlier this year they stopped granting requests for new feed-in tariffs. Beginning in January 2013 they’re implementing a new 6% flat tax on all electricity production. In addition, they’ve singled out nuclear energy for “special” taxes they are calling a “nuclear waste generation and storage tax.”
Let’s get this straight: Spain’s national energy policies enriched wind and solar energy investors while bankrupting utilities and contributing to massive job losses. Now they’re calling on nuclear energy operators, their largest source of domestic energy to foot the bill! Not only is this course of action irrational and unfair, it punishes the domestic energy production and job creation they desperately need and it perpetuates favoritism for expensive renewables that created the problem in the first place.
The first victim has already fallen to the anti-nuclear tax; the Santa María de Garoña nuclear plant is being forced out of business. Garoña is a 446 MW BWR that began commercial operation in 1971. The plant’s owner says the new 153 million euro tax that will go into effect in January is more than ten times the plant’s annual profit. They have no choice but to shut the plant down for the last time on Sunday, December 23. Hundreds of jobs will be lost at the plant and in surrounding communities. Since Garoña provides about 1.4% of Spain’s electricity, utilities will be forced to import more coal and natural gas to make up for lost base load generation.
With lost jobs, lost revenues, and rising energy imports Spain’s energy death spiral continues.
Mis oraciones por mis amigos de Garoña. Buena suerte en el Año Nuevo, y le deseo todo lo major.
There was a horrible accident in Kenya this week. More than 100 people were burned to death, and hundreds more were injured when a gasoline pipeline began leaking and then exploded. My heart goes out to the victims, and their families, and to all the people of Kenya who are dealing with the worst industrial disaster in their history. Eyewitnesses reported seeing burning people leaping into a nearby river trying to extinguish the flames that engulfed them. Rescue workers had to place a net across the river to catch the charred bodies of the dead so they would not wash down stream. The death toll continues to grow, and most of the 100+ injured including many children are not expected to survive.
The pipeline runs through Sinai, a Nairobi ghetto of corrugated tin and cardboard huts. When the pipe began leaking hundreds of people gathered around to scoop up the spilled gasoline. As the crowd grew a spark from a cigarette butt or some other heat source ignited the fuel. The blast incinerated scores of people nearby. Flames cascaded down on nearby huts then raced through the crowded slum. Read the rest of this entry »
This is a follow up to the podcast titled “Water Wars in New York” on May 27, 2010 in which I discussed how NY State is using their authority to issue Water Quality Certificates to wage war against the Indian Point Nuclear Plant. In case you missed that show, New York is holding the plant’s 20 year license renewal hostage by refusing to issue a Certificate of Water Quality unless the plant agrees to install expensive cooling towers. The plant has argued that the cost of cooling towers, approximately $2 Billion, is excessive and disproportionate to the environmental benefit that would be derived. In fact, the plant has identified an alternate technology that would provide greater environmental benefits at about one-tenth of the cost of installing cooling towers. Thus far those arguments have fallen on deaf ears. Read the rest of this entry »
In this podcast I discuss the question “Is Nuclear Energy Renewable?” that I first posed in a recent blog post.
In addition, I added the following discussion of recent news and events:
Indian Point License Extension Proceeds Despite Anti-Nuclear Hurdles
Despite barriers erected by anti-nuclear groups to block the license renewal for the Indian Point nuclear reactors, the two unit nuclear plant in NY has passed two major hurdles in the life extension process.
- On August 12 NRC issued their final safety evaluation report and concluded there are no safety issues that would preclude running the plants for another 20 years.
- On Sept 23 the independent Advisory Committee on Reactor Safeguards, and independent team of experts that advice the NRC, recommended that the license extension be granted.
Unless renewed, the current licenses expire in 2013 and 2015.
In 2007 the anti-nuclear group Riverkeeper filed five contentions opposing the 20 year license extensions. The NRC granted Riverkeeper a hearing to review arguments on three of their five contentions. In those hearings Riverkeeper was unable to provide sufficient evidence to support their claims and the NRC ruled the contentions had no merit.
On the NRC’s web site they have a schedule showing a tentative final decision on Indian Point’s relicensing in February of 2010.
And you thought nuclear engineering & science was all about energy? Guess Again! (Podcast Episode #69)
While at the American Nuclear Society Annual Conference last week I had the opportunity to speak with several students about their interests and fields of study. The broad range of responses is insightful and serves to illustrate that commercial energy generation is just one of many career options related to nuclear engineering, science, and technology.
The students also help dispel the myth that nuclear careers are only for technical specialists. The industry needs people who focus on business, communications, government affairs and many other non-technical disciplines!
Watch the video and you’ll see what I mean!
Operation Sea Orbit – 1964 (Front to Back: USS Enterprise, USS Long Beach, & USS Bainbridge)
The Markey / Waxman Climate Change Bill
Momentum is building towards greenhouse gas regulation in the United States. Two weeks ago the house of representatives released draft climate change legislation sponsored by Rep. Henry Waxman and Rep. Edward Markey. On Friday the US Environmental Protection Agency turned up the heat when they declared CO2 and other greenhouse gasses “hazards to public health” and labeled CO2 a pollutant. This action gives the EPA authority to regulate CO2 emissions even if congress does not pass legislation focused on curbing greenhouse gas releases.