US nuclear’s problems add to the challenge of carbon-free power
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The Indian Point Energy Center in New York State, about 30 miles north of Manhattan, began generating nuclear power in 1962. On Friday, its last reactor is shutting down for good. The story of the plant is a good illustration of just how difficult it will be for the US to achieve President Joe Biden’s goal of 100% zero-carbon power by 2035.
Nuclear is by far the largest source of zero-carbon electricity in the US: it contributed about 20.5% of the country’s electricity last year, compared to 11.1% for wind and solar combined. But it faces long-term challenges. New reactors are prohibitively expensive to build, and only two are presently under construction. And the economics of the existing fleet, built mostly in the 1970s and 1980s, are under severe pressure from low natural gas prices.
President Biden has repeatedly said that he wants nuclear power to be part of the low-carbon future he envisages for the US. The administration’s announcement last month of its proposed $2 trillion infrastructure package included a pledge to introduce an Energy Efficiency and Clean Energy Standard, which among other things would “continue to leverage the carbon pollution-free energy provided by existing sources like nuclear”.
The president’s problem is that states retain control of generation within their borders, and they have often been reluctant to prioritise nuclear as a zero-carbon power source. New York State has a system of zero emissions credits that benefit three of its nuclear plants, but Indian Point was specifically excluded after an effective campaign by environmental groups. Ohio abandoned a proposed $1 billion package to support its nuclear plants after an FBI investigation into alleged bribery. The nuclear bailout bill passed by Illinois in 2016 led to a separate bribery scandal, and a proposed second support package is now the subject of intense debate.
Environmental campaigners have suggested that the zero-carbon electricity provided by nuclear can be replaced by renewables, but so far in New York that appears not to have been the case. Unit 2, the first of Indian Point’s two reactors to close, was shut down last year, and the shortfall in nuclear generation was almost entirely made up by an increase in gas-fired generation, Wood Mackenzie data shows. The Cricket Valley Energy Center, a new combined-cycle gas turbine plant about 30 miles from Indian Point, came online in April last year, the same month that Unit 2 at Indian Point was shut down. The two plants have almost identical capacities: 1 gigawatt for Unit 2, 1.1 gigawatts for Cricket Valley.
“It’s a story of one step forward, two steps back for zero-carbon energy in New York”, says Ryan Sweezey, a Wood Mackenzie research manager for power and renewables. The share of the state’s power drawn from large-scale zero-carbon sources — wind, utility-scale solar, hydro and nuclear — dropped from 59% in 2019 to 54.8% last year.
Other states have shown similar impacts from the loss of nuclear generation. After the San Onofre Nuclear Generating Station in California was shut down in 2012, the shortfall in electricity supply was replaced “largely by increased in-state natural gas generation”, according to research from the Energy Institute at Haas.
President Biden’s goal of a 100% carbon-free power sector by 2035 is challenging in the extreme, and a continued decline in nuclear generation will make it even more so. The proposed federal Energy Efficiency and Clean Energy Standard could help support nuclear plants, but its future is uncertain. Narrow Democratic majorities in both houses of Congress mean it is unlikely to be passed into law, and attempts to achieve similar goals through regulations based on existing legislation will face legal challenges, just as the Obama administration’s Clean Power Plan did. “The technical, political and economic issues it raises make the zero-carbon power goal very difficult to achieve on the timeline that is being proposed”, Sweezey says.
The US Senate votes to reinstate the Obama administration’s methane regulations
One of the idiosyncrasies of the US regulatory system is the Congressional Review Act, a measure that allows Congress to strike down rules issued by federal agencies for a limited period after they have been adopted. The law was used 16 times by the Republican-controlled Congress in 2017 to overturn regulations introduced by the Obama administration. Now, the Democrat-controlled Senate is attempting to do the same for one of the Trump administration’s measures, which removed regulations on methane and related emissions from oil and gas installations.
In September of last year, the administration finalised two rule changes to make it “simpler and less burdensome” for the oil and gas industry to comply with performance standards for new sources of emissions of methane and volatile organic compounds. The changes, which reformed rules set by the Obama administration in 2012 and 2016, exempted transmission and storage facilities from the requirements of the rules, and removed the methane requirements for upstream and processing facilities.
A resolution passed by the Senate on Wednesday, on a 52-42 vote, called for that rule change to be struck down. If the House now votes the same way, and President Biden signs the resolution, both of which seem likely, the Obama-era rules would be largely reinstated.
That outcome is likely to receive a mixed reception from the US oil and gas industry. The Trump administration’s deregulation was welcomed by the Independent Petroleum Association of America, which accepted the need for regulation but said the specific rules introduced under President Obama, especially the 2016 measures, included “flawed provisions” and had been rushed through under political pressure.
On the other hand, some large companies, including ExxonMobil and Royal Dutch Shell, opposed the Trump administration’s move. ExxonMobil’s Bart Cahir, senior vice-president for unconventional resources, said in a blog post that the rule change “misses the mark”. Gretchen Watkins, Shell’s president in the US, described the move as “frustrating and disappointing”. President Biden has promised to bring forward his own methane regulations that would be even more stringent than President Obama’s, and the American Petroleum Institute, the industry group, has said it wants to work with the administration to help shape those new rules.
Another reason for US oil and gas producers to support some federal regulation of methane emissions is that many of them are under pressure, from investors and increasingly from customers as well, to reduce their carbon intensity. Regulations would help level the playing field between the companies that do face those pressures and the ones that do not. Comparisons of emissions intensity for the oil and gas production of the leading crude exporters to the US, calculated with Wood Mackenzie’s emissions benchmarking tool, show that US onshore basins, while far from the worst, have clear room for improvement.
The OPEC+ group decides the oil market can take more supply
President Biden this week marked 100 days in office, and addressed a joint session of both houses of Congress to claim a list of successes, particularly on his two top priorities: fighting the coronavirus pandemic and reviving the economy. “America is on the move again”, he said, “Life can knock us down. But in America, we never, ever, ever stay down. Americans always get up”.
Economic data released on Thursday supported that upbeat message. US GDP grew at an annualised rate of 6.4% in the first quarter, which the New York Times described as a signal of “a stellar year” ahead. The level of GDP in real terms is on course to exceed its pre-pandemic peak this quarter.
Around the world, there is a clear divide opening up in the progress of the pandemic, driven by the availability of vaccines. In the US, about 30% of the population has been fully vaccinated and the number of new coronavirus cases is falling. Worldwide, however, the number of new cases are at record highs, partly because of the enormous increase in India, where only 1.8% of the population has been fully vaccinated.
For the OPEC+ countries, which met this week to review their output strategy, there was nothing in the outlook that called for lengthy deliberations. Ministers from OPEC countries and their allies, including Russia, had been scheduled to hold an online meeting on Wednesday, but instead they reached a speedy decision on Tuesday after a meeting of the group’s Joint Ministerial Monitoring Committee earlier in the day.
The meeting’s statement highlighted concerns that “Covid-19 cases are rising in a number of countries, despite the ongoing vaccination campaigns, and that the resurgence could hamper the economic and oil demand recovery”. But the ministers decided they were confident enough in the demand outlook to continue to relax their production curbs as previously planned. The agreement at the meeting means the group will boost supply incrementally each month in May, June and July, and Saudi Arabia will gradually bring back the additional 1 million b/d that it voluntarily cut from production from February.
The decision, said Wood Mackenzie’s Ann-Louise Hittle, was “as expected” but optimism about the strength of demand drove crude prices higher. By Thursday, Brent was above $68 a barrel.
European industries say it is becoming increasingly urgent for the EU to introduce a border carbon adjustment mechanism — a carbon import tariff — as the rising cost of allowances in the Emissions Trading System is leaving them unable to compete.
BP, Royal Dutch Shell and Total opened the first quarter reporting season for the oil Majors with strong earnings. Eni reported its earnings along with a plan to sell a minority stake in its retail and renewable energy business next year. It is studying options, including a possible stock market listing through an IPO or the sale or exchange of a minority stake to another company. Chevron and ExxonMobil also reported their first quarter earnings on Friday morning.
California generated almost 95% of its electricity from renewable sources recently, but only for 4 seconds.
The UAW auto workers’ union has reacted angrily to the news that General Motors plans to invest $1 billion in a plant in Mexico to build electric vehicles. Terry Dittes, the union’s vice-president, described the investment as “a slap in the face”, not only for union members but also for US taxpayers, at a time when GM was asking the government to subsidise EVs.
Daimler and Volvo say their fuel cell joint venture is aiming to cut the cost of the technology sharply, to below the cost of battery packs. They see fuel cells as the natural zero-emissions technology for heavy trucks, while lighter trucks and cars go to battery EVs.
Carbon monoxide poisoning killed 11 people and sent 1,400 to hospitals and clinics during the cold weather and power outages in Texas in February, ProPublica reported. It was “the biggest epidemic of CO poisoning in recent history”, a doctor said.
Members of Congress from Texas hope they may be able to secure funding for the “Ike Dike”: a system of coastal barriers to protect the vital petrochemical facilities on the Houston Ship Channel from the threat of a hurricane storm surge.
And finally, a fix for a perennial complaint about low-carbon vehicles: they are too quiet. Toyota has come up with a solution: a Corolla that burns hydrogen in a three-cylinder internal combustion engine. The result, as you can hear in this video, sounds very much like a conventional gasoline-engined car. It is a solution that has its drawbacks, because hydrogen ICE vehicles are not entirely zero-emissions: the exhaust that makes that pleasing roar has only trace amounts of carbon dioxide, but it does include nitrogen oxides, and nitrogen dioxide in particular is a dangerous pollutant. Given the progress already made by EVs, alternative low-carbon technologies like this one face an uphill battle to establish themselves. Still, the hydrogen ICE car is a sign of how Toyota is still exploring a range of different options for reaching its goal of a 90% reduction in carbon dioxide emissions from its vehicles by 2050. Meanwhile, designers are still working on the issue of how EVs should sound.
Quote of the week
”The US for example will not be an oil-producing country in 10 years. Today it produces like 10 million barrels [a day], after 10 years it will barely produce 2 million barrels”. — Crown Prince Mohammed bin Salman of Saudi Arabia gave a wide-ranging television interview in which he suggested that oil supply from some of the world’s largest producers would decline much faster than demand.
Chart of the week
This chart is particularly relevant in the light of Friday’s news from Eni that it plans to sell or IPO a minority stake in its retail and renewable energy business. I used it in my speech to the national convention of Mexico’s oil and gas industry association Amexhi this week, and before that it came from a piece by our chief analyst Simon Flowers last year. It shows the projected renewable electricity generation capacity for some leading European energy companies, plotted against the years by which they aim to achieve their goals. The companies include both oil and gas Majors such as BP Total and Eni, and established power companies such as RWE and Enel. You can see that if the oil and gas groups achieve their objectives for developing renewables, their capacity will be up alongside some of the biggest companies in the European power industry.