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Friday, March 1, 2013

Legislature Weighs “Nuclear” Option for Renewables



Only in Wisconsin will you find lawmakers who treat renewable energy as though it were radioactive.

A legislator from Brown County, Rep. Andre Jacque, has introduced a bill (AB 34) to incorporate nuclear energy within Wisconsin’s 14-year-old renewable electricity standard. The bill defines the terms under which utilities could apply the output from in-state nuclear power plants toward their existing 10% requirement, which would be renamed the Advanced and Renewable Portfolio Standard (ARPS). Right now, Wisconsin has three operating nuclear reactors at two locations five miles apart along Lake Michigan. 

Two of the three nuclear power stations--Point Beach units 1 and 2--are located within Rep. Jacque’s district. The adjoining district contains the other nuclear unit , the 560-MW Kewaunee Nuclear Power Plant owned by Dominion Resources, a Virginia-based utility holding company. Late in 2012, Dominion announced that it would shut down and decommission Kewaunee this spring, while cutting the plant’s 650-person workforce in half.

During its 39 years of operation, the Kewaunee plant pumped millions of dollars into local government coffers, a substantial revenue flow that will dry up some time after Dominion closes down the plant for good.  It will be quite a challenge for Kewaunee and Manitowoc counties to recover from the retirement of such a powerful economic engine.

But let’s be clear about one thing: state legislation cannot bring Kewaunee back to life. As Mark Kanz, a Dominion representative, said regarding Jacque’s legislation: “What we needed was a long-term power purchase agreement. I don’t see the market changing a whole lot any time in the near future, and what this really was all about was economics.” 

Over the last three years, Kewaunee has produced red ink as prodigiously as it has electricity, to the tune of $362 million. One can certainly understand why Dominion was so eager to sell it. But the only way an expensive plant like Kewaunee can generate profits is by convincing nearby utilities to pay a premium for its output under a long-term contract. 

Even Rep. Jacque and the other bill sponsors know better than to expect that outcome. As stated in their co-sponsorship memo: “A flood of cheap natural gas on the energy market and the failure to negotiate a long-term power purchase agreement make it very likely that Kewaunee will be closed … later this year.”

But AB 34 wouldn’t provide any immediate assistance to Wisconsin’s other nuclear generators at Point Beach either. That is because the legislation specifically exempts nuclear generation that is sold under an existing contract from qualifying for the renamed standard. With a power purchase agreement in place until 2031, Point Beach doesn’t need a helping hand from state government.  At this point, one might be forgiven for wondering who might benefit from this bill.

As for Wisconsin’s Renewable Electricity Standard (RES), there isn’t much kick remaining in it. Collectively, the utilities’ renewable percentages had already reached 8.88% by the end of 2011, and that was before Wisconsin’s largest wind project commenced operations.  Apart from a 50 MW biomass plant currently under construction, the utilities do not have plans right now to add more renewable generators to their systems. There is virtually no room left for any more qualifying energy sources, be they renewable or, if AB 34 clears the Legislature, nuclear.

Let’s make some comparisons. In 2006, the last year that both Kewaunee and Point Beach were utility properties, nuclear contributed about 18% of the electricity generated in Wisconsin, with each unit accounting for 6% of that total. Coincidentally, that was the year Wisconsin enacted its current RES, which specifies an increase in the percentage of renewable electricity sold in Wisconsin from 4% in 2004 to 10% by 2015. That’s a six percentage point difference, roughly equal to the output from Kewaunee or one of Point Beach’s two units.

Now, AB 34’s sponsors could have specified higher targets after 2015 to create room for a Point Beach unit or two, but they chose not to. This begs the question, how can a modest 10% renewable electricity standard that is 95% full accommodate the output of an existing Wisconsin nuclear station? How does the math work here?

The answer, of course, is it doesn’t. How this bill would yield anything of value to a nuclear plant operator is a complete mystery to anyone with a sixth-grader’s grasp of arithmetic. At this point, it makes sense to look through the more obscure provisions of AB 34 to pin down the underlying intent of this legislation.

To my way of thinking, the bill sponsors expose their true motives in the section dealing with so-called “resource” credits, which would replace the way renewable energy credits are currently created and accounted for. There, one stumbles upon a provision to remove the four-year limit on banking unused renewable energy credits. Should this provision ever find its way into the statutes, a utility would be able to apply kilowatt-hours generated from decades past to their current requirements. No other state with an RES lets their utilities bank surplus credits indefinitely.

When this proposal first surfaced in a stand-alone bill introduced in 2011, renewable electricity producers of all stripes--private and county-owned  landfill gas generators, dairy operations with biogas systems, small hydro owners, windpower companies and solar PV owners— banded together to denounce this attack. They understood all too well the real purpose behind giving renewable energy credits the gift of perpetual life, which is to render them valueless, thereby giving utilities all the room they need to drive the incremental price for renewable energy down to zero.  That bill died in 2012, but since then the indefinite banking provision has been resurrected and now lies deep within the nether reaches of AB 34.

What we have here, then, is a bill that uses the pretext of preserving the state’s nuclear generating assets to dismantle what remains of Wisconsin’s renewable energy policy. Not ones to accept the market realities precipitating Kewaunee’s forced retirement, the bill authors decided to craft a bill that aimed at hobbling the only other zero-carbon game in town: renewable energy.  The thought that seems to be driving AB 34’s sponsors is this:  If nuclear is going down, renewables are going down with it.

AB 34 is not the only bill that aims to weaken Wisconsin’s RES. Senator Glenn Grothman, a Republican from West Bend, is sponsoring legislation to roll back the renewable requirements on utilities down to 2011 levels. What is Sen. Grothman’s beef with renewable energy policy?  Simply put, he does not want wind turbines going up in his district, and he is convinced that the wind energy industry would dry up and blow away  without the RES. Of course, if his initiative were to become law, its impact would extend beyond windpower to all eligible renewable energy resources. In his quixotic quest to stamp out windpower in his district, Grothman appears willing to accept all the collateral damage to other renewables that would ensue.

To gauge how far renewable energy’s star has fallen in Wisconsin, one need not go farther back in time than 2006, when a Republican-controlled Legislature passed the 10% RES with only one dissenting vote. Even Senator Frank Lasee, the state’s most prominent antiwind crusader, voted for the RES, as did Grothman.  But the bipartisanship spirit alive in 2006 has completely curdled, and more than a handful of legislators are taking up cudgels against an energy pathway they had welcomed only seven years before.

Ironically, clean energy represents the best hope for creating new jobs and business opportunities for the individuals and communities that will be hit hard by Kewaunee’s retirement.  Between the 31 wind turbines erected in Kewaunee County 14 years ago and biodigester systems serving local dairy farms and food producers, clean energy has made substantial inroads in Manitowoc and Kewaunee counties, and has the potential to deliver much more. But progress will be difficult to attain when local legislators would rather score cheap political points than produce an energy bill that might actually benefit their constituents. 

Michael Vickerman is program and policy director of RENEW Wisconsin, a sustainable energy advocacy organization. RENEW Wisconsin is an independent, nonprofit 501(c)(3) that leads and represents businesses, and individuals who seek more clean, renewable energy in Wisconsin.  More information on RENEW’s Web site at www.renewwisconsin.org.

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