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Can nuclear bailouts and electricity markets coexist?

Andy stone | Energy policy now | 27 June 2017


To access the full Energy Policy Now podcast, click here.

David Cherney, an energy market expert at PA Consulting Group, is featured on the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania alongside Christina Simeone, Director of Policy and External Affairs at the Kleinman Center. 

In the podcast, David discusses the expanding debate over nuclear power subsidies, the potential for subsidies to undermine competitive electricity markets, and how nuclear generation might impact the cost of electricity to customers. 

David discusses a major legal issue over subsidies for nuclear generation and the impact of these subsidies on wholesale markets: "Of course these subsidies are interfering with wholesale markets, there’s no question about that, but what is of question is whether or not that interference is permissible, whether or not that interference is illegal. And so when we think about the nuclear subsidies, there are two past precedents that we need to think about, and opponents and proponents of these forms of nuclear compensation are taking sides on these two issues. The first is renewable compensation. What FERC and what the courts have held is that renewable attributes is a separate and distinct market created by the states. It’s permissible to have these types of markets even though there is some type of interference. This is in contrast to a recent Supreme Court ruling known as Hughes v. Talen.

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David discusses the ongoing nuclear subsidy litigation in New York and Illinois: "There is litigation in both New York and Illinois and it’s very clear that whichever side loses is going to appeal the ruling, so ultimately this will probably end up at the Supreme Court. There has been a blurring of the lines between state and federal control in the energy industry, not just on the nuclear issue but on a number of different issues due to changing market structure, new disruptive technologies. The concept of what can states control, and what can the federal government control, is an increasingly important issue in the energy industry. And it’s likely going to be a topic that the court will want to comment on."

Commenting on the current energy marketplace, and if markets will adapt to these subsidies, David says: "We have very robust wholesale markets across the United States, this is not enough to cause these markets to collapse, however there will be winners and losers with these policies. Someone will be economically harmed, and someone will be economically benefited."

He adds: "I think this is very important for consumers to pay attention to. If we take a step back again and think about the broad energy industry, one of the trends I think we’ve seen over the last ten years, and really ramping up over the last five years, is the concept of customer choice. And customers across the US are increasingly demanding greater choices about their energy future, and this is one of these critical choices. Are we going to be focused on maintaining reliable and affordable electricity, or are we going to be focused on other goals such as having clean energy? This is a very important debate for those customers who are interested in maintaining choice and control over their energy future."  

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