The Path Toward a Nuclear Renaissance; Re-establishing International Leadership Through Tax Reform

Excerpts From A Report to the Electric Reliability Coordinating Council

(Lippold Strategies) – Despite an ongoing effort to develop cutting-edge nuclear generation capacity, boosted throughout the 2000s by a confluence of factors, the nuclear leadership of the United States has fallen into a moribund status that jeopardizes our national security. The civilian nuclear renaissance now faces a crucial test. Before July 31st 2017, there were only two new reactor projects under construction in the United States. Now, however, after the recent decision by South Carolina utilities to abandon the twin-reactor project, V.C. Summer, there remains only one project in progress: Southern Company’s venture in Georgia known as Vogtle.

The nuclear power industry has faced a number of economic difficulties in the past few years including a drop in the price of natural gas, the declining relative cost of renewable energy, and a lack of market pricing mechanisms to value the carbon-free benefits of nuclear power. The decline, however, is not a result of technological inferiority. Indeed, nuclear power consistently boasts the highest capacity factor – the ratio of actual energy generated to the peak production level of a facility – of any energy source in the United States at over 90%. Rather, the root cause of this decline is directly attributable to the unforgiving regulatory and tax environment which overwhelmingly promotes other zero-emissions technologies. However, unlike other sources of zero-emission power, only nuclear has a national security benefit beyond just power generation.

The disparity in tax-related incentives related to nuclear versus other clean-energy sources, is shocking. In 2016, nuclear and renewables accounted for a similar percentage of primary energy production – 10% and 12.1% respectively. However, renewables received a total of $11.4 billion in tax incentives while nuclear only received $0.2 billion. The gap cannot be explained solely using environmental reasons because fossil energy received $5.2 billion. When scaled based on their relative contributions to overall energy production, fossil fuel sources still received over three times as much tax support per unit of energy than did nuclear. This comes on top of a number of other policies like state renewable portfolio standards (RPSs), which only further encumber new nuclear projects.

The Nuclear Production Tax Credit is Crucial to the Industry

Policy decision-makers and legislators are presented with a binary choice – either support existing advanced light-water nuclear projects and sustained U.S. leadership, or accept certain and irreparable decline throughout the industry, with an exponentially negative effect on our national security. Projections from the Center for Strategic and International Studies Commission on Nuclear Energy Policy indicate that if the Vogtle project fails, nuclear capacity would precipitously fall and come close to zero by 2050. The consequences of this are many, but are particularly grave in the context of international civilian nuclear leadership.

One particular provision, the 45J Nuclear Production Tax Credit, has the potential to provide advanced light-water nuclear technology with a critical financial bridge to the future. It is more than a tax credit; it is an investment in the security of the United States.

The nuclear production tax credit is a program specifically tailored to compensate each kilowatthour of electricity produced by advanced light-water nuclear power plants. The provision significantly enhances a clean-energy source by improving the economics of nuclear power and has the ongoing potential to inaugurate a more diverse energy policy portfolio. Additionally, governmental support, both in the form of production tax credits and grant, provide a spectrum of mechanisms that can assist in addressing qualms regarding new nuclear development and the implications of shouldering the cost of capital investments.

The provision, as currently written, applies only to plants placed in service before January 2021, a deadline threatening the only new nuclear power construction project slated to become operational. Extending the tax credit’s deadline or crafting the legislation to provide an ongoing tax incentive for current and future construction projects would provide enough time to finish the new reactors. Further, it would provide a clear commitment and sense of certainty to an industry reeling from the ongoing retirement of older nuclear power plants.

The decision to shutter the projects in South Carolina demonstrates just how important the 45J credit is at this particular time. While the existing reactor fleet itself is under significant pressure, the U.S. is likely facing the last chance it has to promote concrete innovation in advanced light-water nuclear technology. This incentive is important not only for its immediate impact on nuclear power reactor projects, but also the ripple effect it will have on nuclear research more broadly.

In order for the US to be an effective leader on nuclear issues, it must sustain a robust and diverse ecosystem of education, research and development, scientific innovation, and industrial capacity in the nuclear field. The domestic and international market for technology created by the tax credit would attract new investment in the industry; that investment would spark interest in research, supporting laboratories, and directing students into a growing and cutting-edge field of study. This cycle of investment and interest only functions if there is a vibrant market for nuclear energy to drive it.

The evolution and growth of the nuclear segment of the clean energy industry is a pressing requirement since nuclear power is expected to remain a viable energy source for the foreseeable future. To support this requirement, the U.S. nuclear industry must develop the resources necessary to support and sustain the academic research and development of next-generation power plants, small modular reactors, and supporting technology. Without the continued investment into the brain power of our nation’s youth to support the nuclear energy field of study, the U.S. risks a growing shortage in human capital, making us unable to compete with other countries.

Simultaneously, the United States worked for decades to ensure nuclear non-proliferation remained at the forefront of our national security policy. Nuclear proliferation issues still drive our national security actions today with the threats posed by Iran and North Korea. In conjunction with the education necessary to support a strong nuclear industry, many of the same facets of science and academia used to educate a new generation of nuclear engineers and educators is absolutely necessary to understand how to monitor, detect, and prevent the proliferation of nuclear weapons. Only through the rigor of academia can a body of experts be developed that can ensure this component of our national security posture is maintained and expanded, especially in a world where the pursuit of nuclear weapons is being sought by rogue nations and terrorists.

***

Commander Kirk S. Lippold, USN (ret) is a graduate of the US Naval Academy, and received his commission in the Navy in 1981. He attended the Navy Postgraduate School from 1987 to 1989 where he received a Master’s of Science in Systems Engineering (Joint Command, Control and Communications). He is a 1994 graduate of the United States Army Command and General Staff College and is also a 2001 graduate of the Joint Forces Staff College. Currently, Commander Lippold is the president of Lippold Strategies, LLC, a consulting firm specializing in executive leadership development, strategic planning and training programs, and crisis management. Additionally, he serves as Senior Vice President for military policy and strategic development at the public affairs firm Phillip Stutts & Co. He is the author of Front Burner – Al Qaeda’s Attack on the USS Cole, that recounts the story of Al Qaeda’s bombing of his ship and the continuing ramifications for the war on terror. He serves as a member of the Board of Advisors for Halo Maritime Defense Systems and the National Defense Roundtable.

This article was originally published here on ElectricReliability.org.

Pin It on Pinterest