December 19, 2016

Nuclear Retirements Could Lead to Significant Increases in Short- and Long-Term Carbon Emissions, According to Brattle Economists

A whitepaper by Brattle economists finds that the vulnerability of some U.S. nuclear power plants to premature retirement could create a major threat to the attainment of carbon dioxide (CO2) reduction. According to the Brattle analysis, the retirement of a 1,000 megawatt nuclear plant could increase CO2 emissions in the range of 4.1 to 6.7 million tons per year, or 0.52-0.84 tons per megawatt hour (MWh) of nuclear generation lost, depending on the region in which the nuclear retirement occurs.

The Brattle analysis also finds that preventing premature nuclear retirements is a cost-effective means of restraining carbon emissions to attain climate policy goals. A typical revenue deficit for a vulnerable nuclear plant is around $10/MWh. If this shortfall were offset by a carbon uplift payment, the cost of the avoided CO2 emissions would range between $12 and $20 per ton of CO2, varying with the regional fossil fuel mix that would substitute for the plant. This cost compares favorably with other carbon abatement options such as state policies designed to reduce CO2 emissions from the power sector, as well as with many estimates of the social cost of carbon.

“These findings demonstrate that the retention of existing nuclear generating plants, even at a modest operating cost recovery premium for a limited period, represents a cost-effective method to avoid CO2 emissions in the near term and would enable compliance with any future climate policy at a reasonable cost,” notes Metin Celebi, a Brattle principal and co-author of the whitepaper. “Sustaining nuclear viability in the interim is a reasonable and cost-effective insurance policy in the longer term.”

The Brattle whitepaper examines the aggregate and regional carbon emission impacts of premature nuclear retirements, and evaluates the implications of such retirements for the ability to achieve carbon reductions in the U.S. power sector. Based on their analysis, the authors find that:

  • Under current market conditions, some nuclear units do not reliably earn sufficient revenue to cover going-forward costs, and thus are vulnerable to premature economic retirement under current market conditions. The revenue shortfalls experienced by the most vulnerable plants – typically small, single-unit plants operating in markets with particularly low energy prices – can be as high as about $20/MWh, though most experience smaller shortfalls.
  • The increased level of CO2 emissions arising from a premature nuclear retirement is not confined to the state in which the unit resides. Rather, the majority of this emissions increase is likely to occur outside the state, with a substantial share from beyond even the adjacent states. This geographic dispersion of emission effects throughout regional electricity markets may pose challenges to state-level climate policies and goals.
  • Since CO2 emissions persist for many years in the atmosphere, near-term emission reductions are more helpful for climate protection than later ones. Thus, preserving existing nuclear plants will improve the effectiveness of any climate policy approach, by holding down cumulative emissions.
The whitepaper, “Nuclear Retirement Effects on CO2 Emissions: Preserving a Critical Resource,” is authored by Brattle Principals Metin Celebi, Marc Chupka, Frank Graves, and Dean Murphy, and Research Analyst Ioanna Karkatsouli, with funding and support from the Nuclear Energy Institute (NEI). It is available for download using the link below.