Report by Brattle Economists Assesses Potential Costs Associated with Administration Policy Designed to Prevent the Retirement of All Coal and Nuclear Plants

A new report by Brattle economists estimates the cost of the U.S. Department of Energy’s (DOE) proposed draft memorandum plan to support uneconomic coal and nuclear plants across the country. Using several possible implementation methods to illustrate the range of potential costs, the study finds that a plan to keep all presently uneconomic power plants available for two years could cost about $34 billion, or higher if the policy would provide a return on historic investments.

The Brattle report was commissioned by several energy industry associations representing gas, oil, storage, solar, grid services, wind, and other renewables. The Brattle economists studied a range of out-of-market payment choices to keep the national group of coal and nuclear plants available for operation and calculated the following estimates of direct costs:

• $16.7 billion per year, or roughly $34 billion for two years as proposed, if every coal and nuclear plant in the country were given uniform ($ per unit of capacity) support at the level of the average financial shortfall experienced by such plants;
• $9.7 billion to $17.2 billion annually, or roughly $20 billion to $34 billion over two years, if only those plants now facing shortfalls were given payments sufficient to cover their operating losses; or
• $20 billion to $35 billion annually, or $40 billion to $70 billion total, if power plant owners were also granted a return on their invested capital in addition to payments for operating shortfalls.
  The study does not address the magnitude of potential benefits, such as the claimed reliability and resilience effects or the environmental benefits associated with retaining nuclear units, nor does it assess any potential impacts on competitive markets.

The study was funded by Advanced Energy Economy (AEE), American Petroleum Institute (API), American Wind Energy Association (AWEA), Electricity Consumers Resource Council (ELCON), Electric Power Supply Association (EPSA), and Natural Gas Supply Association (NGSA).

The report, “The Cost of Preventing Baseload Retirements: A Preliminary Examination of the DOE Memorandum,” was written by Brattle Principals Metin Celebi and Marc Chupka, Consultant Richard Sweet, and Research Analyst Kelly Oh.