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By Jonathan N. Crawford and Mark Chediak
(Bloomberg) — The Obama administration is giving the struggling U.S. nuclear industry a glimmer of hope with changes to its carbon emission rules that mean new reactors will count more toward meeting federal benchmarks.
States will be able to take more credit for future carbon- free electricity to be generated by nuclear power plants still under construction when meeting their emission reduction targets, the U.S. Environmental Protection Agency said in a call on Sunday. The targets are required under the EPA’s landmark Clean Power Plan that was unveiled on Monday.
Under last year’s draft of the rules, the yet-to-be completed reactors were counted as existing units that wouldn’t be fully credited for carbon reductions generated in the future after they started operating. The nuclear power industry complained that amounted to a penalty on the plants and made state targets harder to achieve.
“We tend to view new rules as potentially the first bit of good news for the struggling nuclear industry,” Julien Dumoulin-Smith, an analyst for UBS, wrote on Monday in a research note.
Nuclear operators are being challenged by high maintenance and clean up costs as well as competition from cheap natural-gas fueled power plants and low-cost wind and solar generation. About 10 percent of the nation’s nuclear output could be retired early due to low energy prices, according to Moody’s Investors Service.
The question of waste disposal also hangs over the industry as efforts to establish a federal repository at Yucca Mountain in Nevada have stalled.
The Nuclear Energy Institute, a Washington-based trade group, said it was “pleased” that the EPA recognized that nuclear plants under construction “should count toward compliance when they are operating,” according to an e-mail statement from Marvin Fertel, president of the group.
Fertel said the industry was disappointed that existing reactors won’t get credit for their carbon-reduction value given that some plants are at risk for early retirement, according to the statement.
New reactor projects – the first in decades – have been plagued by delays and cost increases.
Beneficiaries of the rule changes would include Southern Co. and Scana Corp., which are building new reactors in Georgia and South Carolina, respectively. The Tennessee Valley Authority, which is building a reactor at its Watts Bar facility near Spring City, Tennessee, would also get a boost.
“We had indicated that any nuclear facility that was under construction would be considered as part of the standard-setting process,” U.S. EPA Administrator Gina McCarthy said in a call with reporters Sunday. The agency reconsidered after reviewing comments, and now will be counting new nuclear under construction as “a compliance strategy,” she said.
“If nuclear plants already under construction can be counted toward a state’s carbon reduction goals, then those states may not have to do something else to reduce carbon,” said Paul Patterson, a New York-based utility analyst for Glenrock Associates LLC.
The rule changes address one of TVA’s “major concerns,” Scott Brooks, a spokesman for Tennessee Valley Authority, said in a statement Monday.
“That means we can count Watts Bar Unit 2, scheduled to be online within the next year, as part of our compliance plan.”
Southern is reviewing the final rules and remained concerned that they “impede state’s authority to act in the best interests of customers,” Tim Leljedal, a spokesman for Southern, said in an e-mail statement Monday.
Southern said in January that delays may add more than $700 million in costs to the twin reactors its building at Plant Vogtle near Augusta, Georgia. The company has said customers won’t have to pay for those setbacks.
“Nuclear facilities will be credited because it’s new, zero-carbon generation that will be credited as part of a compliance strategy,” McCarthy said. “We think that’s entirely consistent and appropriate.”
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