New Subsidies For Coal, Nuclear in the Federal Budget

Nice to know our government is so generous, even rewarding corporate failure.

By Leonard Hyman and William Tilles,

The two year spending bill just passed by Congress and signed by the President attempts to make good on the administration’s promised tilt towards coal and nuclear power. For the energy industry the bill contains an assortment of subsidies, emergency assistance for hurricane damaged regions, and rewards for failure.

The biggest sum is the $2 billion dedicated to restore Puerto Rico’s electric grid. Not much debate on that and a long time in coming.

The next $2 billion will go to Southern Company’s over budget and behind schedule Vogtle nuclear project. The two unit AP1000 plant, designed by the ill-fated Westinghouse Corp., is the only new nuclear construction project remaining in the United States. Southern Company will receive a subsidy of 1.8¢ per kWh generated.

A previous subsidy for new nuclear construction had been approved by Congress in 2005. However, new plants had to be in service by the end of 2020 to collect. We should point out that when the Vogtle project began construction, Southern’ s management was certain the project would meet the 2020 deadline. As it turns out they were not even close.

Georgia’s regulators recently voted to continue to permit Georgia Power to charge its customers for the Vogtle project with the understanding that the builder’s tax credit would be extended. Congress has lifted the deadline. Apparently the government is ready to advance another $3.7 billion of loan guarantees as well.

It is nice to know our government is being generous. There are financial rewards for company’s performing as specified. And there are commensurate rewards even for those not remotely performing or meeting the specs so to speak. It’s kind of like TeeBall were every kid gets a hit and a trophy at year end. Nice. Or certain corporate boards that pay departing executives a considerable sum merely to leave — after the “new strategic direction” these managers plotted wrecked the business. That we believe is the definition of crony capitalism.

The third item of note may not have a price tag because it is so iffy. But the Trump administration has made no secret of its attempts to rehabilitate coal as a boiler fuel for electric power generation in the US. To this end it is encouraging carbon capture and sequestration (CCS). This technology would have made enormous sense a decade or two ago. Renewable energy was expensive then and people had dreams of making coal clean by stripping out the carbon emissions from the generating process and entombing the carbon dioxide underground or using it in enhanced oil recovery operations.

The carbon capture procedure involves building a chemical processing plant on the so called front end of an already large, complex electric power generating station. These plant modifications reduced electrical output by a quarter. They also posed some interesting liability dilemmas. For example, what if the stored carbon dioxide escaped?

But considerable sound research suggested this CCS technology would work to decarbonize coal. And more importantly several electric utility companies, notably Duke Power and again Southern Company, invested in this promising technology. Due to cost overruns and subpar operating performance and the ensuing regulatory disallowances, money invested in these projects has been either written off or will earn a meaningfully subpar return.

The question now is whether we can expect utilities to build expensive CCS-equipped coal-fired power stations. The only clear economic use is for enhanced oil recovery where CO2 is pumped into old, uneconomic oil fields. Due to the CO2 injection, these aging oil fields begin once again to produce at commercial volumes. Or is this just a payment for the benefit of the several utilities that have sunk money in these projects?

The law contains additional subsidies and benefits for fortunate energy producers. But, as far as we can tell, it lacks any money for the key technology that could truly change the electric power business — storage.

F.A. Hayek, the economist most favored by conservatives, warned about the perils for the economy if the government persisted in picking winners and losers from among various competing technologies and industries. Worse, the government could support failing industries which still however retained considerable political clout.

Peter Drucker, the legendary management guru, exhorted managers to put their resources with the winners rather than try to improve the performance of the losers.  We’re not sure what that duo of Austrians would make of Congress’ latest foray into energy policy.  But we doubt they’d wholeheartedly approve. By Leonard Hyman and William Tilles,

A utility in Texas takes the first steps. Incumbents are not amused. Read…  Wholesale Power Generators to Get Hurt by Grid Batteries

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  31 comments for “New Subsidies For Coal, Nuclear in the Federal Budget

  1. Kent says:

    “But, as far as we can tell, it lacks any money for the key technology that could truly change the electric power business — storage.”

    Truly shocking how inept this administration is. Affordable storage changes the world for the better in a hundred ways. Instead we’re going to subsidize a nuke plant at almost 2 cents per kWh. How many billions of kWhs is a nuke plant likely to generate over its 50 year life span?

    I really wish the US had a competent opposition party to the Republicans. Just can’t see anything on the horizon.

    • BTilles says:

      “How many kws will a nuclear plant generate over its 50 year life?”

      Assuming a 1000 mw plant, 90% capacity factor, and a 60’year operating life: about 4.7 trillion.

      • AlabamaMan says:

        Let’s settle the amount aroud 8$ billon in 50 years or 160$ millions each year. I want that welfare check too.

    • TJ Martin says:

      … not to mention charging Georgia energy customers extra in order to pay for that red herring plant in one of the most poverty ridden states in the country .

      But inept ? Guess that depends on your point of view . Can a group of Grade A government approved grifters filling their back pockets at our expense be considered … inept ?

      Hmmm …….

      • Gibbon1 says:

        My take is the voters are generally inept. Combine that with an over class that thinks ‘winning the cold war’ means they will dominate the world forever and you get the mess we have. Our leaders are the worst sort of corrupt, arrogant, complacent, and lazy. Compare with the Chinese leadership, corrupt yes, complacent and lazy no.

        • BTilles says:

          Re “My take is the voters are generally inept.”

          We don’t disagree. But are the politicians any more “ept”? There are two forms of ownership, public or private. And there are at least six viable technologies: coal, gas, nuclear, hydro, wind and solar. That’s twelve permutations right there.

          We don’t expect the public to compute missile telemetries. Why should we expect public opinion to discern the correct asset alignment of complex, inter connected utility systems?

  2. 2banana says:

    Yes, this is nice change to the socialists who wanted to destroy the largest energy resource in the United States.

    “So if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them”
    — President Obama, 2008

    “”We’re going to put a lot of coal miners and coal companies out of business,”
    — Hillary Clinton, 2016

    • Wolf Richter says:

      The economics of coal were wiped out by two factors:

      1. the arrival in the mid-1990s of the highly efficient Combined Cycle Gas Turbine (CCGT) for NG power plants

      2. Dirt-cheap natural gas in the US since NG fracking took off massively in 2009.

      Now there is starting to be a third factor: renewables, their cost of fuel = zero for their life span. And their capital costs are not huge anymore compared to other technologies.

      That’s the capitalist way.

      By the time Obama said this in 2008, coal for power production was already doomed.

      • 2banana says:

        Amazingly, the market can figure out which energy source works.

        I can remember when NG was exceedingly expensive.

        New technologies now make NG the right choice today.

        I am fully confident, that one day, new technologies will make coal the right choice. Especially considering the MASSIVE coal reserves that reside within America’s borders.

        And for certain applications even today – coal is, by far, the correct choice.

        What we don’t need is socialists/marxists targeting (or picking winners and losers) in markets and industries. Especially based on their feel good socialist justice “science” for votes.

        It NEVER works. And destroys the national economy in the meantime.

        • two beers says:

          If, by your reasoning, picking winners makes one a socialist/Marxist, then you’re saying Trump’s proposed giveaways to Big Coal and Big Nuke make him a socialist/Marxist.

          Comrade The Donald sure pulled a fast one, eh? I’m sure all those billionaires with their massive trumpian taxcuts are waving their little red books in support.

        • Matt P says:

          The government is responsible for making sure coal pays for their negative externalities, mainly pollution which you can see with all our fish now containing mercury which is highly toxic.

          But I guess you don’t eat fish or you just really don’t care about the Earth. I miss the days when conservatives were outdoorsmen.

      • Gibbon1 says:

        > highly efficient Combined Cycle Gas Turbine

        My understanding as well is the payback time is really short for a CCGT. A bonus is being able to sell power into the peek demand market which has much higher margins.

        That puts coal plants into the category of ‘obsolete technology’ same as open hearth and blast furnaces.

        Brings up a point, renewables tendency to generate more power than demand is going to totally upend the steel industry. You can produce steel via electrowinning but traditionally that costs 2-4 times thermal chemical processes. But if you have ‘excess electricity’ at near zero cost. That changes things. Electric furnaces and electrolytic cells can consume huge amounts of power.

        • 2banana says:

          Do you really think renewable energy produces electricity at near zero cost???

          Mindless babble from the left.

        • Wolf Richter says:

          2banana, you said, “Mindless babble from the left.”

          Take off your political blinders for a moment and look at it like a businessman or rancher in West Texas looks at it (Texas is by far the biggest wind power producer in the US).

          What companies and investors (and the rancher in West Texas) look at is the total revenue from the project over its design life minus the total cost of the project over its life. Total costs includes:

          – capital cost (planning, building, and funding the plant)
          – fuel cost
          – maintenance.

          With a renewables plant (wind turbine, for example), fuel costs = zero. Capital investment is real, but no matter what power plant is being built, it costs money to build it, so you have capital investment in all power plants. And all power plants require some maintenance.

          So one day, the rancher in West Texas, where the wind always blows, sees how wind is blowing tumbleweeds across the dirt road and into the fence, and he says, “They actually pay me for wind?”

          After he figured out the answer, Texas became the number 1 wind power producer in the US… because it made sense to the landowners in West Texas. And check out the Oklahoma panhandle. These folks are not liberals. But they know when something is a good business.

          So businesses and investors make their decisions. And for them, it doesn’t matter what you think. They’re motivated by the chance to make a profit. Sure there are risks. But there are risks in everything.

        • Gibbon1 says:

          Comment for the banana.

          The point is solar and wind power are able to produce power at zero _marginal_ cost. Other producers hate hate that.

          The point is as you increase the amount of solar and wind power you will get periods when production exceeds ordinary demand. When that happens the spot price of electricity falls to near zero. Being able to tap into electric power intermittently when the spot price is very low is an opportunity.

        • BTilles says:

          Hi Gibbon1,

          Re “A bonus is being able to sell into peak demand”.
          The CCGTs if which you speak are large base load power generating machines thought of in 500 or 1000 MW increments. Gas peaking units are much tinier (50 MW), distributed around a service area and are “black start”.

      • BTilles says:

        Hi Wolf,
        Re coal: I think of it as a battle (economics) which as you point out is over and coal has lost. But there is also a “war” in regards to power generation technologies, fossil vs renewables, distributed vs central station)–and coal is on the losing end there too.

        Re “That’s the capitalist way.” I think technological change has the potential to transcend economic systems. And its ruthlessly eliminationist over time. I doubt Henry Ford initially set out to completely eliminate the horse and wagon from American life, yet he did.

      • You could call the Feds QE part of the national energy policy if you like. Before that they were making foreign policy in places like Ukraine. The LNG export business is ready to take off (sort of) as long as the base costs are lower than any other carbon energy form, it seems like these days policy arrives via skyhook. The president may say this or that, (COAL!) but the real policy is already in place. Ad nauseum the war in the ME. Trump is like the others, an interloper.

      • RagnarD says:

        @ Wolf
        it is definitely true that the fundamentals of wind, solar and natural gas generation (cost) have hurt the economics of coal generators.

        But it is certainly true (the above quotes are a great indicator) that the Dems /govt/ EPA had coal in their sights.

        Some of the comments by former EPA head Gina McCarthy were flat out insane / irrational. But they are “rational” in the political arena where you start out with the most outlandish comment with the hope/plan of simply meeting somewhere in the middle. Which STILL might be an insane place. But from where the discussion started, it looks “normal/ moderate”.

        I’m explicitly referring to EPA stance on the cost of pollution on American lives (wildly high with clearly no allowance for the benefits of actually having coal fired electric generation: low cost electricity!!) and their statement that carbon sequestration for coal fired plants was a proven/viable technology and that only plants with such tech would be permitted in the future. Any one in a position of govt power making these statements in the manner they did, IMO, should be tried for treason.

      • Laurence Hunt says:

        The other no fuel, no carbon technology is compact fusion, which is also continuous, but which nobody talks about. It’s progressing at a more rapid rate than Moore’s law, but nobody brings it into these kinds of discussions. There are about a dozen initiatives in the field, including MIT, Lockheed Martin, Tokamak Energy, and Tri Alpha Energy. Well, there is fuel, but you don’t have to mine hydrogen, and it doesn’t take very much. Future designs will be radiation free.

  3. raxadian says:

    The reason nuclear is such a failture is the US is because they did many things wrong. Instead of forcing regulations to be obeyed they looked the other way. And if you screw up with nuclear power the consequences are a big disaster.

    But yes long term it would be better to have solar panels in every house, even if that would only cover less than 40% of the electricity consumption.

  4. John Doyle says:

    The criticism here of your government exactly mirrors that of our Australian government. Utter incompetence is the norm today. Government is too complex and tangled for politicians to manage. So they fall back on ideology to give them direction or the vested interests coach the N ed

    Australia is hugely endowed with natural gas yet domestic supplies are 4x the US charges. We trashed our car industry recently, so all those jobs were dumped. The gov’t is busy with its neo-Liberal agenda, winding back benefits etc and numerous selling off most public assets
    Woe is us

    • walter map says:

      “Government is too complex and tangled for politicians to manage.”

      Con artists are great at weaseling the gullible into voting them into office and into CEO positions, but really are rather devoid of any other skills. They’re mostly just in it for the girls and the graft anyway.

      I’m probably not telling you anything you don’t already know here. Sorry.

  5. JB says:

    interesting – the chinese are trying to get their ap1000 reactors online. They have many proposed

    • BTilles says:

      Hi JB,

      Thanks for the link. Reminded me that two new reactor designs, the AP1000 and France’s EPR, are both mired in delays and cost overruns.

      • walter map says:

        That’s a feature, not a bug. Profits over production, you know. If they ever do manage to generate electricity the bills will make their customers sorry they did.

        I think my cynicism gland just ruptured.

  6. NH Mariner says:

    It seems there is much misinformation with regards to renewables. While I wish renewables were zero cost, it is anything from the truth.

    Wind Turbines are quite ineffecient, averaging around 30% efficiency, need optimum wind speeds between 30-50mph, create significant noise pollution, need specific air densities, and are really only viable for residential uses at this time. Wind power must be backed up. Air is a fluid, and must follow the laws of Fluid Dynamics; we have come close to the Betz Limit, therefore future efficiency gains will be minimal.

    With a woefully low capacity factor of wind at around (30%) compared to Coal (70%) and Nuclear (90+%) I understand the decision based on the facts they had been provided. (Solar is 25% at best and very dirty to make)

    I agree it is foolish to subsidize nuclear while not focusing on storage, which is the biggest problem of today. At the same token I believe it is important to use all cheap energy sources we have until costs come down and efficiency of renewables rise.

    • Wolf Richter says:

      At a renewables power plant, fuel cost = zero.

      Capital costs and maintenance costs exist, as they do with all power plants. But fuel costs over the life of a fossil-fuel power plant is a huge part of the total cost. And that fuel cost = zero with renewables.

    • Laurence Hunt says:

      Fusion power. See above.

      • walter map says:

        Fusion power has been The Energy of the Future for over 50 years now. And always will be.

        You have a perfectly good fusion reactor perfectly positioned 150 million km away. Costs nothing, no maintenance. All you need are some accessories. Try that instead.

  7. george mcduffee says:

    It has been estimated that for $5 billion a prototype productized modular rail-transportable LFTR/MSTR [liquid fluoride thorium reactor / molten salt thorium reactor] using largely COST [commercial off the shelf technology] can be developed.

    One of the major benefits is the ability of a properly designed LFTR to use “depleted” fuel rods [actually still containing 99%+ of the available nuclear fission energy] reducing the physical bulk by c. 90% and reducing dangerous radiation levels to less than a century.

    For more details on LFTR/MSTR see

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