Efforts by two states to save in-state nuclear power, major advances for renewable energy and a looming deadline for wind projects were featured topics at the Dec. 12 session of Pennwell’s GenForum in Orlando, Fla.
The session was organized by Generation Hub.
Todd Williams, a partner at ScottMadden Management Consultants, offered an update on renewable portfolio standards (RPS) and related issues for that part of the power industry. “Renewables have been given a jump through favorable tax treatments and mandates,” he noted. Out of those factors, tax credits have been more like “icing on the cake,” while RPS initiatives by the states have been the “cake” itself, he added.
“Mandates like RPS are a powerful way for individual states to express their electricity generation preferences, despite temporary, potentially, economic disadvantages,” Williams added. Williams pointed out, though, that energy storage has to be a companion development priority with renewables, due to the high variability of wind and solar output depending on weather conditions.
Scott Cockerham of law firm Akin Gump Strauss Hauer & Feld LLP looked at the recent state of federal tax credits for wind, solar and other renewables and how the Internal Revenue Service (IRS) regulates construction timelines for new renewable energy projects. He noted that the current federal tax credit for wind actually starts a multi-year phasedown period at the end of December, so there is a scramble on by some developers to get enough initial construction work done on their projects to qualify for the full credit. The credit drops 20% for any project that hasn’t started the construction process by Dec. 31. Solar doesn’t have any phase-down issues until 2019, Cockerham added.
One question he’s been getting a lot of lately is what has to be done on-site to meet the somewhat vague IRS criteria for a construction start. Cockerham said his firm advises generally that at least 10% of the wind turbine foundations be excavated. Both on-site and off-site work counts, he added. Off-site work, he said, has to be, for example, custom work on project equipment. Equipment for the project just taken off the supplier’s shelf doesn’t qualify. It has to be equipment “integral to the facility,” he said. As for on-site work, ancillary work like putting in a project fence line or access road won’t meet IRS scrutiny.
Edward Kee, CEO of the Nuclear Economics Consulting Group, said the U.S. nuclear industry is currently “under threat” as many nuclear plants are losing money for their operators in the current low-priced power markets. Legislators in Illinois recently passed a bill, which the governor has signed, to protect the Clinton and Quad Cities nuclear plants from shutdown by basically giving them income based on their “zero emissions” profiles. New York earlier this year enacted a similar “out of market” program for three endangered nuclear plants there.
Kee pointed out how FirstEnergy (NYSE: FE) recently announced it wants to get out of merchant generation due to poor economic returns from those plants, which may endanger a handful of nuclear plants like Davis-Besse in Ohio.
Without policy changes, nuclear power will be largely gone in the U.S. by 2050, Kee warned. What’s left at that point would basically be the newest units, like the in-construction Vogtle units in Georgia and Summer units in South Carolina. Policy changes needed to save nuclear include a range of options, like putting a price on carbon emissions from non-nuclear power plants, tax incentives and perhaps even government ownership of nuclear plants, Kee said. He noted that countries like China and France have government ownership of nuclear plants.