The U.S. government intends to allocate billions of dollars to keep unprofitable nuclear power plants operational.

• The $6 billion program in the Bipartisan Infrastructure Law aims to maintain the U.S. fleet of nuclear power reactors, which was signed into law by President Joe Biden in November.
• According to Ben King, a senior analyst with the energy and climate division at Rhodium Group, it is extremely difficult for nuclear power to remain operational and economic when natural gas is cheap.
• Lazard's global head of power energy and infrastructure, George Bilicic, stated that the holy grail of the energy transition is the development of energy storage technology at scale to provide the 24-7 energy that humans require, despite the affordability of renewable energy.

To keep nuclear power plants operational in the US, the government will allocate billions of dollars in funding.

The Biden administration could achieve its climate goal of reducing net greenhouse gas pollution by 50% from 2005 levels by 2030 by utilizing the clean, greenhouse-gas free energy generated by nuclear power plants.

In November, President Joe Biden signed the Bipartisan Infrastructure Law, which includes a $6 billion program to maintain the U.S. fleet of nuclear power reactors. On February 10, the Department of Energy's Office of Nuclear Energy began the process of distributing that money.

Government documents reveal that multiple nuclear plants are at risk of early closure and several others have already closed prematurely due to economic circumstances, hence the need for that money.

Why?

Deregulation and cheap natural gas

Lazard's vice chairman and global head of power energy and infrastructure, George Bilicic, stated that the issue can be traced back to deregulation in the industry.

According to the Nuclear Energy Institute, in the United States, 10 states with nuclear power plants are deregulated, while 17 states with nuclear power plants are regulated.

In deregulated markets, nuclear power generators must sell their energy on an open market, where distribution companies select the most cost-effective energy option that can perform the same task. Currently, this is frequently natural gas.

Ben King, a senior analyst with the energy and climate division at Rhodium Group, stated in a phone call with CNBC that one of the main drivers of nuclear economics is the affordability of natural gas.

It is challenging for nuclear power to generate sufficient revenue to remain operational and economical when natural gas is inexpensive, according to King.

According to King and his colleagues' projections, the U.S. nuclear energy fleet, currently at 96 gigawatts across 60 facilities, may decline to as low as 60 gigawatts by 2030 due to current natural gas prices and projections.

The $6 billion in the Infrastructure law is beneficial in preventing a flood of closures, but it is still insufficient, King stated. The Rhodium Group combines the $6 billion with the proposed nuclear production tax credit in the Build Back Better Act, which the Joint Committee on Taxation estimates to be worth $23 billion.

According to King, when combined, they are more effective in reducing nuclear emissions and keeping the U.S. on track towards its emissions reduction goal, as stated on CNBC.

The objective of deregulating energy markets was to foster innovation and competition. However, with the growing urgency of addressing climate change, there is a temptation to reevaluate that decision.

The debate about whether deregulation was successful or if the industry should have remained regulated is ongoing, according to Bilicic. However, the federal government's decision to intervene and support nuclear energy indicates that it may have been a misstep.

In contrast, many experts argue that deregulation leads to lower costs, increased innovation, and the success of remarkable companies.

The viability of a nuclear power plant is influenced by whether it is part of a larger utility company, as these plants tend to be more stable and less affected by market fluctuations, according to King.

Renewables plus battery storage a ‘holy grail’

Besides fossil fuels, other significant sources of zero-emissions energy include wind, solar, and hydropower, and the cost of these energy sources is typically the cheapest in the market.

Although not to the same extent as natural gas, nuclear must also compete with lower prices.

King stated that the impact of renewables, despite their installation level, is not as significant as the impact of gas.

Baseload sources of energy such as nuclear, gas, and coal cannot be replaced by intermittent sources like wind and solar until utility-scale battery technology is developed and deployed, which is expected to take several years.

Bilicic stated that the holy grail of the energy transition is a practical storage solution that can be paired with renewables, providing reliable 24x7 power. Currently, there is nothing in the marketplace that can be scaled to meet the needs of mankind.

Battery technology is being developed by various innovators, including ESS and Form Energy, with funding from prominent investors. Established companies like Tesla are also working on the issue. However, utility-scale battery storage is not yet at scale.

To achieve these decarbonization objectives, several elements must be aligned, as if sewn together. Among them is nuclear power, according to Bilicic.

Price on carbon could fix the market

In deregulated energy markets, greenhouse gas emissions are not taken into account, and only price matters.

A carbon pricing mechanism could maintain a competitive energy market while also advancing climate objectives.

Bilicic stated that if a carbon pricing environment were in place, nuclear power plants would become more valuable. He emphasized that this recognition is implicit in the public policy debate and that the marketplace does not fully acknowledge the value of these plants.

One reason why Bilicic supports government subsidies for nuclear power plants is that it is one of the reasons.

Bilicic stated that in his opinion, the money being given to nuclear power plants is not being given for no reason, but rather because of the recognition that they provide a benefit that they are not being compensated for in the marketplace.