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The Positive Fallout of Nuclear Deregulation
Profs. Wolfram and Davis find operating efficiencies reduced greenhouse gas emissions and saved billions of dollars.
More than 10 years after electricity deregulation, the nuclear power industry has decreased greenhouse gas emissions by nearly 40 million metric tons of carbon dioxide over that decade and saved $2.5 billion a year as a result of operating more efficiently.
Those were the unexpected but positive findings of Professors Lucas Davis and Catherine Wolfram in their recent working paper “Deregulation, Consolidation, and Efficiency: Evidence from U.S. Nuclear Power.” Wolfram and Davis’ results have implications for the future of U.S. nuclear power policy as well as climate change, energy security, and fossil fuel prices.
“One of the most interesting points the research makes is that a policy that had nothing to do with the environment led to greater carbon reductions than all the wind and solar generation combined,” says Wolfram, associate professor and co-director of the Energy Institute at Haas. “It’s possible that there are other similar opportunities to improve the efficiency of our existing system in ways that would substantially benefit the environment.”
Wolfram and Davis, an assistant professor and fellow researcher in the Energy Institute, analyzed 103 reactors over a 40-year period from 1970 to 2009 using monthly operating efficiency data compiled by the U.S. Department of Energy’s Power Plant Report. They determined a strong correlation between deregulation and operational efficiency by tracking nuclear units that were sold after deregulation. The sold units went from below-average to above-average efficiency shortly after being sold.
Deregulation began in the late 1990s, and today, three companies control one-third of the country’s nuclear capacity: Exelon, Entergy, and NextEra. There have been no nuclear reactors built since the mid- 1990s because they are cost prohibitive. The research documents a trend in which power operators became dependent on the existing infrastructure; they learned how to increase reactor generation efficiency mainly by reducing the frequency and duration of reactor outages.
Prior to deregulation, nuclear plant operators had little incentive to improve their level of performance because “cost-of-service” regulation rates were set to allow utility companies to recover recurring operating expenses from customers. In a deregulated market, independent power producers sell power in competitive wholesale markets; increased efficiency equates to increased profits.
“In 2009, U.S. nuclear reactors produced about 20 percent of total domestic electricity generation,” says Davis. “The three main nuclear power companies are earning $120,000 per hour in revenues, and it’s almost all profit.”
Read the full paper at haas.org/nuclearpaper.