September 29, 2011
The Positive Fallout from Nuclear Deregulation: Increased Efficiency and Reduced CO2 Emissions
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 and saved $2.5 billion a year as a result of operating more efficiently over the past decade, according to a new study.
These were the unexpected but positive findings of Professors Lucas Davis and Catherine Wolfram, UC Berkeley's Haas School of Business. In their working paper, "Deregulation, Consolidation, and Efficiency: Evidence from U.S. Nuclear Power," Wolfram and Davis performed a detailed analysis of the nation's 103 nuclear reactors. The results provide 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 in the U.S. 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 at the Energy Institute, analyzed U.S. nuclear 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 found a strong correlation between deregulation and operational efficiency by tracking nuclear units that were sold after deregulation and the industry began consolidating. The sold units went from below-average to above-average efficiency shortly after being sold.
"I attribute the increase efficiency to better management and the profit motive," says Davis, "The power producers keep the plants running about 95 percent of the time. Back in the 1970's, these plants ran on average about 50 percent. This is a big change and a lot of power."
Deregulation took hold in some parts of the country beginning 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 suggests independent power producers were able to increase operating efficiency 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, where increased efficiency equates to increased profits.
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