Nuclear On Verge Of ESG Inclusion: White House To Subsidize Existing Nuclear Power Plants

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by Tyler Durden
Wednesday, May 05, 2021 - 09:58 AM

In a move that may infuriate environmentalists and delight investors in uranium stocks (who already saw a surge in their portfolios on Monday following our weekend report "This Is A Game-Changer For Uranium Stocks") Reuters reports that the White House has privately signaled to lawmakers and stakeholders in recent weeks (so as not to reveal to the broader public) that it supports taxpayer subsidies to keep existing nuclear facilities from closing, bending to the reality that it needs these plants to meet its deliriously aggressively climate goals (which were dissected recently by Bloomberg in "The U.S. Will Need a Lot of Land for a Zero-Carbon Economy").

The new subsidies in the form of "production tax credits," would likely be swept into President Joe Biden's multi-trillion-dollar legislative effort to invest in the nation's infrastructure and jobs, the Reuters sources said. More importantly being on par with other more "green" sources of energy, it likely means that it is now just a matter of time before even the most rabid members of the ESG crew are forced to admit nuclear to their cool crowd. Wind and solar power producers already get these tax rebates based on levels of energy they generate.

As revealed last month, Biden wants the US power industry to be emissions free by 2035, a schedule which is unachievable without the benefit of nuclear power which as shown below has among the lowest land area footprints...

... and unless the US wants to be covered in reneweable sources of energy, it will have no choice but to support and expand its current NPP arsenal.

Biden is also asking Congress to extend or create tax credits aimed at wind, solar and battery manufacturing as part of his $2.3 trillion American Jobs Plan.

The US has more than 90 nuclear reactors, the most in the world, and the business is the country's top source of emissions-free power generation. But as discussed here previously, these aging plants have been closing, some as recently as last month, due to rising security costs and competition from plentiful natural gas, wind and solar power, which are rapidly becoming less pricey.

Losing more nuclear plants could make Biden's zero-emissions goal challenging, if not impossible, analysts have said.

And the punchline: a source quoted by Reuters engaged in the talks and familiar with the White House thinking, said what may be the magic word for far greater gains ahead for uranium stocks, namely that "there's a deepening understanding within the administration that it needs nuclear to meet its zero-emission goals."

As we reported earlier this week, New York state's Indian Point nuclear power plant closed its last reactor on April 30. In Illinois, Exelon Corp threatened to close four reactors at two plants by November, if the state does not implement subsidies.

The Indian Point Energy Center nuclear power plant, which New York Governor Andrew Cuomo announced will shutdown as planned, is pictured along the eastern shore of the Hudson River in Buchanan, New York, U.S., April 30, 2021.

There is another reason why Biden will cave: the plants provide thousands of union jobs that pay some of the highest salaries in the energy business. Biden's allies in the building trades unions have lobbied the White House for the production tax credits. The credits also have the support of Democratic Senator Joe Manchin, a moderate from the energy-rich state of West Virginia, who holds outsized power in the evenly divided Senate because he can to block his party's agenda.

As Reuters adds, preliminary plans for a federal nuclear power production tax credit in deregulated markets bar companies from double-dipping in states that offer similar assistance, according to one of the sources. Companies also would have to prove financial hardship, the source said.

While Biden pledged in his campaign to boost spending for research on new generation of advanced nuclear plants, his White House, like the preceding Trump and Obama administrations, has struggled to devise a blueprint to save the existing reactors. The Biden administration has also supported a Clean Energy Standard (CES) in the infrastructure plan, a mechanism that could support existing nuclear plants.

A CES, which could co-exist with production tax credits, would set gradually more ambitious targets for the power industry to cut emissions until they hit net-zero. The production tax credit could be implemented on a faster timetable and could help save even the Illinois plants, some experts say.

“We’re racing to cut emissions, create jobs, and shore up local economies -- allowing nuclear plants to close sets us back on all three fronts," said Ryan Fitzpatrick, director of the climate and energy program at Third Way, a moderate think tank.