Will more US nuclear advocates support increased public ownership and/or re-regulation?
Continuing my deep-dive into the political economy of the electricity sector, in this blog I update my 2022 analysis on the relative performance of the US nuclear sector by ownership, and use similar analysis to assess performance by type of economic regulation. I find that from 2008 to 2024 nuclear capacity in the US decreased by 3.86 GW. Private nuclear capacity in restructured states decreased by 5.22 GW. In contrast, public nuclear capacity in traditional markets increased by 2.12 GW.
Public Ownership of Nuclear in the USA - an update
I use the most recently available (September, 2023) data provided by the IEA on nuclear capacity and ownership shares, to which I add Vogtle-4, which is expected to be operational in 1Q2024. The table below is based on same methodology described in my previous blog, including definitions of “public”, “private” and “Mix”-ownership reactors.
Relative to 2008, there are 10 fewer reactors in the US, accounting for a reduction of 3.9 GW in capacity. Public ownership capacity has increased by 2.1 GW, while private ownership capacity is down 6.0 GW. Nuclear public ownership is 20.3% in the US.
Economic Regulation: “Restructured” & “Traditional” States
I am also interested in assessing the impact of electricity sector restructuring. “Restructuring” is a US-centric term; in other countries similar initiatives have been called “deregulation”, “unbundling”, “liberalization”, “markets”, “reform”, “competition”, “privatization”, etc. What all these initiatives have in common was to change the traditional electricity models that had driven industrialization and electrification in the industrialized countries since World War II.
One main variation of that model is what continues to prevail in Canada: a publicly-owned vertically-integrated enterprises providing service to a specific geographic area, based on a legal monopoly. The prices the enterprise may charge are approved by an economic regulatory agency, typically on a cost-of-service (COS) basis. In essence, a set of prices that result in revenues that yield a designated profit on investment included in the “rate base”. The other variation, which was what prevailed in the USA via the “Investor Owned Utilities” (IOUs) was that these vertically-integrated firms where privately—owned. They too were provided with a de facto or legal monopoly and were COS-regulated at the state level by Public Service Commissions (PSC) or Public Utility Commissions (PUCs). Each State has a PUC or PSC, the oldest of which is New York’s PSC, established in 1907.
During the 1990s there was concerted political economy push to introduce competition and/or to privatize the electricity sector. Given that the US was already mostly private ownership, the advocacy there was mostly related to competition. The preferred approach was upstream “restructuring” which was the legal requirement, passed at the state legislature, for IOUs to divest or decontrol their generation assets. Those assets were thus “unbundled” and “deregulated” by being taken out of the rate base; generation prices would be based on state/regional spot markets facilitated by FERC (the national regulatory agency) and implemented by Regional Transmission Organizations (RTOs) (TSOs in Europe).
The table below lists the 16 States that mandated upstream “restructuring”, and the year of implementation, from one of a number of recent academic and policy papers to critique the performance of restructured markets. To be clear, these 16 states are not necessarily the same as those that had “downstream” deregulation at the retail level, or states that may or may not belong to an RTO/ISO. There are many states that did not restructure (“traditional” states) that voluntarily belong to RTOs/ISOs to facilitate trade.
The table below shows how the 16 restructured and 34 traditional states have performed with respect to the number of reactors and nuclear capacity. The totals match the table above, with 104 and 94 reactors for 2008 and 2024, respectively and capacity 108.8 and 96.9 GW.
Relative to 2008, there are 7 fewer reactors in the restructured states and 3 fewer in traditional states. However, by capacity, we actually see an increase of 1.3 GW in traditional states, while there is a decrease of 5.2 GW in restructured states.
Figure 1 summarizes the analysis so far, parsing out the overall change in capacity from 2008 to 2024 by ownership and by type of economic regulation. This is a an updated version of the figure I tweeted on January 4.
For those that are interested in the details, the table below provides a reactor-by-reactor accounting of the reactors that have closed or opened from 2008 to 2024. This analysis allows us to present the ownership and economic regulation data in different combinations.
Figure 2 shows the data recombined to be able assess the interplay of ownership and regulation. The results are stunning. The overall reduction of 3.86 GW can be broken down as follows:
Public ownership capacity in traditional states increased by 2.12 GW, while it was stable in restructured states.
In stark contrast, private ownership capacity in restructured states decreased by a whopping 5.22 GW, while it decreased 0.78 GW in traditional states.
The Politics of Restructuring
I was interested to see what was the partisan nature of the legislative push for restructuring. The table below is based on state-level data shows control of the Governorship (Gov), the Senate (Sen) and the Assembly (Ass) at the time of implementation. It also shows the different combinations of power dynamics including a “Trifecta” (Tri) when one party controls all three.
The table shows that about half of the restructured states were controlled by Democrats and the other half by Republicans when restructuring took place from 1998 to 2002.
Discussion
Ownership and economic regulation are ultimately implemented via a political process.
The world’s first and largest publicly-owned utility, Ontario Hydro (OH), was created in 1906 based on a provincial election in 1905 that pitted two political parties presenting competing visions of the electricity sector. Based on a political mandate of “public power”, FDR applied the “Ontario model” in New York to create the New York Power Authority (NYPA) and then the Tennessee Valley Authority (TVA) as President. Seventy years later, 16 State Assemblies passed legislation that mandated the unbundling of generation assets. In New York elected representatives required NYPA to privatize its two reactors, including Indian Point—3 that would ultimately close in 2021.
The push for public power never really went away in the US, but current campaigns, both victories and defeats, are being lead primarily by wind and solar advocates. Critiques of restructured markets, mostly based on reliability or price, have filtered from some analysts to policy-makers, including notably a FERC Commisioner. So while there have been no new restructurings since 2002, nor has there been any significant re-regulation.
Restructured states shed 5.22 GW of private nuclear capacity, while public nuclear capacity in traditional states increased 2.12 GW. Not surprisingly, many nuclear advocates have focussed on saving specific “at risk” privately—owned reactors in restructured states, such as Diablo Canyon in CA and Byron and Dresden in IL. Without those victories, the carnage would have been much worse…
But if my diagnosis is correct, this will always be a defensive strategy; those existing reactors will always be at systemic risk. Equally troubling, the evidence suggests that the probability of private new builds in those states will remain limited.
The aim of this blog was to show that a particular political economy has been detrimental to nuclear in the US. The prescription, to support increased public ownership and re—regulation, however, may be too bitter a pill for most US nuclear advocates.