Georgia: Doing its Part for Nuclear, Solar & National Security - While Keeping Rates Low

This week, PACE is pleased to feature a guest blog by Dr. David Gattie, a faculty member at the University of Georgia with deep expertise in energy policy, and co-author of our 2017 paper on net metering. 

The U.S. Energy Information Administration recently released new data for 2017, so I compiled a few statistics for some of the top GDPs in the U.S. In particular, average residential rates since 1990 (Figure 1) and the energy portfolios for those states (Figure 2). Since my home state is Georgia and we’re working toward the completion of the only nuclear reactors under construction in the U.S., I have highlighted Georgia green.

As most in the U.S. may know, Georgia operates in a regulated market and, in my opinion, this provides fundamental benefits that deregulated markets can’t offer. One being the capacity to look out over the long-term and take into account the policy constraints that are likely to be imposed on the utility industry–in particular, carbon constraints. In addition, our existing coal fleet will eventually shut down and the Georgia PSC, along with Georgia Power, Oglethorpe Power and the MEAGs of Georgia, are working to position the state for a continuation of reliable, baseload power generation.  Consequently, we are in a position to leverage that long-term perspective in the construction of Vogtle Units 3&4, where this new generation capacity will be not only reliable baseload–it will also be zero-carbon.

Georgia has a good track record for reliability and low rates. Here, in Figure 1, the trends indicate that since 1990 Georgia has consistently ranked below the U.S. average in residential rates (cents/kWhr) and well below the rates in some of the deregulated markets to the north (e.g., New York, New Jersey, Massachusetts, Pennsylvania, Ohio, Michigan, Illinois and Maryland. This is not to imply causation–it is only an observation. I’ve also inserted a box indicating rates for February 2018.

Figure 1. Average residential rates for leading U.S. state GDPs. Rates for February, 2018 are inserted for most recent comparisons.

A closer look at the respective portfolios for these states provides a little more insight as to where each state stands on traditional baseload power (i.e., coal and nuclear), natural gas and renewables. I include only solar and wind for this profile.

Table 1. Profiles of the leading state GDPs for the year 2017, including  average residential rates, total generation and the respective energy portfolio breakdown.

Again, this is not meant to convey causation. Rather, it is only a snapshot of 2017 with a few observations below.

  1. States with the lowest shares of baseload coal have the highest residential rates–they are also in deregulated markets;
  2. Massachusetts is highly dependent on pipelines for conveying the two-thirds share of natural gas that their power generation depends on. During this past winter’s harsh, cold weather they resorted to on-site stored fuel oil;
  3. California and New York derive 22.5% and 23% of their power generation from hydro–a resource that isn’t likely to see much of an increase in capacity in the future;
  4. New York and New Jersey have recently gone through some serious policy revisions in order to keep their nuclear plants open. Should this be reversed in the future, it’s hard to imagine how they would replace the loss of this much zero-carbon baseload power (33.5% and 46.5% share, respectively);
  5. Maryland, Pennsylvania and Michigan have a reasonably good mix of natural gas and baseload coal and nuclear, although their rates remain above the national average by 1.09 cents/kWhr, 1.43 cents/kWhr and 2.57 cents/kWhr, respectively. In addition, Pennsylvania is facing the prospects of closing down two of its nuclear plants; and
  6. Illinois, with 54.4% of its power generation coming from zero-carbon nuclear, is also facing difficulties with keeping some of its power plants from closing prematurely, as is Ohio.

Georgia: Doing Its Share in Nuclear and Renewables

With the recent announcement from Southern Company CEO, Tom Fanning, that the company is planning on a low-carbon future with little-to-no coal capacity, the recent transition from coal to gas plays well with the current new nuclear capacity at Plant Vogtle and the ongoing penetration of solar at a measured, calculated pace. At the national level, Georgia’s 1.4% solar share is on pace with the national average, while its commitment to the completion of the two reactors at Vogtle will signal to the rest of the world that American hasn’t abandoned nuclear. As I’ve said many times in my commentaries on U.S. nuclear power and in my policy proposals, the U.S. must retain its technological leadership in the global nuclear cycle as China is developing an aggressive nuclear power program and is already in the mode of referring to the U.S. as being in retreat. The following quote is from a recent article about China fast-tracking its nuclear energy industry:

“China is the fastest-expanding nuclear power generator in the world, underscoring the huge potential of the country’s nuclear sector at a time when traditional giants like the US are retreating,” Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times on Tuesday.

In this article, Lin went on to point out the contrast between the Chinese and the U.S. approach. “China has an incomparable advantage in developing nuclear power — the sheer size of State-owned nuclear enterprises, which have long-term stability and rich financing sources to support research and development spending. They are also not as vulnerable to market risks as their private counterparts,” Lin said. “The huge injection of capital at the initial stage could be balanced by quantity production in later phases, providing economic efficiency.”

A critical point here is that Chinese SOEs can sustain risks that private U.S. companies generally can’t, meaning China can look long-term for the economics to eventually work out for them.

A robust U.S. nuclear power sector remains an issue of national security, and Georgia is doing its part to ensure that nuclear power remains a part of America’s future and America’s legacy.

And the low rates in Georgia are an added bonus.