The Legislature is reportedly mulling whether and how to subsidize the three nuclear power plants owned by Public Service Enterprise Group. As we wrestle with the challenge of addressing climate change, subsidizing a carbon-free energy source like nuclear power is a reasonable idea. But we can do better.
PSEG has a legitimate concern, at least in theory. The way our energy market works, its nukes get paid a market rate that is effectively set by natural gas. As the fracking revolution has driven down the cost of natural gas, payments for nuclear power — and PSEG's profits — have been squeezed in ways we never anticipated when we set up that energy market in the first place.
PSEG warns that its nukes will go into the red in a few years. If the company decided to shut its plants down, New Jersey would find itself with no choice in the short-to-medium term but to use more fossil-fuel power, including coal. This would represent a severe setback in our effort to reduce our carbon footprint.
Until the accountants at the Board of Public Utilities get a good look at PSEG's books, no one knows how real the danger is here. But even if the company needs some help to keep those plants running for a while, subsidizing nuclear power is not the way to do it.
Here's a better approach: Instead of paying the nuclear plants, make the fossil-fuel plants pay us. Don't subsidize the (relatively) good stuff. Tax the bad stuff. And the bad stuff is carbon.
A tax on the carbon content of fossil fuel — coal and gas — would raise the market price of power generated from those fuels. Since the nukes get paid the market price for natural gas power, their payments would go up, which will help them stay in the black. And unlike a subsidy just for the nukes, a carbon tax will also help tip the balance in the marketplace in favor of other carbon-free energy sources, like solar and wind power. At the same time, the tax would provide a revenue stream to the state, allowing us to spend more on clean-energy alternatives such as energy efficiency and renewables.
You're probably thinking, "Hey, won't this raise my electric rates?" Well, yeah, it will. So will subsidizing the nukes directly. And raising electric rates is economically regressive. It will hit low-income households harder than high-income ones, so it's something we should do very judiciously.
But it's also something we already do. The state's existing Clean Energy Fund (the one we keep raiding to balance the state budget, but that's another column) also comes from a hidden tax on your utility bill. We live with taxes like this because they pay for things we really need. And what we really need more than anything else is to stop burning carbon.
Having a larger pool of money for clean energy can also help consumers, by promoting money-saving investments in energy efficiency. Some of that money could be used to pay for all those charging stations you're going to need when you finally bite the bullet and buy an electric car. It could also be a source of funds for offshore wind, which everybody wants but nobody seems to know how to pay for.
PSEG's nuclear plants won't last forever, and we don't want them to. But we probably ought to try to keep them around until renewables are ready to replace them. (They aren't yet, unfortunately.) And we need energy policies that don't just help the nukes. We need energy policies that promote energy efficiency and hasten the day when most of our power comes from renewables, not older, polluting technologies. A carbon tax on fossil fuel generation would be a good way to start.