In Millstone Brinkmanship, Is A Carbon Tax The More Elegant Solution? | Connecticut Public Radio

In Millstone Brinkmanship, Is A Carbon Tax The More Elegant Solution?

May 2, 2017

As nuclear power plants across the country close, the owners of the Millstone Power Station in Waterford, Connecticut are asking the state legislature for help. They want to sell their electricity directly to utilities through a state-run auction. It's a controversial -- and complicated -- request. And now, some energy experts think the nuclear industry should embrace a simpler solution: taxing pollution.

It's called a carbon tax. Or, put more mildly, a "carbon price."

"If you want to reduce carbon dioxide emissions in the most efficient way possible, the way to do that is to simply raise the price of things that use more carbon," said Ken Gillingham, an assistant professor of environmental and energy economics at Yale University. So, if a fuel -- like gasoline or natural gas -- emits carbon, it gets taxed.

Right now, carbon emissions are priced -- indirectly -- through something called "RGGI," or the Regional Greenhouse Gas Initiative. It basically works like this: firms who emit more carbon dioxide buy permits to pollute.

"The cost of that permit fee is, effectively, the carbon price under the RGGI system," said Gillingham.

Now, as federal action on climate change looks more and more unlikely in the near future, some New England states are working to pilot their own carbon taxes, separate from RGGI.

But before we get into why Gillingham thinks a carbon tax is something Millstone should be amenable to, a quick refresher on the legislative debate currently going on in Connecticut.

Today, Millstone’s owner, Dominion, sells its energy months ahead of consumption. Nuclear plants run continuously for long stretches of time, but day-to-day energy markets can be volatile: subject to supply, demand, and the weather. Millstone leverages that volatility, selling its energy in credits today to third-party buyers, who might be able to turn a profit on them in the future.

Credit Millstone Power Station

But as the price of natural gas has fallen, those credits have become -- at least for now -- less attractive to buyers.

So, Dominion is essentially asking for a state-run auction. One where it can sell its power directly to utilities.

"If it was deemed to be a good value for rate payers, by the energy regulators, they could enter into a contract for up to five years with Millstone," said Dominion's Kevin Hennessey.

The move is controversial. While the bill passed out of committee -- it's been opposed by powerful lobbying forces like the natural gas industry and AARP Connecticut, which is concerned the measure could result in higher utility bills.

AARP's John Erlingheuser said Dominion is asking for benefits without opening up its books.

"They don't want any obligation to ratepayers by having to demonstrate that they're actually only getting expenses and a reasonable rate of return," Erlingheuser said.

Energy markets fluctuate, so it's pretty unclear how the proposed Millstone legislation would impact ratepayers. But Yale's Ken Gillingham, said one thing this is clear. "A carbon price would help Millstone, potentially, very substantially," Gillingham said.

Around the country, nuclear plants have been closing, in part, because of those aforementioned cheaper natural gas prices.

"If you had a carbon price that would add an additional surcharge commensurate to the emissions that natural gas emits, that would make a nuclear plant like Millstone more attractive," Gillingham said.

Since nuclear doesn't emit carbon, Gillingham said that could potentially price their electricity lower than natural gas -- netting nuclear more money.

Dominion's Kevin Hennessy said his company is watching carbon tax proposals, but it's "not ready to weigh in for the pros and cons of the idea," Hennessy said, and it's "aware of it out there. Aware of the conversations, and we view that as a longer-view position."

And a tax that would, probably, Hennessy said, have to be region- and economy-wide, to work.

Jordan Stutt, a policy analyst at the Acadia Center, said a carbon tax might help crystallize a future energy path for the region -- one that gets above things like the brinkmanship going on right now over Millstone, while also fostering clean-energy growth.

"If we know that we're going to have a strong carbon price for decades into the future, instead of investing in an expensive natural gas pipeline, we might invest in cleaner alternatives," Stutt said. "We might invest in more local clean energy projects."

As to what a carbon price would mean for your energy bills? That's also unclear, but Gillingham said the bill would probably go up -- just a little bit.

That could make it a hard sell. But still, any proposal would take time to become real. A carbon tax idea was floated as a trial balloon during this legislative session, but never made its way out of committee.

And to date, no U.S. states have successfully passed a carbon tax.