The nuclear power industry and its supporters have proposed that Congress take action to prevent the shutdown of currently operating U.S. reactors before the expiration of their operating license. Supporters contend that nuclear power should be valued as a domestic source of highly reliable, low-carbon electricity. However, opponents contend that nuclear power suffers from too many drawbacks (e.g., safety risks) and that federal incentives should focus instead on renewable energy and efficiency. Generally, U.S. nuclear plants are located in one of two market types: (1) competitive—where the value of electricity fluctuates based on supply-side price offers that are generally a function of fuel (e.g., natural gas) costs and demand-side price bids, and (2) cost-of-service—where the value of electricity is set at a rate based on regulator-approved costs, operating expenses, and a reasonable investment return. Unlike cost-of-service market areas—where generators have electricity price rates that are approved and periodically revised by a state utility commission—competitive power markets are subject to electricity price volatility that results from supply and demand fundamentals as well as fuel (e.g., natural gas and coal) costs for the marginal price-setting generators. Six reactors have permanently shut down during the past five years; 10 reactors—at eight plant sites—have announced, since 2010, their intent to close—nine in the past two years (see Figure 1 ); and 10 have been identified by consultants and ratings agencies as "at-risk" of closing prior to the expiration of their operating licenses. To date, CRS has not been able to locate or aggregate a comprehensive data set that would allow for a plant-by-plant analysis that accurately reflects all financial variables. Nuclear power plants annually provide about 20% of total U.S. electricity generation, most recently 19.5% in 2015. Power Purchase Agreements (PPAs)

Some nuclear power plants that operate in competitive power markets have separate power purchase agreements (PPAs) outside the RTO market that provide a specified value for electricity generation. However, the combination of capacity payments and electricity sales is estimated—assuming constant production costs at 2015 levels—to be less than production costs in 2016, not considering any capital expenditures. The Illinois legislature passed S.B. 2814 on December 1, 2016, which includes a Zero Emissions Credit (ZEC) incentive program for existing nuclear plants in the state. This may result in continued operations of the Quad Cities nuclear plant. Plant-Level Analysis of Electricity Sales Revenue and Fuel and O&M Costs

Plant-specific cost and price information available to CRS for 33 nuclear power plants that operate in competitive power markets was used to assess whether electricity revenue did, or is expected to, exceed 2015 fuel and O&M costs for each plant for the years 2015 to 2019. Each nuclear power facility is subject to a unique set of cost, price, and financial performance variables. Secretary of Energy Ernest Moniz has reportedly indicated that the federal government has limited existing authority to provide financial support for operating nuclear power plants and that doing so is currently a state issue. A range of policy options are available to Congress, should it choose to act, that could potentially provide some degree of financial support for operating U.S. nuclear power plants. However, no federal tax incentives are available for existing nuclear power plants. Carbon Price

Because of the low-carbon attributes of nuclear-generated electricity, a price on carbon emissions could potentially benefit existing nuclear power plants if the carbon price were reflected in wholesale electricity prices. Both revenue and cost data used to perform this analysis are at the plant level, with revenues represented by the nodal electricity price paid to each power plant and plant-level fuel and O&M cost information as reported by third-party sources.
Some of the 60 operating nuclear power plants (comprising 99 nuclear reactors) in the United States have experienced financial stress in recent years due to a combination of low wholesale electricity prices and escalating costs. Six nuclear reactors have permanently shut down during the past five years, and 19 others have announced their intention to close or have been identified as "at-risk" of closure by financial consultants and ratings agencies.
Generally, U.S. nuclear plants are located in one of two market areas: (1) competitive—where the value of electricity fluctuates based on supply-side price offers that are generally a function of fuel (e.g., natural gas) costs and demand-side price bids, and (2) cost-of-service—where the value of electricity is set at a rate based on regulator-approved costs, operating expenses, and a reasonable investment return. Most of the U.S. plants considered vulnerable to shut down before expiration of their operating licenses are "merchant plants" that sell all or most of their power into competitive wholesale power markets. The price paid to merchant plants for electric power varies by location and is influenced by the price-setting fuel (usually natural gas and coal), transmission congestion, and other factors. Wholesale electricity prices in certain locations have fallen and electricity sales revenue may be below the fuel and operating and maintenance (O&M) costs of some plants, not considering capital expenditures that may also be incurred.
CRS analysis of third-party data indicates that 19 of 33 power plants operating in competitive power markets may incur fuel and O&M costs that exceed electricity revenues for each plant in 2016. However, this number declines to seven in 2017 due to rising forward electricity prices as reported by Bloomberg. While merchant generators do have other revenue sources (i.e., capacity payments where available, power purchase agreements, and hedging positions) and additional costs (e.g., capital), CRS was not able to locate plant-specific information about these revenues and costs that would allow for a holistic financial assessment at the plant level.
The nuclear power industry and its supporters have proposed that Congress take action to prevent currently operating U.S. reactors from shutting down before their licenses expire. Supporters contend that nuclear power should be valued as a domestic source of highly reliable, low-carbon electricity. However, opponents contend that nuclear power suffers from too many drawbacks and that federal incentives should focus instead on renewable energy and efficiency. Nuclear power plants annually provide about 20% of total U.S. electricity generation.
To date, all of the policy action related to financial support for existing nuclear plants has been at the state level. New York has implemented a Clean Energy Standard (CES) that includes payments to qualified nuclear power plants in the state starting at approximately $17 per megawatt-hour in 2017. The CES has been challenged on legal grounds. A similar program was recently approved by the Illinois legislature, and Ohio has also considered nuclear support.
Since each nuclear power plant is subject to a unique combination of financial variables, federal-level incentives are challenged because some nuclear plants are expected to continue operating without federal financial support. Should Congress choose to debate financial incentives for existing nuclear plants, several options may be considered. Tax incentives based on capital investment or electricity production could potentially provide financial support for existing nuclear plants. Establishing a carbon price—carbon tax, cap-and-trade, emissions regulations—could also provide some financial assistance to nuclear power, depending on how a carbon price mechanism was designed and implemented. Finally, Congress could authorize and require the federal government to enter into power purchase agreements with nuclear power plants that would provide a guaranteed price for nuclear-generated electricity. Additionally, the nuclear industry has been advocating that the Federal Energy Regulatory Commission (FERC) institute changes to electricity price formation in competitive power markets.