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atw 2018-03v6

atw

atw Vol. 63 (2018) | Issue 3 ı March ENERGY POLICY, ECONOMY AND LAW 152 the summary demand of future oil & gas rigs on the Russian Arctic shelf may be quite high. About 40 % of this demand can be covered by underwater feeder cables, but this option is limited by distances below 200 km from the shore. Another 60% from rigs situated beyond this distance can be covered by autonomous underwater/sub-ice power plants. As concerns this application, small autonomous reactors seem to have no alternative [7]. By the end of 1980-ies, the USSR already had a concept of underwater NPP with small reactor units [8]. Table 3 lists some nuclear facilities proposed by the leading Russian design companies for application on oil & gas Facility Basic parameters Submarine tanker Carrying capacity – 20,000 t, propeller power – 30 MW Underwater nuclear compressor station Underwater station for LNG production Nuclear drill submarine | | Tab. 3. SMR designs under development. Displacement – 7,500 m 3 , compressor output – 40 MW, continuous unmanned operation time – 10,000 hours The station includes: tankers, gas storages, liquefaction units, nuclear power facilities, terminals etc. Displacement – 20,000 m 3 , reactor capacity – 6 MWe fields in heavy ice conditions. In late 2017, the media have published some information on the Iceberg project developed by the Rubin and OKBM Afrikantov design bureaus: a 24-MW underwater NPP capable of autonomous unmanned operation for a year (total lifetime 30 years). This NPP is intended as a power source for oil/gas drill and extraction rigs in areas with thick ice – in fact, this is a return to one of unique unimplemented designs of the eighties. In the developers’ opinion, nuclear energy supplies to underwater/sub-ice oil/gas production on the Arctic shelf should be based on system approach (“made in factory and shipped to sites”), with a maximum use of long operating experience of nuclear ships. This would enable: • no atmospheric releases plus localization and minimization of heat impact on the Arctic Ocean water to negligible values (compared to natural temperature fluctuations); • lower risk of oil spills – that cannot be efficiently liquidated by available technologies – in ice con ditions; • higher reliability and safety of power facilities; • minimized workforce requirements (up to total autonomy); • efficient and safe offshore operation under water/ice at distances of 1,000 km from the coast and beyond. The policy currently implemented by the government with regard to the Arctic region, as well as the scientific and technical experience accumulated by Russia, both allow for confident conclusion that considerable advances in the development of nuclear power facilities for the Arctic are to be expected in the short term. References 1. Kurchatov Specialists and Atomic Fleet. Editor: M.V. Kovalchuk, NRC KI, Moscow, 2016 (in Russian). 2. Status of Small and Medium-Sized Reactor Designs. A Supplement to the IAEA Advanced Reactor Information System (ARIS). IAEA, 2012 3. Russia’s Nuclear Energy Strategy to 2050. NRC KI, Moscow, 2013 (in Russian). 4. M.V. Kovalchuk. Arctic Vector of Russian Energy. Priroda, 2016 (in Russian). 5. V.V. Petrunin et al.: Prospects for Small and Medium Nuclear Power Plants: a New Development Area. In: Small Nuclear Power Plants a New Development Area, IBRAE, Moscow, 2015 (in Russian). 6. A.I. Alekseev et al.: Uniterm SMR: a Frontline Area of Nuclear Power Development. In: Small Nuclear Power Plants a New Development Area, IBRAE, Moscow, 2015 (in Russian). 7. E.P. Velikhov et al. Nuclear Energy for the Arctic Shelf. V Mire Nauki, v.10, 2015 (in Russian). 8. V.S. Nikitin, V.S. Ustinov et al.: Nuclear Energy in the Arctic Region. The Arctic: Ecology and Economy, v.4(20), 2015 (in Russian). Authors Andrej Yurjewitsch Gagarinskiy National Research Centre “Kurchatov Institute” Moscow, Russian Federatio Energy Spotlight Policy, on Nuclear Economy Lawand Law Russian U.S. Regulators Nuclear Reject Energy Proposal Technologies to Subsidize for the Nuclear Development and Coal of the Power Arctic Prices ı Andrej ı Andrej Yurjewitsch Gagarinskiy

atw Vol. 63 (2018) | Issue 3 ı March U.S. Regulators Reject Proposal to Subsidize Nuclear and Coal Power Prices Jay R. Kraemer On January 8, 2018, the U.S. Federal Energy Regulatory Commission (“FERC”) unanimously rejected a rulemaking proposed by Secretary of Energy Rick Perry designed to enable the owners of coal and nuclear power plants to charge higher prices for their output, and thereby to prevent further premature retirements of such plants. The FERC has exclusive authority, under the Federal Power Act, to establish rules for interstate wholesale sales of electricity. Although the FERC simultaneously initiated a new proceeding to consider how to enhance the resilience of electricity supply and delivery in the U.S., that proceeding seems unlikely to offer near-term relief to nuclear plants that are approaching closure due to their inability to compete economically both with facilities fueled by low-priced natural gas and with renewable power sources benefitting from favorable tax provisions. Accordingly, the American nuclear power industry wil+l probably have to look elsewhere for relief from its present dire economic circumstances. Last fall, Secretary Perry concluded that U.S. wholesale electricity markets, as operating in power auctions conducted in accordance with FERC regulations, were not adequately compensating the “resiliency” benefits of nuclear and coal-fired “fuel-secure generation” facilities. Accordingly, he issued a directive instructing the FERC to develop and publish new market rules to correct that shortcoming. See, “Grid Resiliency Pricing Rule,” 82 Federal Register 46940-48 ( October 10, 2017) (the “ Proposed Rule”). Specifically, he called upon the FERC to amend its regulations to require that each of the six regional entities ( Independent System Operators (“ISOs”) and Regional Transmission Organizations (“RTOs”)) conducting FERCregulated power auctions promptly establish new rates for the purchase of power from certain generating facilities. Such rates would provide for recovery of the facilities’ costs of operation, fuel, capital, and financing, as well as a fair return on equity. Eligible generating facilities were defined in the Proposed Rule so as to include power plants that were not currently subject to cost-of- service rate regulation, had a 90-day fuel supply on site, and were able to supply certain reliability energy services, such as voltage support, frequency services, and operating reserves. As a practical matter, therefore, the Proposed Rule called for the FERC to adopt regulations requiring electricity rate tariffs allowing full cost and reasonable profit recovery for coal-fired and nuclear “ merchant” power plants which, on the document’s face, appeared to be the only generating facilities that could meet the applicable definitions. The FERC received extensive comments on the Proposed Rule from ISOs, RTOs, electric utilities, non- utility elec tricity generators, trade associations repre senting a wide variety of energy interests, and many others. Meanwhile, the composition of the FERC itself changed markedly in the two months following publication of the Proposed Rule, including the confirmation of a new Chairman who assumed office in early December 2017 (and one of whose first official actions was to request an additional 30 days within which to respond to the Proposed Rule). In its unanimous Order terminating the rulemaking proceeding initiated in response to the Proposed Rule, the FERC briefly reviewed the development of the U.S. electric power industry and its own efforts to help ensure the resilience of the bulk power system. It then held that neither the Proposed Rule nor the record in that rule making proceeding had shown that the current RTO/ISO rates were unjust or unreasonable, or that they were unduly preferential or discriminatory – the statutory criteria in the Federal Power Act for changing rates. In addition, the FERC found no basis in the record to conclude that there was a threat to grid resilience, either in the current rates charged for power or otherwise. It then specifically rejected the Proposed Rule’s concept that all qualifying generating facilities should receive a cost-of-service recovery rate regardless of the need for power or the resulting prices to power consumers. Two FERC Commissioners – both Democrats – wrote concurring opinions that were quite critical of the Proposed Rule. One stated that, by “simply designat[ing facilities] for support rather than determining what services needed to be provided,” the Proposed Rule “sought to freeze yesterday’s resources in place indefinitely, rather than adapting to the resources that the market is selecting today or toward which it is trending in the future.” (Concurring Statement of Commissioner LaFleur, at 4.) The other described the Proposed Rule’s remedy as a “multi-billion dollar bailout targeted at coal and nuclear generating facilities,” and pointed to the transmission and distri bution systems in the U.S., rather than to generating facilities, as a greater threat to grid resilience. (Concurring Statement of Commissioner Glick, at 2.) A third Commissioner, after applauding “Secretary Perry’s bold leadership in jump- starting a national conversation on this urgent challenge,” stated that he would have preferred to move expeditiously to direct the RTOs/ISOs either to submit interim rate revisions for existing power plants that were providing resilience attributes and were at risk of retiring before the new FERC proceeding was concluded or to explain why such rate revisions were not necessary. ( Concurring Statement of Commissioner Chatterjee, at 1, 3.) After terminating the proceeding involving the Proposed Rule, the FERC began a new proceeding to address potential grid resiliency challenges in the RTOs/ISOs, including a better understanding of what resiliency means and requires. The FERC ordered each RTO and ISO to submit, within 60 days, comments on those issues, on how the RTOs/ISOs assess threats to resiliency, and on how they mitigate threats to resilience. Following those sub missions, other interested parties will have 30 days to submit reply comments. The new FERC proceeding is much more “open-ended” than was the Proposed Rule, in terms of its potential outcome, whether it will in fact lead to any new rule making, and especially whether it will result in higher rates for nuclear plants threatened with premature retirement. Some states, most particularly Illinois and New York, have already put in place arrangements that permit compensation to the owners of nuclear plants for their non-carbon-emitting power production. Other states, such a Connecticut, New Jersey, and Pennsylvania have similar schemes under consideration. However, because the Trump Administration appears wedded to continued efforts to support the coal industry (and, relatedly, seems unwilling to recognize the climate benefits of carbon-free generation of electricity), it appears that any economic relief to at-risk nuclear power plants is more likely to come from state-sponsored plans, or possibly proposals initiated by ISOs and/or RSOs themselves, than from initiatives from the Federal Government. Author Jay R. Kraemer Of Counsel Fried, Frank, Harris, Shriver & Jacobson LLP 801 17 th Street, NW Washington, DC 20006, USA 153 SPOTLIGHT ON NUCLEAR LAW Spotlight on Nuclear Law U.S. Regulators Reject Proposal to Subsidize Nuclear and Coal Power Prices ı Jay R. Kraemer