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Viewpoint: S.C.’s nuclear failure a crisis — and an opportunity

Energy
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The failure to complete the multibillion-dollar V.C. Summer nuclear power plant is a major setback for South Carolina. But it is also a rare opportunity to prepare the state’s electricity sector for major changes sweeping the industry.

The Legislature is already considering at least 12 bills to address the V.C. Summer fiasco. Lawmakers have a choice. Will any new laws focus solely on the canceled nuclear plants, or will they aim for an affordable and reliable electricity sector into the future? Will they just apply a Band-Aid or seize the chance to update South Carolina’s energy laws?

The sector is undergoing a rapid transition. When SCANA and Santee Cooper sought approval for V.C. Summer, the world looked very different. Electricity demand was projected to increase, making new generation necessary. Natural gas prices were high and volatile. Congress was debating climate change legislation.

All of those factors have changed. Electricity demand is flat, gas is cheap and federal carbon regulation looks unlikely in the short term. Rapid change seems to be the new normal in the previously stable electric utility industry. In addition to the aforementioned changes, renewable energy prices have fallen drastically. Battery storage may soon become cost-effective, allowing renewables to play a much larger role in the electricity system.

Failure to adjust the state’s approach to electricity regulation risks exposing ratepayers to even higher costs in the coming decades. Inaction could prevent ratepayers from taking advantage of new, cost-effective electricity options. In the aftermath of V.C. Summer, the state simply cannot afford to get that wrong.

Although we do not know how the sector will evolve, proven strategies exist to address the risks. Smart energy efficiency policy should be at the top of the list. South Carolina’s efficiency efforts to date have lagged far behind other states’.

Energy efficiency isn’t just an environmental issue. More efficiency means less need for expensive new plants like V.C. Summer. Spending money on efficiency improvements might mean higher rates, but it will mean lower electric bills because consumers will use less electricity.

Regulators’ focus on rates, rather than real-world bills, has held back efficiency efforts in the past. Opportunities for efficiency improvements are highest among low-income citizens, who are hurt the most by high electric bills. State lawmakers and Public Service Commission members concerned about potential rate increases could implement performance reviews to ensure that SCANA — set to be acquired by Virginia-based Dominion Energy in a $14.6 billion deal pending regulatory and shareholder approval — earns revenue on energy efficiency programs only if those programs effectively reduce consumption. This could be an easy, inexpensive win for the state.

Increasing investment in renewable energy is another reliable strategy to proactively address an uncertain energy future. Because these energy sources do not require fuels and do not emit air pollutants, they are immune from fuel price volatility and costs associated with regulatory changes. Furthermore, they can be coupled with emerging energy storage options to provide reliable energy even when the sun is not shining or wind is not blowing.  Renewable projects are also small and modular, a big advantage over traditional power plants in a changing energy landscape. Solar energy legislation adopted in 2014 spurred an initial round of renewable energy investments in the state. Lawmakers should build upon this success.

Greater investment in energy efficiency and renewables can help protect the state against expensive power projects like V.C. Summer and keep it nimble in a changing energy landscape. It could also have environmental benefits by allowing the state to continue closing its old, polluting coal power plants. This would improve air quality and public health. Coal plants are South Carolina’s largest contributors to the climate change risks facing the state.

The state has many options for increasing energy efficiency and renewable energy. State mandates or incentives are one strategy. A new North Carolina law provides a different model, calling for a significant increase in solar energy capacity while implementing competitive bidding to ensure that ratepayers get the benefits of competition. This approach allows utilities to compete but rewards other companies if they can provide the same service at a lower cost.

Many states now require their electric utilities to compete with independent companies. Energy efficiency and renewable energy could then compete directly with traditional coal, gas or nuclear power plants. Investors, not customers, would pay the cost of failures like V.C. Summer — just like in most other businesses. Such a change would be complex and would require a thorough assessment of potential benefits and challenges for the state. But it should not be ruled out.

Another unconventional option? Rather than selling Santee Cooper and allowing the sale of SCANA, perhaps the state should consider buying SCANA. Public power companies and electric membership cooperatives have a history of providing affordable, reliable electricity and responding to the changing needs of their customers.

If coupled with the right reforms to ensure a more robust planning process, stakeholder engagement and pursuit of emerging options for meeting the state’s electricity needs, a revitalized Santee Cooper could align the interests of consumers and voters with their utility.

South Carolina’s continued economic success depends on its ability to not only manage the V.C. Summer crisis but to turn it into an opportunity to secure a flexible and cost-effective electric power system for decades to come.

Jonas Monast is the C. Boyden Gray Distinguished Fellow at the University of North Carolina School of Law. Nathan Richardson is an assistant professor at the University of South Carolina School of Law.

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February 09, 2018

This is spot on and exactly what Upstate Forever and the state's conservation groups are working on in Columbia. We are truly at a tipping point.