Lawmakers look to small nuclear plants to boost Indiana’s energy. Who should bear the risk?
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Just a few months ago, the term “small modular nuclear reactor” wasn’t in the lexicon of most Hoosiers.
But now, a trio of GOP-sponsored bills are poised to advance the new technology in Indiana with significant tax credits.
Republicans bringing the legislation say that with a slew of energy-intensive data centers coming to the state, Indiana needs to increase and diversify its energy portfolio.
But consumer advocates say the legislation puts the financial cost of financing the expensive, unproven technology on ratepayers.
At the core of the legislation is a 20% tax credit for energy companies on costs related to developing small modular nuclear reactors, or SMRs. Another key, contentious provision would let utility companies ask state regulators for the ability to recover costs on SMRs, even before the projects receive official approval.
The related bills—House Bill 1007 and Senate Bill 424— are authored by Rep. Ed Soliday, R-Valparaiso, and Sen. Eric Koch, R-Bedford, respectively. In committee testimony this week, Soliday said strengthening and diversifying the state’s energy supply is the main goal of the legislation.
“Our goal in this ongoing endeavor is keep Indiana competitive in the national and world marketplace by keeping our five foundational energy pillars—reliability, affordability, resilient, stability and environmental sustainability—in balance,” Soliday said.
SB 424 passed the Senate Committee on Utilities in a party-line vote Thursday. A related measure—Senate Bill 423, also authored by Koch—establishes mechanisms for utility companies to create business partnerships on SMR projects. SB 423 also passed the utility committee.
Supporters of the bills note nuclear power is virtually carbon-free and can run around the clock, making it more efficient than wind or solar. They point to bill language saying major energy users would be required to pay for 75% of the costs associated with their energy usage from resulting projects and amendments that offer more consumer protections.
Opponents of the measures include the Indiana Conservation Voters, Hoosier Environmental Council and the Citizens Action Coalition. Their main qualms aren’t about the technology itself, but rather how the technology would be paid for.
“We’re using rate payers as economic development tools more and more. And now we’re asking ratepayers to foot the costs for monopoly utility companies and big tech to think about maybe applying for approval for a small modular reactor,” said Kerwin Olson, executive director of the Citizens Action Coalition.
What is a small nuclear reactor?
Like the name suggests SMRs are nuclear reactors, just smaller. Current Indiana law defines SMR power capacity as reactors that generate up to 470 megawatts. There are no current large-scale nuclear reactors in Indiana, but the Cook Nuclear Plant in southwest Michigan, by comparison, can output 2,360 megawatts.
Experts say smaller reactors have a few advantages—their size makes them cheaper to operate and they can be built in more areas. Specifically, they can be integrated into existing natural gas or coal plants which further reduces the cost for ancillary parts of the project.
However, SMR technology is very new. So new that there are currently no operational SMRs in the U.S. or Canada. That isn’t stopping Fort Wayne-based Indiana Michigan Power, which recently announced it is applying for a federal grant to begin feasibility studies for an SMR at the site of its current coal plant in Rockport.
Who bears the risk?
Opponents to the measures take the most issue with provisions that let utility companies recover costs for SMRs projects. HB 1007 lays out that utilities will get rate increases to recover 80% of their costs on an approved SMR project within three years, while the other 20% can be recovered through general rate increase requests.
That includes utilities recouping their costs for the planning stages of projects that potentially might never be built or projects that go vastly over budget.
Opponents highlighted worst-case scenarios, including the infamous Virgil Summer nuclear expansion project in South Carolina, where a similar law passed in 2007. Construction and planning failures led to the project failing, leaving ratepayers on the hook for $9 billion that had been poured into the project.
Joseph Rompala, a lobbyist representing Indiana Industrial Consumers said even well-managed projects often run over budget, and asking ratepayers to pay the price for that isn’t fair.
“Unfortunately all the good intentions in the world don’t protect us when circumstances don’t work out the way we want them to. When there are cost overruns and projects run longer than expected,” said Rompala.
Energy of the future
But proponents of the bills say Indiana needs to become an early adopter for the new wave of nuclear energy in order to secure the state’s energy supply into the future.
Indiana’s new Secretary of Energy and Natural Resources Suzanne Jaworski said she supports the state diversifying its energy production in recent decades, but noted Indiana’s energy efficiency metrics have decreased due to wind and solar being less reliable than coal or natural gas. She said a December report from the North American Electric Reliability Corp. shows much of Indiana is at an “elevated” or “high” risk for having enough capacity to meet future energy needs.
Getting a head start on nuclear energy represents an opportunity.
“Yes, nuclear takes 7-10 years to build. Yes it’s quite a lot more expensive…but that will be clean, carbon-free electricity on the Indiana grid for 80-100 years,” she said.
Other nuclear proponents told lawmakers demand for nuclear SMRs will only increase and states who don’t adopt early may get stuck near the back of the line for qualified engineers and equipment.
Before passing Senate Bill 424 out of committee, Koch did amend the measure to give the IURC more discretion to deny cost recovery attempts for projects that are cancelled or go over budget.
There will be more debate on Soliday’s HB 1007 in the house Utilities, Energy and Telecommunications Committee next week.