No reward for divestment. Guest post by Robert Bancroft

Divestment: all financial risk for retirees, not reward 

Robert Bancroft

Since the 2016 session began, Gov. Peter Shumlin has begun calling for state managed funds to divest from coal companies and ExxonMobil stocks. During my career as a consulting economist, I have often been asked to examine the risk of proposed fiscal policy. While the political benefits of divestment may be appealing to some, unfortunately the economic risks could harm the financial security of Vermont’s retirees.

Firstly, divestment entails serious and immediate financial consequences for the $4.02 billion Vermont State Pension Fund and its 50,000 public sector beneficiaries. State Treasurer Beth Pearce understands this and has called for “a real assessment of the cost and benefits” of divestment. When the State Treasury studied divestment in November 2014 it found that costs to the state pension funds would include $10 million per year in lost returns and another $8.5 million in implementation fees. Clearly a well-diversified investment portfolio is better for Vermont’s pension beneficiaries.

Second, the mission statement of the Vermont Pension Investment Committee (VPIC) is to manage investments for the Vermont public pensions “with integrity, prudence, and skill to meet or exceed the financial objectives of the beneficiaries of the funds.”  Given that mission, it would be imprudent, and violate fiduciary responsibility, to risk millions in returns to make a political point about fossil fuel use. In fact, the very reason the VPIC was set up is so that public funds could be stewarded by an independent body, not susceptible to political pressure and whims.

It’s clear that divestment makes little sense in terms of dollars and fiduciary duty, but it also fails on the environmental front, which is supposedly Shumlin’s motivation. Selling stock in fossil fuel companies will do nothing to lower greenhouse gas emissions or address climate change.

For starters, the handful of energy specific or company specific equities that would be sold off will be immediately bought by other market participants. Additionally, the proposal to divest from fossil fuel stocks takes the very limited view that suppliers of these fuels are to blame for climate change. But what about all of the companies, and individuals, that buy and use fossil fuels to power their production processes or to light their homes?  By the logic of those calling for divestment we should also divest from any company that uses fossil fuel.

When pressured to divest the University of Vermont, my own alma mater, unanimously rejected divestment and made it clear that it is the university’s fiduciary responsibility to serve its faculty and students and divestment would pose a significant risk to financial returns. As many have pointed out, allowing legislators to insert their political agenda into the state’s retirement fund and use beneficiaries’ dollars to push ulterior motives, whether social or political, sets a bad precedent.  Simply put, as Beth Pearce states, legislating divestment and investment decisions is simply not good investment policy. That’s why organizations like the Vermont Troopers’ Association, Vermont Retired State Employees Association (VRSEA), Vermont League of Cities and Towns and the Vermont State Employees Association (VSEA) have all passed resolutions calling for funds to be managed by VPIC in accordance with fiduciary responsibilities, not by the Legislature.

For the security and well-being of Vermont’s retirees we need to let our public financial managers do their jobs and not legislate investment decisions.

Representative Robert Bancroft (Chittenden-8-3)

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I received this op-ed from Representative Bancroft, whom I have never met.  I rarely write about divestment or things of that nature.  However, my mother was a school teacher.  I do not like the idea that state pension funds are being invested as a set of political statements, instead of being invested solely for the benefit of retirees.  I decided to publish this op-ed, because I agree with it.

Air Pollution and Vermont Yankee

Meredith Angwin speaking at the PSB hearing

My name is Meredith Joan Angwin and I live in Wilder Vermont.  I am here to speak in favor of granting Vermont Yankee Certificate of Public Good for continued operation.  I am the Director of the Energy Education Project of the Ethan Allen Institute, I blog at Yes Vermont Yankee.

I am a physical chemist by training. I worked at improving pollution control methods and corrosion resistance of nuclear, gas, geothermal and coal plants. I was a project manager at the Electric Power Research Institute. I also consulted with many utilities, in the U. S. and abroad.

I am here today as a citizen of Vermont who wants Vermont to remain the clean, green and attractive state that it is today. Nuclear power has the least environmental impact of all baseload types of electricity.  Specifically, it creates no air pollution. Nuclear power creates no nitrogen oxides.

Intermittent renewables like solar and wind must have be backed up by baseload power and dispatchable power.  What kind of backup power will Vermont choose? Hydro, nuclear or fossil?

New hydro plants and new nuclear plants are unlikely to come on-line in this region. Our practical choices are Vermont Yankee, new fossil plants, or buying power from outside Vermont. I will discuss the environmental issues of natural gas versus Vermont Yankee, because I have technical expertise in this area.

Fossil power means air pollution. Natural gas plants are the best in terms of emissions, but they emit acid gases to the air: carbon dioxide and nitrogen oxides.  I will talk about nitrogen oxides, an acid gas that contributes to acid rain and smog.  I have patents in the control of nitrogen oxides.

Controlling nitrogen oxides is difficult. At the high temperatures in gas turbines, the air actually burns itself. That is, the nitrogen in the air combines with oxygen in the air and makes nitrogen oxides (NOX). NOX is only partially controlled by ammonia addition at the end of the process. Sometimes the ammonia itself becomes a pollutant.

NOX is a very acid gas, contributing to acid rain. NOX is also the main cause of smog, which can happen on any sunny day. You don't have to be in Los Angeles to get smog.  All you  need is NOX and sunshine.

Nuclear plants do not release NOX. They keep our air clean. For clean Vermont air, we need to make our baseload power with Vermont Yankee, not fossil fuels.

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This is the fourth in a series of posts which share statements made in favor of Vermont Yankee at the Public Service Board hearing on November 7, 2012.

I almost labelled it a  "guest post" but then I remembered that I wrote it!

Trojan Cows and Grid Facts: Op-Ed

Non-Trojan Cow

The Cow

On July 1, a group of people opposed to the continued operation of Vermont Yankee protested at the nuclear power plant’s gates. One prop they used to dramatize their belief that there are better energy options than nuclear power was a hollow “Trojan Cow” they pulled to the demonstration. Some protesters pulled mock solar panels out of the cow, while others held whirligigs representing wind turbines. The cow sculpture even included a representation of manure, representing “cow power” energy produced from farm methane. The theme was clear: Vermont Yankee will be replaced with renewables.

Well, that is simply not true, at least in the foreseeable future. Closing Vermont Yankee will not bring a burst of renewables to market to replace its power.

Grid Power

Closing Vermont Yankee would mean buying more power from the New England grid to make up for Vermont Yankee’s supply. Grid power is approximately 58 percent fossil fuel, 28 percent nuclear and 12 percent hydro plus renewables. Wind, solar and farm methane together account for less than 1 percent of the power generated in New England.

What would closing Vermont Yankee mean? More solar power on the grid? No. With or without Vermont Yankee, renewables are expensive, and they are not coming on line quickly.

On the other hand, fossil fuel plants are abundant suppliers to the New England grid, supplying the majority of grid power. Many fossil fuel plants operate only part-time. The part-time plants run when they are needed to satisfy the power requirements on hot summer days or cold winter evenings. They also operate when nuclear plants are down for refueling.

The New England Grid responds to nuclear refueling
From Vermont Dept Public Service  presentation

If Vermont Yankee closed, existing fossil fuel plants would compensate by running longer hours and making more power. If the Vermont Yankee protesters had wanted to stage a more accurate dramatization, they would have pulled a model of a gas or coal plant from their Trojan Cow’s belly, not a cardboard solar panel.

Renewables: Too Slow, and Too Expensive

Or perhaps the demonstrators were claiming that shutting down nuclear plants will bring more rapid development of renewable energy, even if we’re forced to use more fossil fuels for a “short while.”

Well, a “short while” is likely to be very long.

For example, the Vermont state energy plan calls for the state to meet 90 percent of its total energy needs from renewable sources by 2050. That’s an ambitious goal considering that Vermont does not meet its current renewable energy goals and has no prospects of meeting them in the near future. The Vermont energy plan established a goal of having the state use 20 percent of its electricity from renewable sources by 2017. Even using optimistic assumptions about project completion, the state will attain only the 16 percent mark in by that date. In 2009, the state had 13 percent of its electricity from renewables (mostly in-state hydro). A growth of 3 percentage points over eight years ( 13 to 16%, 2009 to 2017) is not very impressive.

Perhaps the rate of growth of renewables is accelerating? Not really. Last year, the Vermont Legislature voted against having an aggressive Renewable Portfolio Standard for Vermont. Such a standard might raise the percentage of renewables in Vermont, but it would also raise Vermont electricity rates to unacceptable levels. Renewable growth is slow in neighboring states for similar reasons. In short, closing Vermont Yankee would have the regional result of requiring more fossil fuel to supply the New England grid.

Vermont Is An Island?

Within Vermont, many anti-nuclear activists don’t seem to care much about the regional issue. They often say that the power from Vermont Yankee doesn’t matter to Vermont, because “Vermont is no longer using any Vermont Yankee power.”

Not true. In March of this year, the power contracts between Vermont utilities and Vermont Yankee ended. Vermont utilities no longer buy Vermont Yankee power. However people in Vermont are still using Vermont Yankee power.

That sounds weird, but realize that buying power and using power are different, because power from different sources blends together on the grid. The supply on the grid depends on the power plants, transmission lines and end-users. These don’t change when contracts change.

Buying and Paying

Who pays for the power is a different matter altogether: Payment depends on agreements made between plants and utilities and regulators. The day after Vermont Yankee stopped selling power to Vermont utilities, Vermont consumers used the same actual power mix as they had used the day before. However, on that day, Vermont consumers began paying for power in a different manner. Among other changes, Vermont consumers began paying for Seabrook power, according to a contract between Green Mountain Power and Seabrook. This did not mean that Seabrook power suddenly began streaming into local power lines.

Once again, we have to take into account the regional nature of the grid. Power contracts determine payment methods, but contracts don’t determine power routing and use — that is determined by plant availability and geography.

Power blends together on the grid. If a plant goes off-line, other plants take up the slack. When nuclear plants go off-line, fossil fuel plants step up and produce replacement power.

(Note: Howard Shaffer wrote an excellent description of the grid at his recent guest post: Where's the Magic Switch?)

Deception 

Protesters used a Trojan Cow to suggest that if Vermont Yankee closed, renewables would take its place. Perhaps the use of a Trojan animal was more apt than the demonstrators intended. After all, the original Trojan horse was designed to deceive. In this case, the people that the demonstrators are deceiving about the consequences of closing Vermont Yankee start with...themselves.

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This is a slightly edited version of an op-ed I wrote for my local paper, the Valley  News.  I wrote this op-ed about the July 1 "Trojan Cow" protest at Vermont Yankee. It appeared in the Valley News on Sunday, July 29, but the Valley News puts very little of its content on-line.   I felt this op-ed fit in well with Howard Shaffer's recent blog post about the grid: Where's the Magic Switch.

You can watch a three-minute video of the demonstration on YouTube.

The Debate at WHMP: Blog Post at ANS Nuclear Cafe

Denise Vozella, WHMP News Director
 Bob Flaherty, WHMP Morning Show Host

On April 24, Richard Schmidt and I debated Jeff Napolitano and Michael J. Daley on WHMP radio in Northampton, Massachusetts.  My blog post about this debate is up this morning at ANS Nuclear Cafe: Be Here Now and the Debate. You can also hear the debate on this page of the WHMP web site.  We are grateful for WHMP for hosting this event. 

I titled my post ANS post Be Here Now because a lot of the debate was about the nature of reality.  The opponents refused to admit that shutting down a nuclear plant meant encouraging fossil fuels. They didn't want to talk about the choices we make today.

Read the post at ANS Nuclear Cafe for a fuller account.

Bill Newman, Host of the Bill Newman Show
Mary Serreze, Reporter for WHMP and Northamptonmedia.com

Me and Jeff Napolitano.
Napolitano is a non-violence instructor
with the SAGE antinuclear alliance.

Michael J Daley, nuclear power opponent and author.
Richard Schmidt, conservationist and engineer.

About the photos.  Vozella and Flaherty were hosts for the first hour. Newman and Serreze were hosts for the second hour.  Schmidt and I debated Daley and Napolitano. All photos courtesy of WHMP.

25th Carnival of Nuclear Energy Blogs

Is Every Accident The Fault of the Nuclear Industry?

In Professional Anti-Nuclear Activists Using San Bruno Fire-Inspired Concerns About Natural Gas Pipelines Against the Indian Point Nuclear Plant, Rod Adams of Atomic Insights explains the attempt to use the recent gas pipeline explosion as a reason to force Indian Point Nuclear Power Station to shut down. Replacing the Indian Point nuclear power with natural gas would lead to more natural gas being transported in pipelines, of course. (I think it is best to avoid attempting to follow the "logic" of these arguments.)

In other posts, Rod points out that worrying about a small hole in a redundant system is a waste of personal energy. Should People Worry About a Rusty Hole the Size of a Quarter? Rod is also following the Vermont Tiger blog series on the cozy relationship of anti-nuclear activists and renewable energy money in Vermont.

Meanwhile, New Builds Move Forward

U. S. Congressional Representative Judy Biggert (R, Illinois) writes Election 2010: Breaking the nuclear deadlock? at ANS Nuclear Cafe: The standstill in Congress over climate change legislation has resulted in a deadlock on other national energy priorities, including nuclear issues. There will be new voices in Congress following the upcoming elections, which may bring opportunity for nuclear advocates. Biggert outlines bipartisan legislation that she has sponsored to advance nuclear science and technologies and urges scientists, engineers and nuclear energy advocates to vote in the elections.

As Dan Yurman points out in Idaho Samizdat, Cracks Appear in the Wall for California's Ban on Nuclear Energy, California is moving toward nuclear, despite the statewide ban on new power plants. There's no ban on plants for process heat though, and there are state laws against adding to global warming. Two 1600 MW Areva ERP reactors for industrial purposes are planned near Fresno. When you can't do carbon, and renewables don't provide enough oomph, what do you do next? A cheerful tale.

Meanwhile, the AtomWatch blog reviews the Institute of Chemical Engineers study of world-wide new nuclear builds. The AtomWatch blog has with a short, simple list of lessons learned. No, success is not about "using cheap labor" (the comment with which people dismiss the Asian builds). Success is about skills, designs, and planning. Just like other big construction projects, oddly enough.

At Next Big Future, Brian Wang comes to similar conclusions in his post China's Nuclear Reactors and Bridges and budgets and schedules. He carefully reviews several Chinese projects, concluding that Red Tape does not make a project safer. Also, the Chinese have many huge construction projects underway, including power plants and bridges. Chinese construction companies and construction crews are skilled, experienced and efficient with big projects. The way American crews used to be, back in the old days.

Are We Building the Right Plants?

In Dr. Furakura's Vision (Nuclear Green Blog) Charles Barton describes the early development of Molten Salt Reactors, which was followed by squashed hopes. Dr. Furakara is old now (85) but he is trying to launch the Fuji reactor project. Dr. Furukawa believes that by 2050-2060 as many as 10,000 billion-watt Fuji reactors could be powering the global energy economy. Why do we believe the next generation of reactors will be developed in this country, or in France? We should not be ignoring the visions of the future from Japan. In a related post, Charles analyses the MIT David J Rose Lecture in which John Holdren lays out Obama Administration thinking. Apparently, they think that a thorium molten salt reactor is impossible. The video of the Rose lecture is embedded in the blog.

Just in case you think that if it's an MIT lecture, it must be right, Brian Wang has a blog post describing the negotiations between Japan and Korea to build mini-Fuji reactors for ships. The companies see this as a competitive move vis-a-vis Chinese nuclear-powered ships. Where is the U.S. in all this ferment of new reactors?

What About the Sun? What About Fossil?

At Yes Vermont Yankee, Willem Post has an excellent guest blog on Photovoltaic Feed In Tariffs and Germany and this country. A very interesting post, with tons of data and links. Did you think solar helps a lot with peaking power? Well, not much, actually.

Similarly, also at Yes Vermont Yankee, I have a post The Inconvenient Truth About Vermont Yankee. Without It, Vermont Would Use Fossil. The general statement is obvious, but the back-up facts are interesting. New England, as a whole, has 60% of its installed electrical capacity in gas and oil. Vermont has 9%. The chart of energy use during refueling outages is also worth a look.

Enjoy the Carnival! Always something new to see and to learn!

About This Blog

Yes Vermont Yankee is a blog in support of the Vermont Yankee nuclear plant. Vermont Yankee is due to be relicensed in 2012, but is fighting fierce opposition from well-organized groups. For example, some anti-Yankee people are currently walking from Brattleboro to Montpelier. They are gathering accolades and publicity along the way.

The walkers apparently don't care that shutting down Yankee will mean burning more fossil fuels. Their leaders say that we will only burn more fossil fuels for a "short time" if Yankee is shut down. They claim that renewables will take over in three to five years. Will Vermont really have hundreds of megawatts of renewable baseload power in five years? I don't think so, and no reputable analyst thinks so.

Still, the anti-Vermont Yankee walkers accept the idea that Vermont will burn expensive fossil fuels for electricity for "three to five years" -- or maybe ten years, or maybe forever. They apparently don't concern themselves with global warming or pollution from fossil-fired plants. They just want to shut down Yankee, and they are very organized.

The Vermont Yankee power plant has been an asset to Vermont by providing safe, clean, reliable, inexpensive power. It has provided good jobs, charitable donations, and taxes. Yankee's low-cost electricity encourages business and employment in Vermont. Vermont Yankee has been, and can remain, a boon to the state and the region.

It is time that Vermont Yankee supporters become organized. This new blog can be a place where we can trade information. I hope it will become a rallying point for plant supporters.

You might wonder who is writing this blog. Do I work for Vermont Yankee? No. I am Meredith Angwin, a physical chemist. I have worked most of my life for the power industry. My background includes fossil fuels (patents in NOx control), risk management for natural gas pipelines, economic and corrosion assessments for geothermal energy, and corrosion control in nuclear power plants. I currently earn my living as a writer. Though I accept contracts from electric utilities and equipment suppliers (among other companies), this blog is not part of any paid work. It is completely my own, and I am responsible for its contents.

One final word. There are many excellent pro-nuclear blogs, and one of my friends asked why I wanted to start another one. However, most other blogs tend to cover the whole world, including nuclear construction in China, the latest word from Congress, and so forth. I live in Vermont, and I have started this blog specifically to concentrate on Vermont Yankee issues.