Nuclear giants urge market changes to thwart closures

UTILITIES:

Nuclear giants urge market changes to thwart closures

Hannah Northey, E&E reporter

Greenwire: Thursday, February 6, 2014

The largest nuclear operators yesterday reiterated their calls for market changes to prevent a spate of reactor closures in markets that they say are becoming too reliant on subsidized renewables and cheap gas amid premature plant retirements.

Top executives from Entergy Corp. and Exelon Corp. -- the United States' biggest nuclear operators in competitive markets -- warned at a Platts energy conference in Washington, D.C., that electricity markets are rewarding the lowest-cost, near-term energy sources, namely cheap gas and subsidized wind.

Being overlooked are merchant nuclear power plants that provide carbon-free base-load power, they said.

"Regulators, policymakers really don't understand the consequences of some of their focus, which are well-intended; they want to do the right thing, move to renewable resources, reduce carbon output," said William Mohl, president of Entergy Wholesale Commodities, which operates about 5,000 megawatts of merchant nuclear power. "[But] we're really headed off a cliff if we don't see some changes in overall market design."

Nuclear operators say they're particularly concerned about older, single reactors throughout the Northeast that are struggling amid cheap natural gas; high operating costs; new regulatory expenses following the 2011 Fukushima Daiichi disaster in Japan; competition from subsidized generation -- wind and solar; and years of profits wiped away from the recession.

So the price of electricity in the NE market has been skyrocketing in the last three years because the system has sabotaged new natural gas pipelines. How come these NE nuke can't make big money on the most expensive electricity in the nation?

One issue is longer-term capacity markets. Grid operators in New England yesterday said the retirement of several power plants in the region is reducing power supplies and driving up prices. ISO New England, in results for its 2017-18 "capacity market" auctions -- markets designed to encourage the retention and construction of new power-generating facilities and ensure a reliable grid in coming years -- said it secured a commitment of 33,700 MW, down from the required 33,855 MW of capacity.

Other factors are playing out in the day-to-day energy markets. Mohl said nuclear plants are competing with wind and solar using production and investment tax credits, which he said created unfair footing for Entergy's 5,000 MW of merchant nuclear power. He also pointed to utilities adding generation -- usually cheap, combined-cycle gas-fired plants -- through certain contracts that work to push down wholesale prices.

Clean energy groups have repeatedly accused the nuclear industry of making wind and solar a "scapegoat" for their financial woes, and have said the real issue is the need for more transmission as the cost of renewables drops (Greenwire, June 12, 2013). Dave Hamilton, director of clean energy for the Sierra Club, said the markets are changing and nuclear operators, also highly subsidized, cannot "turn back the clock." "They're fighting the markets ... trying to make a bad bet a good bet," Hamilton said.

The trends have brought uncertainty to the power markets, triggering about 3,000 MW of announced capacity retirements in the Northeast -- including Entergy's Vermont Yankee nuclear plant and the Brayton Point coal plant in Massachusetts -- because there was "too much uncertainty" in the markets, Mohl said. Entergy is slated to close Vermont Yankee, about 5 miles south of Brattleboro, Vt., in December, and it will be decommissioned in 2015, Mohl said.

Basically the NEISO OK these shutdowns recently..why the abrupt change in position.

"Frankly, what we're dealing with right now in some of these markets is they are insufficient to provide sustainability for investors -- and that's where you end up with a situation like Vermont Yankee," Mohl said. "And obviously, there are other units out there that are critical.

Yea, like Pilgrim with a horrendous operations and reliability issue.

"Our discussions with the [grid operators], our discussions with [the Federal Energy Regulatory Commission] is this is not sustainable," he added. "What you hear a lot of regulators say, or a lot of politicians may say, is that driving wholesale prices down is a good thing for consumers, when in reality it's going to turn out to be a very bad thing for consumers."

The nuclear and utility sectors are also reorganizing internally. Entergy and Exelon have met with the Nuclear Energy Institute, the Edison Electric Institute and the Electric Power Supply Association to discuss possible market reforms or raising awareness about the issues, Brown said.

"We're all coming together, racking our brains, saying what's out there, what can we do, whether it's market reform or raising awareness of the value of nuclear?" said David Brown, Exelon's vice president of federal affairs. "The frustrating thing is there's no silver bullet; it's going to be an all-arrows-in-the-quiver response."

You got to see these things in a beyong a global warming and or inviromentalism lens. What they are aiming at with the "all-arrows-in-the-quiver response", is for the highest priced electricity source to set the price for everyone else. In any other times, you be calling this massive collusion in the electrcity sector to inflate the price of electrcity to all of us. They all our manufacting a crisis, or much worst, they are taking advantage of a crisis...so as to boost profits for everyone. This is so anti competitive and damaging to our whole economy! 

This is how the 1%ers screw the rest of us! 

Looking ahead

Mohl said he's been encouraged by steps ISO New England, which is not allowed to favor any fuel over another, has taken to address the issue.

ISO New England last week proposed changes that would impose a "pay for performance" program, or reward units that overperform while reducing capacity payments for resources that fail to perform adequately. The program, the grid operator said, is designed to clarify and strengthen the definition of capacity and improve incentives to achieve better performance of power plants when needed

Yea, but how do you explain the terrible reliability issues with say Palisades, Pilgrim and Arkansas Nuclear one. These guys are terrible unreliable. The industry and Entergy waste hundreds of million dollars in ineffective maintenance…shutdown and do-overs of a lot a work. Shouldn't these guys be punished?

The proposed changes -- not directed at a specific fuel type -- are necessary to address a growing dependence on gas that has left the region "extremely vulnerable" to supply interruptions, and an uptick in outage rates and other problems including inadequate oil inventory for some plants and insufficient staffing, ISO New England said.

But Mohl said the proposal for market changes is too complicated -- and more nuclear reactors could close before any changes take place.

"If you're an investor in these markets trying to run these plants, you need more certainty than that in terms to your ability to make additional capital," he said.

Just how many market rule changes -- or nuclear plant closures -- could materialize in coming months and years remains unclear.

Brown said Exelon is eyeing shaky finances at five of its merchant nuclear plants -- including Clinton, Quad Cities and other units not made public -- where losses have wiped out revenues at the company's other 19 nuclear facilities. Brown said those decisions will be based on movement with gas markets and what Congress decides to do with the production tax credits.

Mohl said Entergy has not decided to close any other unit beyond Vermont Yankee.

Nuclear industry leaders yesterday pushed the point -- one backed by the Obama administration -- that nuclear power could play a critical role in reducing the country's carbon emissions.

Mohl said markets need to reward diversity and include nuclear power's base-load, carbon-free attributes. Under one aggressive and hypothetical scenario, Mohl said scrapping 11 gigawatts of nuclear power in New England could trigger a 40 percent rise in carbon emissions.

He noted that countries like Germany that are phasing out nuclear power and pushing renewables are now seeing customer rates and carbon emissions increase as more oil- and coal-fired power is added to the grid.

"You've really got to be careful what you ask for, and you think about your state policies, your federal policies and your overall market design," he said.