trending Market Intelligence /marketintelligence/en/news-insights/trending/pa_3cxqe-rlcyuoosmzrow2 content esgSubNav
In This List

NJ nuclear plants will close without subsidy, warns PSEG

Video

S&P Capital IQ Pro | Powered by Expert Insights

Blog

Insight Weekly: Soaring food prices; bankruptcies reach new low; insurtech M&A to accelerate

Blog

Essential Energy Insights - November 2021

Blog

European Energy Insights October 2021


NJ nuclear plants will close without subsidy, warns PSEG

SNL Image

The Salem nuclear in Salem County, N.J.
Source: Associated Press

Public Service Enterprise Group Inc. warned New Jersey utility regulators that its two nuclear plants in the state will shut down in three years without financial support from a new subsidy program for at-risk nuclear generation.

At a state Board of Public Utilities hearing on Oct. 4, Joseph Accardo, deputy general counsel and chief regulatory officer at PSEG Services Corp., said the company will open up its financial books to prove that the two nuclear plants it operates in southern New Jersey will be forced to retire within three years — one of the conditions that must be met to be eligible for subsidies — unless they receive zero-emissions credit, or ZEC, payments.

Signed into law by Gov. Phil Murphy in May, the ZEC program seeks to prevent early closures of the 1,172-MW Hope Creek and 2,328-MW Salem nuclear plants in Salem County by paying them as much as $300 million a year for their avoided emissions. PSEG owns the plants through its PSEG Nuclear LLC business. Exelon Corp. owns about a 43% interest in the Salem plant and would be eligible for up to $100 million of those ZEC incentives a year.

For residential ratepayers, the cost of the ZEC program would be 0.4 cent/kWh, or $4 per month for a customer using 1,000 kWh/month.

The amount of nuclear generation receiving ZECs is capped at 40% of all electricity distributed in New Jersey. However, as authorized by the state law, Senate Bill 2313, the BPU still needs to adjust ZEC payments to make sure they represent a plant owner's actual need to keep the reactors running. By November, the BPU is to create the ZEC program, including an application process for eligibility review and a mechanism for each of the state's electric companies to buy ZECs from selected nuclear facilities.

An S&P Global Market Intelligence analysis of the two plants in early 2017 found that their operation and maintenance expenses were generally less than wholesale market prices at the PJM Interconnection's Eastern Hub.

Also as part of the ZEC implementation and public input process, the BPU will conduct a second proceeding to certify which applicant nuclear units are eligible to receive credits and then rank those eligible plants in order of need. This eligibility process is required by law to be completed by April 2019.

"Implementation of the ZEC Law does not need to be daunting or overly complex," Accardo said in his testimony, adding that the BPU is now "focused on implementing the ZEC Law, rather than reconsidering it."

Accardo accused detractors speaking at the public hearing of making suggestions that would create implementation challenges and burden BPU resources. Instead, he urged the board to focus on the law's clear guidance on criteria and its evaluation.

Safeguarding New Jersey's climate goals is the main driving force behind the ZEC program. In an interview, Dean Murphy, an engineer and economist with the consulting firm The Brattle Group, relayed an analysis he gave to the BPU finding that Hope Creek and Salem avoid almost 14 million tons of carbon dioxide emissions and tens of thousands of tons of other pollutants each year. These avoided emissions prevent an estimated $733 million a year of damage in total environmental and human costs if they were replaced by pollution-emitting fossil fuel-fired generation, he said.

If Hope Creek and Salem were to close, Murphy said they would most certainly be replaced by existing natural gas-fired generation, and to a lesser extent by existing coal-fired generation, which would ramp up production to fill the vacuum left by the lost nuclear capacity.

At the same hearing, New Jersey's consumer advocate, Division of Rate Counsel Director Stefanie Brand, dismissed this analysis by the Brattle Group that fossil fuels would likely replace Hope Creek or Salem plants.

Citing data from the U.S. Energy Information Administration, Brand noted that renewables accounted for more than half of the roughly 21,000 MW of installed capacity additions in the U.S. in 2017.

"So an assumption cannot be made that if a nuclear plant shuts down it will be replaced by a natural gas or coal plant," Brand asserted. "It is just as likely that the lost capacity will be replaced by a renewable resource … [and thus] the loss of the nuclear plant may have no adverse impact on air quality or other environmental benefits."