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NY nuclear plants: On the brink of a subsidized future or more shutdowns

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NY nuclear plants: On the brink of a subsidized future or more shutdowns

NewYork's nuclear plants are in dire need of revenue and is warning that theNine Mile Pointand R.E. Ginna nuclearplants may be forced to close if state regulators fail to provide subsidies tocompensate upstate nuclear generation at above-market prices. Meanwhile,Entergy Corp. iscrying foul at the exclusion of Indian Point — the sole downstate nuclear plant — fromGov. Andrew Cuomo's subsidy plan.

TheNovember 2015 announcement by Entergy that it is retiring its uneconomicJames A.FitzPatrick plant by early 2017 has galvanized New York and Cuomo'sDemocratic administration into action to save the state's three upstate nuclearplants in an era of low electricity prices fueled by low natural gas prices.

Nucleargeneration makes up roughly a third of New York's electricity mix, and the lossof the 851-MW FitzPatrick plant alone would threaten the reliability of thestate's grid by leaving a statewide deficiency, warned a report. Cuomo hasstressed that the emissions-free power produced by nuclear power plants is alsoessential in meeting the state's goal of cutting carbon dioxide emissions 40%by 2030 from 1990 levels.

As aresult, the Cuomo administration is trying to provide "zero-emissionscredits" as part of the governor's clean energy standard, or CES,initiative to compensate the carbon-free baseload of upstate nuclear plants,which are located along the shore of Lake Ontario. The New York Public ServiceCommission is also seeking to develop interim payments to keep plantscommercially afloat until the credits kick in. State lawmakers have likewiseproposed $100 millionof funding for FitzPatrick but Entergy is adamant that the plant will stillclose.

"BothGinna and Nine Mile Point are facing significant, long-term financialchallenges due to historic low natural gas prices, record low capacity marketclearing prices, and the lack of federal and state policies that value nuclearpower's reliable, carbon-free baseload power," said David Tillman, aspokesman with Exelon.

WhileExelon Generation Co.LLC owns the 582-MW Ginna plant with subsidiary , the Exelon subsidiary ownsthe 1,937-MW Nine Mile Point plant with both EDF Inc. and the .

Sofar, New York has acted to compensate Ginna to keep the plant online aftercontinued loss of revenue threatened to shut it down. The recent approvals bystate and federal regulators of payments to Ginna under a reliability supportservices agreement have relieved the plant of its financial hardships. However,it is "only a temporary solution to a long-term problem" and thepayments run out in March 2017, Tillman said.

"Withouta long-term market based solution like the CES, we would be forced to considerclosing unprofitable upstate nuclear facilities," Tillman said. "Itis important that the NYPSC establish the CES quickly so that importantdecisions on the future of our plants can be made."

Price of carbon

Duringa Feb. 23 meetingand using Ginna as an example, Raj Addepalli, the NYPSC's managing director ofutility rates and services, said current wholesale power prices in New York areaveraging about $35/MWh to $36/MWh, or roughly $15/MWh lower than the nuclearplant needs to operate. Addepalli said PSC staff is looking to set prices forthe proposed zero-emissions credits at almost $15/MWh — "depending on thecost structure of the particular unit." Utility ratepayers could end upfooting the bill to make up the difference, but Addepalli insisted that doingso and keeping the plants running is still cheaper than letting them retire.

Accordingto an April 8 cost-benefitanalysis report by the NYPSC, subsidizing New York's three upstatenuclear plants could cost the state about $270 million by 2030 but produce $2.8billion in net benefits after factoring in the "social cost ofcarbon" — the amount of damage done by each ton of carbon dioxide ­— asdefined by the U.S. EPA. This estimated social cost includes lower agriculturalproduction, increased human health problems, property damages from increasedflooding and changes in energy costs, such as reduced costs for heating andincreased costs for air conditioning.

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Addepallialso said the commission needs to consider what it would take to replace anuclear plant to ensure the grid's reliability. "It's not just the price,but just the physical ability to get those resources in place in a hurry isalso a constraint," he said.

NewYork would need more than 2,500 MW of new renewable generation to make up forthe loss of the 851-MW FitzPatrick plant, "and if you're talking aboutsolar, it will be much, much higher," Addepalli added. "By necessity,you would be replacing some of them with fossil fuels in the near term if theywere to shut down."

Indian Point's exclusion

Theonly reactors that would be ineligible for Cuomo's proposed zero-emissionscredits are Entergy's 1,031-MW Indian Point 2 and 1,047-MW , which are about50 miles north of New York City along the Hudson River in Westchester County.

Thedual-unit plant is the target of several lawsuits and investigations followinga series of incidents at the plant, including a low-level radioactive leak inFebruary. The Cuomo administration has been adamant that Indian Point should benot be relicensed over concerns that it poses a risk to communities down river,including New York City.

Entergy,which is the operator of both Indian Point and FitzPatrick, asserts that theNYPSC's mission to stop the loss of upstate nuclear plants and to prevent theshutdown of FitzPatrick while excluding Indian Point from receiving the zeroemissions credits is disingenuous and unfair.

"Ifthe state is truly focused on reducing CO2 emissions, the clean energy standardshould apply to Indian Point, which is an essential generation resourcecritical to the state's goal of reducing CO2 emissions," said PatriciaKakridas, a spokeswoman with Entergy. New York should enact a clean energystandard that recognizes the "unique nonemitting, baseload"generation of all nuclear power plants, she said.

Accordingto Kakridas, the continued operation of Indian Point prevents the emissions ofmore than 8 million metric tons of CO2 each year. She also noted that the NewYork City Department of Environmental Protection had determined that replacingthe plant with fossil-fueled generation would lead to a 15% increase in CO2emissions and a 7% to 8% jump in nitrous oxide emissions in the state.

Nuclear's impact on upstateindustry

Amongthose who do support Cuomo's initiative to save New York's upstate nuclear plantsis Michael Treadwell, the CEO of the County of Oswego Industrial DevelopmentAgency and a member of the pro-nuclear Upstate Energy Jobs coalition. LikeAddepalli, Treadwell believes the benefits of keeping the nuclear plants onlinewill far outweigh the costs.

"Webelieve that the zero-emission credits certainly are an investment that will berepaid from the economic activity of these facilities," Treadwell said.Not only are the three upstate nuclear plants vital to Oswego County, which ishome to home to FitzPatrick and Nine Mile Point and neighbors Wayne Countywhere Ginna is located, but the plants are also important to the wider regionaleconomy.

Accordingto a 2015 report by the Brattle Group cited by both the NYPSC in itscost-benefit analysis report of the clean energy standard and the UpstateEnergy Jobs coalition's website, upstate nuclear plants contribute $3.16billion to New York's economy, 16 million tons of avoided CO2 emissionsannually and $144 million in annual and local taxes.

Theabsence of the significant amount of baseload of electricity generated bynuclear plants would also have a very "devastating effect" on thestate economy and, specifically, on manufacturing, which needs not just lowenergy costs but also reliable power, warned Treadwell.

"Inorder to attract business and industry, you have to be able to prove to themthat you have that heavy baseload and the reliability and dependability of agood energy source to run their facilities or they are going to goelsewhere," Treadwell said. As for FitzPatrick, he said the county ishoping for a miracle that another company will purchase the nuclear plant andcontinue its operations but thinks it is "very unlikely" without thezero-emissions credits.

"Pluswe all know that [the price of] natural gas isn't going to stay lowforever," Treadwell said. "There will be a time when fuel costs startinching up and the nuclear industry therefore would be more competitive."