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NEI warns DOE about dangers of nuclear shutdowns, growing natural gas dependency

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Essential Energy Insights - February 2021

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NEI warns DOE about dangers of nuclear shutdowns, growing natural gas dependency

TheNuclear Energy Institute has warned the U.S. Department of Energy about thedangers of America's growing dependence on natural gas for electric generationand the shortsightedness of prematurely shutting down nuclear power plants.

Incomments submitted to the DOE ahead of that agency's pending Quadrennial EnergyReview update, the NEI urged that electricity market reforms be implemented toprevent any further nuclear plant shutdowns. Filed in the wake of recent earlyretirement announcements for nine reactors, the comments stressed that existingnuclear plants are essential to securing stable electricity prices and cuttinggreenhouse gas emissions.

subsidiaryPacific Gas and Electric Co.'sDiablo Canyonfacility is the latest nuclear plant in the U.S. to announce that it will beshuttering as a result of market price signals set by cheap natural gas suppliesand subsidized renewable energy that the NEI described as "unsustainable"and "short-term." Despite a joint proposal by PG&E andenvironmental groups that seeks to replaceCalifornia's last nuclear plant with renewables, the NEI in its filingdismissed the notion that intermittent renewables will be large enough in scaleto replace the dispatchable baseload generation of nuclear power plants. Citingthe U.S. Energy Information Administration's forecasts for 2040 in its "AnnualEnergy Outlook," the NEI also noted that it would take 25 years for windand solar to generate the same amount of electricity now produced by nuclearplants. The NEI accordingly said retiring nuclear generation instead willcontinue to be replaced by carbon-emitting natural gas generation.

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Asconfirmed by increased emissions in California and New England following theretirements of the San Onofreand Vermont Yankeenuclear plants, NEI said it expects that the loss of another 14 reactors, whichhave been shuttered recently or are slated to be in coming years, will increaseannual emissions between 47 million tons and 64 million tons. Thus, thoseclosures could negate more than half of the 82 million tons of avoidedemissions expected by 2020 under the U.S. Environmental Protection Agency'sproposed Clean Power Plan for cutting emissions from existing power plants, theNEI said.

Replacingnuclear generation with natural gas will also be expensive for ratepayers andnegatively impact fuel diversity, the NEI said, noting that the reliability ofNew England's grid was threatened in January and February of 2013 when ablizzard constrained natural gas supplies to the region, which now depends onnatural gas to generate more than 50% of its electricity. New England customerspaid significantly more as a result, with wholesale energy markets from Jan. 1,2013, to Feb. 20, 2013, valued at an estimated $2 billion when the value ofthose markets totaled about $5 billion for all of 2012.

TheNEI said even closing a higher-cost single unit, such as Vermont Yankee orKewaunee, willeventually lead to consumers paying higher rates. For instance, the report saidCalifornia paid $350 million more for electricity the year after the of San Onofre. "Itmight be possible to find cheaper electricity off the grid for a short time —for as long as there's spare gas-fired combined cycle capacity, and spot gasavailable below $2 per million Btu, which is clearly not sustainable," theNEI said. "Sooner or later, that nuclear capacity must be replaced and,when it is replaced with new gas-fired combined cycle capacity, consumers willpay more on a levelized [lifecycle] cost basis."

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Accordingto the NEI, the average cost of electricity generated by multi-unit nuclear plantssuch as Quad Cities,which Exelon Corp. isscheduled to retire by June 1, 2018, is $32.90/MWh, while a single-unit plantgenerates electricity on average at $44.50/MWh. In comparison, the lower-endestimates of levelized costs of new combined-cycle natural gas plants rangefrom $52/MWh to $72.81/MWh, the NEI reported.

TheNEI recommended a number of initiatives that policymakers can adopt to preserveexisting nuclear generation. They include incentives for generating morereliable capacity, such as in the PJMInterconnection LLC's capacity performance program and 'spay-for-performance market reforms, tax credits for nuclear generation thatcreate a level playing field with subsidized renewables, long-term powerpurchase agreements at locked-in rates that value better the unique "attributes"of nuclear, zero-carbon clean energy standards or pro-nuclear "zero-emissionscredits" at the state level instead of renewable-only standards andmass-based state compliance plans for the Clean Power Plan.