An analysis using S&P Global Market Intelligence's unit level production cost model, the Generation Supply Curve, shows two large nuclear plants in the Electric Reliability Council of Texas region — the 2,460-MW Comanche Peak plant in Somervell County, Texas, and the 2,560-MW South Texas Project in Matagorda County, Texas — operating within tight financial margins.
Operation and maintenance costs are within a $2 range of relevant ISO day-ahead market prices or forward around-the-clock power prices for 13 out of the 24 months from 2018 through 2019. Power prices fell below modeled O&M expenses in four of those months.
Those prices are having consequences for power plant operators. NRG Energy Inc., which operates the South Texas Project, posted a fourth-quarter 2017 loss from continuing operations of $1.67 billion; $1.2 billion of which was related to the nuclear plant.
"Our regular fourth-quarter process of revising our forecast of power and fuel prices and the impact on plant cash flows resulted in the need to write down certain fixed assets, including STP," NRG CFO Kirkland Andrews said March 1.

NRG owns 44% of the South Texas Project's two units, with city of San Antonio-owned utility CPS Energy owning 40%, and Austin Energy, owned by the city of Austin, Texas, with 16%. The plant produced 21.6 million MWh in 2017, slightly less than the 21.7 million MWh in 2016. This resulted in a minor decrease in capacity factor from 96.47% in 2016 to 96.24% in 2017. The U.S. Nuclear Regulatory Commission in 2016 approved a request, first made in 2007, for operating licenses for two additional 1,300-MW units at the South Texas site, but CPS Energy, which had a small ownership stake in the additional units, has written off its investment. Austin Energy did not participate in the nuclear plant expansion and has instead contracted as far out as 2049 for electricity from renewables. In 2017 the NRC renewed the current operating licenses for the two South Texas units for an additional 20 years, to 2047 and 2048.
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Comanche Peak is owned by Vistra Energy Corp. and operated through its competitive power generation business Luminant Generation Co. LLC. The plant produced almost 17 million MWh in 2017, which was 3.4 million MWh less than the 20.4 million MWh produced in 2016. This was largely due to a forced shutdown to repair a main generator at unit 2 which lasted from June 6, 2017, through Aug. 10, 2017, and a refueling outage at unit 1 in the fall. These outages led to the large decrease in capacity factor for the plant, which fell from 94.34% in 2016 to 78.89% in 2017.
The future availability of nuclear capacity in the ERCOT market could be put in jeopardy as operating costs and congestion for most of the year keep the plants' operating costs close to wholesale power prices. According to S&P Global Market Intelligence data, forward prices at ERCOT's South Zone hub are running below $40/MWh except for the high-demand months of July and August in both 2018 and 2019.
The situation facing the Texas nukes is the same as in other states with competitive wholesale power markets. States such as Connecticut, Illinois, New Jersey, New York, Ohio and Pennsylvania have considered or already enacted legislative fixes that give nuclear plants financial support for their reliability attributes. In ERCOT as elsewhere as well, traditional baseload coal capacity is giving way to more intermittent wind resources across Texas, leading to fossil-fueled plants being retired.
Meanwhile, ERCOT — the entity tasked with maintaining adequate resources to ensure the electric grid's reliability — is barreling headfirst into a tightrope summer, with potential brownouts and high power prices on the horizon as available resources appear squeezed.
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