New York — With a nuclear power plant prematurely retired in New York April 30 and the fate of two other plants in Illinois hanging in balance, the complexion of the US nuclear power fleet is in flux at a time when CO2 emissions reduction is high on the national agenda.
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Currently, just more than 8 GW of nuclear capacity is slated for retirement, with S&P Global Platts Analytics assessing roughly 5 GW of nuclear capacity at high risk of retirement before license expiration.
Assuming the high risk and announced retirements were to be replaced by natural gas-fired generation with an average heat rate of 7,000 Btu/kWh, an incremental 1.9 Bcf/d of power burn would result from replacing these retired generators, equivalent to about 39 million mt/year of CO2 emissions, or 2% of 2016 levels, according to Platts Analytics.
The analysts track nuclear plant retirement risk based on power market conditions, operating license status, policy changes and other factors. Specifically, plants are categorized from high to low risk, factoring in which units could potentially benefit from state-funded financial support or measures that price carbon emissions.
The 1,041-MW Indian Point Unit 3 in Buchanan, New York, about 20 miles north of New York City, shut down permanently on April 30 after succumbing to political and economic pressure. Governor Andrew Cuomo and environmental groups including Riverkeeper fought for years to shut the plant on safety grounds, arguing an accident so close to the global financial industry in the city would be catastrophic, among other concerns.
"Since my time as Attorney General, I have been deeply concerned with the safety of the Indian Point nuclear power facility," Cuomo said in an April 29 statement, adding the plant does not belong "in close proximity to the most densely populated area in the country."
The plant's owner, Entergy, said Indian Point was struggling financially amid lower wholesale power prices, largely due to abundant shale gas that has led natural gas prices to average around $2/MMBtu for an extended period.
Three additional nuclear power plants in northern New York have remained open because they receive subsidies through ratepayer bills.
The New York Public Service Commission in 2016 created a Clean Energy Standard stipulating that four nuclear units in the state -- Exelon Generation's 597-MW Ginna, the 640-MW Nine Mile Point-1, 1,362-MW Nine Mile Point-2, as well as Entergy's 849-MW FitzPatrick -- are eligible to receive the zero emissions credit payments. Entergy in 2017 sold FitzPatrick to Exelon.
Investor-owned utility Exelon has also complained about low wholesale power prices pressuring the financial stability of some of its other nuclear power plants. The company received subsidies for its Quad Cities and Clinton plants in Illinois in 2016, which reversed a decision to shut them before their licenses were to expire.
Exelon in 2020 said it would shut its 2,347-MW Byron and 1,845-MW Dresden power plants, also in Illinois, in September and November 2021 as they face revenue shortfalls in the hundreds of millions of dollars due to declining electricity prices and market rules that allow fossil fuel plants to underbid clean resources in the PJM Interconnection capacity auction, the utility has said.
However, the state has public policy goals aimed at reducing greenhouse gas emissions to mitigate climate change that would be much more challenging to meet without the carbon-free power provided by the nuclear plants.
The Clean Energy Jobs Act was introduced Feb. 10 and is broadly similar to legislation introduced in previous sessions. As in the earlier bill, it would require Illinois utilities to procure 45% of their electricity from renewable sources by 2030 and 100% by 2050.
The Illinois legislature is also debating whether to grant additional out-of-market payments to prevent Byron and Dresden from shutting, and an Illinois Environmental Protection Agency-commissioned report recommended that about $350 million in subsidies over five years could keep the units in service.
Valuing nuclear attributes
There is robust debate regarding the financial stability of nuclear power plants located in deregulated power markets that operate on a merchant basis, meaning their revenue comes solely from the sale of electricity, capacity and ancillary services at wholesale electricity prices that vary with market conditions.
Nuclear plants in regulated markets are less exposed to wholesale power prices because they can cover operating costs and earn a profit through customer bill increases approved by state utility commissions.
Nuclear industry trade group Nuclear Energy Institute, or NEI, recently released a study by a consultant that found the cost to operate nuclear power plants in PJM is greater than projected revenues in future years.
"The sharp reductions in energy prices in recent years have disproportionately reduced the revenues of nuclear units and attempts to replace these revenues through capacity payments are often falling short because of the current [PJM] capacity market design," NEI said.
The industry group said "insufficient revenues" at "most" of the PJM nuclear plants are leading to "heightened economic pressure to retire."
However, a separate analysis by PJM market watchdog Monitoring Analytics found "no nuclear plants are considered to be at risk of retirement."
This debate is likely to continue in the absence of policy support like state-level subsidies for nuclear plants or a price on CO2 emissions that would benefit emissions-free nuclear units.
Melissa Lott, director of research for Columbia University's Center for Global Energy Policy, said during a March event sponsored by NEI that the administration of President Joe Biden, with its pledge to decarbonize the electricity grid by 2035, could spur development of new technologies including advanced nuclear reactors, storage systems and transmission upgrades.
It is not clear which of those options will develop most, but the premise of decarbonization relies first on another idea: "we don't turn off zero-carbon stuff we already have."