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Roughly 1.7 GW of US nuclear power capacity set to retire in 2020

New York — About 1.7 GW of US nuclear power generation capacity is set to retire in 2020 as plant owners continue to struggle with challenging conditions in deregulated markets, but decarbonization plans could give a boost to next-generation nuclear technology.

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Commodities 2020 | S&P Global Platts

Indian Point Unit 2, located in the New York Independent System Operator market, and Duane Arnold Unit 1, located in the Midcontinent Independent System Operator market, totaling around 1.7 GW of capacity are scheduled to retire in 2020, with little potential for postponement, according to S&P Global Platts Analytics.

The output from these nuclear units owned by Entergy (Indian Point) and NextEra Energy Resources (Duane Arnold) will largely be replaced with wind and gas-fired resources.

Power from the roughly 2,000 MW Indian Point nuclear plant in New York will mostly be replaced with output from the newly constructed 1,100-MW Cricket Valley gas-fired plant and the 680-MW CPV Valley gas-fired power plant, which is under construction.

Another 120 MW is slated to be delivered from the Bayonne Energy Center II Uprate project, a dual-fuel facility in New Jersey that can burn gas or fuel oil.

The 1,028-MW Indian Point Unit 2 is scheduled to close April 30, 2020, while the 1,041-MW Indian Point Unit 3 is scheduled to close April 30, 2021.

An Alliant Energy utility subsidiary will rely on repowered wind farms and build additional wind generation in Iowa to effectively replace power it will lose once the 615-MW Duane Arnold nuclear facility, located near Cedar Rapids, Iowa, is shut in late 2020.

A spokesman for the Iowa utility subsidiary said that Interstate Power and Light currently meets 25% of its customer demand in the state through an off-take agreement with NextEra Energy Resources, which owns the majority interest in the Duane Arnold facility and controls 430 net MW from the 44-year-old plant.

MARKET CONDITIONS

Weather-adjusted grid-level demand for electricity in 2020 will stay flat in most of the US and Canada, according to Platts Analytics, and depressed wholesale power prices, pulled down by cheap shale gas, have been challenging nuclear plant economics in some markets.

Additional nuclear power plant retirement announcements are possible, particularly in deregulated markets, where generators receive wholesale power prices for their output regardless of operating costs.

Nuclear plant owners in regulated markets have struggled less financially in recent years because they receive guaranteed rates of return on their power infrastructure investments after negotiation and approval from state utility regulators.

Merchant generators "get undercut by subsidized renewables" in energy-only markets and have to compete in three-year capacity markets in the Northeast, which "makes it difficult for an asset that you have to invest in for a 50-year period," Jeff Lyash, Tennessee Valley Authority president and CEO, said in a recent interview with S&P Global Platts.

"Nuclear plants are extremely competitive, just not by the rules we've defined in some of these markets," he said.

As a result, nuclear power plant owners in New York, Illinois, New Jersey, Connecticut and Ohio receive state subsidies called zero-emissions credits, or other support. Lawmakers in Pennsylvania may seek to pass ZEC legislation in 2020.

A bill passed in Ohio in 2019 provides financial support to FirstEnergy Solutions' 908-MW Davis-Besse nuclear unit as well as its 1,268-MW Perry nuclear plant. The company warned in 2018 it would close the plants in 2020 and 2021 unless they received financial support.

NEW, SMALLER REACTORS PROPOSED

Climate change concerns may be driving a second look for nuclear energy as an option for US utilities, said John Kotek, a former Department of Energy official and now vice president for policy development at the Nuclear Energy Institute, during a conference in Washington in November.

"I've heard more interest in potential deployment of new nuclear from utilities in the US in the last several months than I had in the previous five-plus years, in large part because you've got companies that are making commitments to decarbonize largely or completely by 2045 or 2050 and they're starting to look at how do you make that system work," he said.

A variety of new small modular reactors, with capacities well below 300 MW, are being proposed that designers say could complement renewable energy by providing baseload to support a grid loaded with intermittent resources.

While no such reactor has been built, multi-state power provider Utah Associated Municipal Power Systems is considering building the nation's first small modular nuclear plant at a site at the Idaho National Laboratory by 2027.

The Northwest alone will have to replace 6,000 MW of power by around 2030 due to retirements, Doug Hunter, CEO of UAMPS, said during the same November conference, sponsored by the American Nuclear Society.

The potential rapid installation of modular reactors, which are designed to be built in a factory setting and shipped to their ultimate site for installation, could help meet that demand, but only if nuclear technologies can be built on time and on budget, Hunter said.

Lengthy delays in existing large-reactor projects have increased the perceived risks of adding nuclear capacity, he said.

Georgia Power's Vogtle plant expansion, in which two 1,150-MW reactors are being added to an existing nuclear plant site, is running at least four years behind schedule and its cost has increased from $14 billion to more than $26 billion. The first new unit there is scheduled to enter commercial operation in November 2021.

Commodities 2020 | S&P Global Platts