Five states with open electricity retail markets now have financial aid programs for nuclear plants
Energize Weekly, October 16, 2019
Five states have now moved to provide financial aid to their economically challenged nuclear power plants, according to a federal Energy Information Administration (EIA) report.
In July, Ohio joined Connecticut, New York, New Jersey and Illinois in offering financial relief or other assistance to their nuclear units, which have seen a growing gap in the cost of their electricity compared to other forms of generation, such as natural gas and wind power.
While nuclear is a significant electricity source in the states, all five also have unbundled, retail-choice markets where generators do not receive cost recovery from state regulators, the EIA said.
“In states with more traditional state-regulated power markets, the cost of electricity generation is regulated by state commissions, which can offer power plants protection from rising costs,” the EIA said. “In states with retail choice, plant owners generally do not have that protection, and some owners have indicated that they are unable to recover all costs of operation in today’s relatively low-price wholesale market.”
While, 55 percent of the country’s nuclear fleet operates in regulated markets, the remainder face market pressures. In 2018, nuclear plants produced electricity at an average price of $31.88 a megawatt-hour (MWh), according to the Nuclear Energy Institute, a trade group.
Wind generation prices were in the $17 to $20 MWh range, according to EIA, and Idaho Power recently signed a solar power purchase agreement (PPA) at $21.18 a MWh.
Since 2013, eight nuclear power plants have closed, and five more are slated for retirement by the end of 2025.
The 14 reactors at 10 plants in the five subsidy states equal about 13 percent of the nation’s nuclear generating capacity, and they provide about 9 percent of the electricity generating capacity for those states.
Four of the state subsidy programs involve zero emission credits (ZECs), whose price is set based on social and environmental carbon costs.
Utilities on the grid are required to buy from ZECs, which in the Illinois, New York, New Jersey and Ohio program range from $10 a MWh to $17.50 a MWh. The length of the subsidy programs also varies from six years in Ohio to 12 years in New York.
The Connecticut program, set to begin this year, permits two generating units at the Millstone nuclear power plant to participate in an auction for carbon-free electricity. In 2018, about half the plant’s capacity cleared that auction, leading to a signed PPA with an in-state load-serving entity.
The Illinois and New York programs have been challenged in federal court by plaintiffs contending the subsidies interfere with Federal Energy Regulatory Commission (FERC) jurisdiction over wholesale power rates. So far, the courts have rejected the challenges, and the programs remain in place.