Nuclear needs financial support to survive, and some states are already heeding the call
Energize Weekly, May 16, 2018
Nuclear power plants under pressure from market forces are facing closures, but states with high concentrations of nuclear power are stepping in to bolster these generators, and there may be additional policy initiatives that can be taken, according to new studies.
“Nuclear power is responsible for around 20 percent of U.S. electricity generation and more than 50 percent of its zero-emission generation,” according to a report by the non-profit, non-partisan Center for Climate and Energy Solutions (C2ES).
“These large sources of zero-emission power are being prematurely retired with respect to their operating licenses because of low wholesale electricity prices resulting from low natural gas prices, excess power generation capacity, declining renewable energy costs, and low growth in electricity demand,” the center’s Solution for Maintaining the Existing Nuclear Fleet said.
There are 60 nuclear plants in the U.S. Thirty-one of them generate and sell electricity into competitive wholesale energy markets where in some cases it has been difficult to compete with lower-cost natural gas and renewables, according to the federal Energy Information Administration’s (EIA) Nuclear Power Outlook.
In some electricity markets, wholesale prices have dropped by 40 percent since 2007, according to the EIA. The price decline, the growth of wind and solar generation and little growth in electricity demand are all pressuring nuclear plants, the EIA said.
“Nuclear power plants operating in merchant markets are experiencing lower electricity prices, which can if low enough, result in unprofitable conditions,” EIA said.
By some estimates, more than half the nation’s nuclear plants are running at a loss, the C2ES study said.
Smaller single-unit plants are most vulnerable in wholesale markets because their fixed-costs are spread over less generation, the EIA said. There are 25 single-unit plants, the smallest is 508 megawatts (MW). The average plant size of the U.S. nuclear fleet is 1,656 MW.
Five nuclear power plants have closed since 2013, and six more are scheduled to be shuttered by 2025 for economic reasons, the EIA said. Some of them are facing major capital improvements required by either state or federal regulators.
Closing decisions were reversed on four plants in 2017 after they received state price supports. Five additional plants are now seeking prices supports, the EIA said.
“Unfortunately, nuclear generation is largely being replaced by fossil fuel-fired electricity,” C2ES said. Natural gas-fired plants are slated in an EIA forecast to make up two-thirds of new generating capacity in 2018, about 21 gigawatts (GW).
The existing nuclear fleet helps to avoid the equivalent of 400 metric tons of carbon dioxide annually and C2ES said, “is a key component on the pathway to our nation’s low-carbon future.”
“Existing nuclear plant owners face challenges which must be addressed, including declining revenue from wholesale power markets … and an unresolved long-term waste storage issue, along with safety and proliferation concerns,” C2ES said.
An EIA modeling analysis looking at the impact of natural gas prices, operating costs and a carbon tax of either $15 a ton or $25 a ton could determine how much nuclear generation there is in the future.
If natural gas prices remain near 2017 levels, the EIA model shows 50 GW of retirements by 2050. If natural gas prices “rise faster and higher” than the base case scenario, there are only 22.3 GW of retirements.
A 20 percent increase or decrease in operating costs results in a swing of about 7 GW in plant retirements. “The U.S. nuclear industry is currently focused on reducing total plant operating costs by 30 percent by 2018 through program and process efficiency improvements,” the C2ES report said.
“Under the carbon fee scenarios, nuclear power plant retirements decline and new nuclear power capacity is added after 2037,” the EIA said.
Relief at the federal level could come in the form of a tax on carbon emission, a clean energy standard or federal tax credits. The C2ES report indicates that none of those initiatives are likely, “the best remaining near-term options are through the states’ targeted clean energy or zero-emission standards.”
“In the absence of significant federal policy support, states like New York, Illinois, Connecticut, New Jersey, Ohio, Pennsylvania and Arizona are exploring options to preserve their existing nuclear power stations,” the report said.
Tools that are or could be used at the state level include:
- Zero-emission credits (ZEC) that offer financial rewards for avoided carbon emissions. New York, New Jersey and Illinois are employing ZECs.
- Expanding state energy portfolios, which have been focused on adding renewable energy generation, to include existing non-carbon-polluting nuclear plants. Arizona is considering such a proposal.
- Increasing carbon prices at the state level. California and the Northeast put a price on carbon, but that has been undermined by low wholesale electricity prices and “did not prevent early nuclear retirements in those regions,” C2ES said.
- Having government agencies, cities and businesses sign long-term purchase power agreements with nuclear power plants.
The states that have been proactive on the nuclear issue are those that have the most exposure to nuclear power generation. New York, for example, gets nearly a third of its electricity from nuclear power. When it adopted a Clean Energy Standard (CES) in 2016, nuclear was included.
The CES calls for New York to get 50 percent of its electricity from renewable sources by 2050 and establishes a Renewable Energy Standard, with state financial backing for projects. It also established a ZEC for existing nuclear power plants.
Qualifying facilities receive ZEC payments from April 1, 2017, through March 31, 2029. The ZEC price for the first of six, two-year periods is set at $17.48 for each megawatt-hour (MWh) of electricity produced.
Illinois is home to 11 nuclear reactors—the largest concentration in the country—and about half of the state’s electricity comes from those plants. As part of the Future Energy Jobs Act passed in 2016, the state created a Zero Emissions Standard with ZEC.
The ZEC is equal to $16.50 a MWh in the first year, cost caps will limit the number of credits that will be paid out, with unpaid credits eligible for repayment in future years.
New Jersey, which gets 40 percent of its electricity from nuclear units, has also adopted a ZEC.
Connecticut has a single nuclear power plant, but it supplies 45 percent of the state’s electricity. In October 2017, a new law went into effect enabling the plant to compete with renewable energy generators on zero-emission solicitations for power.
The C2ES study said that nuclear plants will also have to find new revenue streams, such as providing process heat to be used in desalinization to create fresh drinking water, refining or industrial heat applications.
“Practically speaking, however, non-trivial investments would be necessary to realize these new revenue streams, which require financial decisions weighing the costs and overcoming certain regulatory barriers, particularly where the technology has not been previously employed,” the report said.