Low demand, depressed wholesale prices & low cost shale gas are to blame
In late December 2014, Entergy Corp. announced that Yankee nuclear power plant would cease operation after 42 years of service during which it generated 171 billion kWhrs of carbon-free electricity – more than 70% of Vermont’s electricity total demand since 1972. Bill Mohl, president of Entergy Wholesale Commodities, said, “Economic factors, especially related to the natural gas market in the Northeast, are the primary reason for the shutdown.”
ISO New England, the regional grid operator has determined that the grid can reliably operate without Vermont Yankee’s contribution. New England region, like other parts of the US, is flooded with ample supplies of natural gas at unprecedented low prices, courtesy of shale gas boom. And with lot of renewable generation coming on line in states with renewable portfolio standards (RPS), there is little need for old, inefficient and highly polluting coal-fired plants – or nuclear generation even though the latter is carbon-free and has relatively low fuel costs.
With electricity demand virtually flat in New England (graph on page 14) and prices depressed, old nuclear reactors have had trouble remaining viable. Add new safety requirements following the Fukushima accident, and many operators find it hard to justify the cost of the needed upgrades to keep old plants operating.
The same happened to Dominion Resources’ Kewaunee nuclear plant in Wisconsin, Duke Energy Corp.’s Crystal River plant in Florida and Southern California Edison Company’s 2-units at San Onofre Nuclear Generating Station – all shut down rather than going through required safety upgrades.
Nuclear’s future is brightest where there are no markets or private investors: Net capacity change in key regions, 2013-2040
Source: World Energy Outlook 2014, International Energy Agency, Nov 2014
The US nuclear fleet, once numbering 104 reactors generating roughly 20% of US demand, is gradually declining. Nuclear operators have managed to keep the overall nuclear output relatively constant by running the plants at full blast for extended periods of time while increasing the capacity of some existing units.
Only 4 new reactors are currently under construction, 2 in Georgia and 2 in South Carolina, all expected to be completed by the end of the decade. The former, Georgia Power Company’s Plant Vogtle, were originally expected to enter commercial operation in Dec 2017 and 2018, respectively, at a cost of $6.1 billion. The latest report by an independent monitor says, “It is impossible to determine a reasonable forecast range as to when the units could be commercially available.” The costs, in the meantime have escalated to $6.7 billion – so far so good as nuclear plant delays and cost overruns go.
Little nuclear coming on line
According to a public advocacy monitor, every day the project is delayed will cost an additional $2 million—and Georgia Power “will seek to recover the additional revenue requirements associated with these costs from ratepayers both during the construction period and over the operating lives of the units.”
Southern Co., the parent of Georgia Power, says it wants to diversify its generation fleet by having 18% of its generation from nuclear plants by 2020, regardless of whether natural gas prices rise or fall. That might have been a sensible idea when gas prices were high and rising, but not so great when they are low and possibly falling.
Published Originally in EEnergy Informer: The International Energy Newsletter February 2015 Issue.
