Kewaunee closure announcement reinforces sense of deja vu

It was a surprise to many of my pro nuclear friends, but Dominion’s recent announcement that it had decided to close its Kewaunee nuclear power plant was the almost inevitable result of current market and political conditions. The conditions bring back many memories of the mid 1990s, which were a rather dark time in my life. Way back then, I was failing to attract capital investors for my project to design and build Adams Engines.

Many of the factors that prevented investor interest in any nuclear projects in 1996 faded away for a while, but most of the financial disincentives have risen again – sort of like a phoenix. Back in the 1990s, there was active discouragement from the federal government, active discouragement from state agencies, low natural gas prices, ratcheting regulations, and plenty of more interesting places to invest risk capital.

Not only did the situation make it difficult for a tiny company like mine to attract any investors, but it made it extremely difficult for large companies to economically justify major capital investments to keep existing nuclear power plants running. If the plants were working well, they provided a reasonable return on investment, but if they needed new steam generators, required a major effort for refurbishment before an uncertain relicensing effort, or had any other significant challenge, it was better for the company to shut them down instead of to invest to keep the clean power coming.

A decision to “write off” a significant capital asset can be a money-maker, especially when the asset is a relatively small, isolated nuclear power plant that has a fully funded decommissioning escrow account. Dominion’s decision to close Kewaunee brings an immediate return in the form of a nice tax deduction. It also reduces annual expenditures by allowing the owner to reduce staff, stop fuel purchases, stop waste fund payments, reduce maintenance expenses, reduce property tax payments, and to eventually reduce the annual cost of federal licensing; an operating license costs about $4.7 million per year – for all operating plants no matter how large their output – while the fee for a permanently shut down reactor is just $210,000 per year.

Of course, the company will also have to forgo the revenue that it would have received by operating the plant, but at a time of low natural gas prices and in a service territory where occasional periods of wind turbine overproduction forces the market price of electricity to a level approaching zero, that revenue is too small and too uncertain to cover the predictable and unpredictable costs that seem to rise far more often than they fall. (In the nuclear world, there are people both inside and outside of the business that the fact that costs keep going up – one man’s cost is another man’s revenue.)

In the Dominion press release about their decision to shut Kewaunee, CEO Thomas Farrell provided a brief explanation that included a mention of a failure to achieve scale economies with its single Midwest unit.

“This was an extremely difficult decision,” Dominion CEO Thomas F. Farrell II said in a news release. “This decision was based purely on economics. Dominion was not able to move forward with our plan to grow our nuclear fleet in the Midwest to take advantage of economies of scale.”

Not only was Dominion unsuccessful in its planned acquisition of the nearby Point Beach nuclear station, which was purchased in 2006 by FPL Group (now known as NextEra Energy) for just a little under $1 billion, the company was also not able to help convince the state of Wisconsin to overturn its virtual moratorium on new nuclear plants.

That virtual moratorium, like the laws in about 20 states, does not put an outright ban on new nuclear plants; it just says that no new nuclear plants can be built until the federal government has a functional long term waste storage facility. Though there was a time in the early 2000s when it looked like the federal government was actually making progress on that front, the current “plan” is less advanced than it was way back in 1996.

If there was any hope of someday building a new nuclear power plant in Wisconsin, the potential value of having an existing operating plant site might have made a difference in Dominion’s economic calculation. Under current conditions there is no reason to assign any value to the site as a potential home for any new production facilities. (That fact might also have discouraged any potential purchasers from coming forward.)

I believe that Dominion is being completely honest about the fact that Kewaunee is worth more dead than alive right now. It will not have to commit to new power purchase agreements at a time of low natural gas prices, it will not have to spend money for whatever overreaction the NRC mandates with regarding the Fukushima Frenzy, it will not have to continue maintaining a largely separate nuclear fuel operation (courtesy of a Jon Wellinghoff-led FERC decision – docket #ER11-2774-000 – that substantially prevented the company from consolidating that facet of its operating program), and it will have immediate access to the decommissioning fund to pay for whatever stabilization it and the NRC decides needs to be done to the plant.

I’m saddened, but certainly not surprised. The forces of evil that are determined to make nuclear energy uneconomical are currently stronger than those of us who are determined to ensure that the world’s current and future population has a viable, clean, abundant and reliable alternative to burning the earth’s stored hydrocarbon wealth as quickly as possible.

About Rod Adams

28 Responses to “Kewaunee closure announcement reinforces sense of deja vu”

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  1. Bill Rodgers says:

    Rod,

    I wonder how much the Wellinghoff decision cost Dominion. I am no fan of his since his stated goal is to force “renewable’s” down our throats whether we need the power generation or not. That also makes him an advocate of natural gas. What really burns me is that he is able to champion himself as an advocate of the consumer even as power rates are increasing in certain areas due to the increase in un-reliable wind and solar capacity.

  2. Michael R. Himes says:

    Welll then, it would seem a new approach to nuclear is in order. Kinda like a stocking stuffer for Christmas type of nuclear that is called a battery vs reactor. Doing the same things and expecting a different positive result is …..nuts! Being a qualified “Nut” however has some advantages. All our gadgets are battery powered and what is one more battery or gadget for the market place. A Thorium Plasma “Battery” and an electric car in the stable might perk up the auto and nuclear energy market place. Even a “Battery” powered blimp with a red nose carrying tons of toys……and batteries to all those gadget junkies for Christmas would be a boost to nuclear energy. Wanna take a ride? ……Ho….Ho…Ho!

    • JimHopf says:

      Well, the first thing you’d have to do is get rid of that $4.7 million fee per reactor, regardless of size, that Rod quotes above, before anything in this area could ever move forward. That is something that the SMR industry is working on, with NRC. Is mPower making any progress on this front, Rod?

  3. Seth says:

    Here is the experts at Forbes calling Bull on the low natural gas price where cost of production is now almost 3 times the market price due to Big Oil dumping.

    Google “were-headed-to-8-00-natural-gas”

    I’d like to see more analysis

    1) What are the actual costs in running the plant
    2) What is the distribution of the sale prices of the power
    3)How much do they make from gas and wind sales Ie are there sweetheart deals for fixed price, cost plus and pride of place contracts not available to the nuke.

  4. JimHopf says:

    While it’s true that more coal capacity has been shut off than nuclear, many utility executives (e.g., Southern) have said that when natural gas prices go back up, they’ll be switching those coal plants right back on. It is true that some of the coal plant retirements referred to in the articles about Kewanee sound somewhat more permanent (since they are due in part to new pollution requirements, and many cases involve modifying the plants to burn gas). I wonder what fraction of the coal reduction is permanent.

    My main question is, why is it that nuclear plants are never mothballed (the only exception being Browns Ferry, I suppose). When they’re shut down, they’re shut down for good. With the coal plants on the other hand, they’ll be fired right back up if conditions change. Might Dominion consider mothballing the plant, maintaining the option of restarting it WHEN natural gas prices go back up? I’m guessing that NRC is somehow responsible, making it enormously difficult to reactivate a plant, in some way. Rod already mentioned the fact that is costs more to maintain a plant in “mothballs” (correct?).

    One final comment. I think the govt. should do what it can to prevent old, ultra-dirty coal plants from firing back up again. At a minimum, they should not be restarted just because using gas instead is slightly more expensive. At least some weight should be given to environmental impacts. It’s long overdue. EPA should be more like NRC, and somehow make it at least somewhat of a burden to restart old coal plants (esp. ones that are clearly not needed). This is one reason to favor Obama.

    One idea of mine is weighing environmental costs when deciding the order of plants in the dispatch queue (see link).

    http://ansnuclearcafe.org/2011/09/28/the-dispatch-queue-%e2%80%93-an-alternative-means-of-accounting-for-external-costs/

    • Daniel says:

      @ JimHopf

      Let’s look at what happened at Bruce Power in Ontario. 2 reactors from Bruce A were left idled for 17 years.

      They are now being brought back online with a December 2012 target date for full operation.

      I say we keep our options opened. The same goes for Gentilly II in Québec.

      Did I forget to mention that come Jan 01 2013, if all Bruce Power A and Bruce Power B reactors are online, this nuclear plant will be running at the highest capacity among all nuclear plants in the world? Way to go Ontario !!!!

    • Bill Rodgers says:

      @JimHopf,

      Your question is one I have been wondering as well.

      Why can’t the NRC and Dominion work out an arrangement for a mothballed nuke?

      Recovering from a long term cold shutdown is not impossible. The only issue I see is labor but since many plants are using rotating staffs and contract labor it would seem possible for Dominion to move a crew temporarily from North Anna or Surry to get things on the path to restart then build up the crew.

      The one major issue would be reactor operator requals but Navy Nuke ships have to requal everyone after a major overhaul as a requirement to restart. So it isn’t like the concept is untried. And the cost of having qaul’d reactor operators on staff versus having to rehire them would seem a productive cost analysis to perform.

      A quick read of the NRC’s decom policy is that Dominion has two years between filing the paperwork and full decommissioning take place. If I am reading those rules correctly, that two years could be spent productively setting up a policy for mothballing nukes for restart capability. By then natural gas will be above $5/MMBTu

      • Wayne SW says:

        I don’t know, but it sounds like they want to raid the decommissioning fund more than they want to allow for future recovery of installed capacity. IOW, it’s a short-term profit scheme.

  5. Engineer-Poet says:

    The greatest irony of this shutdown is that the gas market conditions are temporary (the result of something close to a Ponzi scheme in the shale-gas industry, now in the process of collapse), while the shutdown of Kewaunee would be permanent.

    The breakeven price of pure-play shale gas is close to $8/mmBTU, according to the analysis I see. At 60% thermal efficiency (LHV), that’s about 4.5 cents/kWh just for fuel. Based on the statement, Kewaunee would be economic at that price. The two other factors of LNG being substituted for diesel for heavy trucks and possible LNG exports would drive NG prices to $8/mmBTU or more. Shutting Kewaunee is a very short-sighted action.

  6. John Englert says:

    The people of Wisconsin will sleep better knowing that less million-year deadly waste will be created in their state. Cows milk will taste sweeter, Milwaukee’s best will win best American Beer, and the Packers will be Super Bowl Champions. All because more electricity will come from safe natural gas and clean coal.

    • Wayne SW says:

      There is no such thing as “clean coal”. Any kind of hydrocarbon combustion is going to produce nitrous oxides and polycyclic aromatic hydrocarbons. With coal you also produce tons of CO2 and SO2, as well as arsenic, mercury, and lead in the fly ash. You are no friend of the environment if you advocate the use of natural gas. Methane is a terrible greenhouse gas. One ton of methane released to the atmosphere results in the same degradation as 70 tons of CO2. Fugitive emissions of methane from the extraction step alone drawfs the carbon footprint of nuclear.

      • Engineer-Poet says:

        Wayne, you need a new sarcasm detector.

        • John Tucker says:

          We are too used to conversation with the anti nukes – if nothing else who prove Poe’s law with high and regular frequency:

          Poe’s law, named after its author Nathan Poe, is an Internet adage reflecting the fact that without a clear indication of the author’s intent, it is difficult or impossible to tell the difference between sincere extremism and an exaggerated parody of extremism.

          Poe’s law states:

          “Without a winking smiley or other blatant display of humor, it is impossible to create a parody of fundamentalism that someone won’t mistake for the real thing.” ( http://en.wikipedia.org/wiki/Poe%27s_law )

        • Wayne SW says:

          Sorry. Too many battles with the idiots. My apologies for taking a sacrastic post too serious.

          • John Tucker says:

            I thought he was serious for more than a few moments.

            Lol If I logged back in with a different moniker and started a rant about nuclear power killing millions of babies, low dose radiation poisoning the earth for millions of years and Japan and the northern hemisphere needing an evacuation would it be anything we haven’t heard in the last few months !!??

          • jmdesp says:

            @Tucker : Recently I found out that the proper helicopter-borne instrumentation can allow to draw a precise map of plutonium and uranium fallout, not just cesium.
            See this http://www-dase.cea.fr/public/dossiers_thematiques/cartographie_radiologique_heliportee_et_autoportee/description.html (sorry French only, but the sensibility array that show this will detect a level of 10 Bq/kg of U238 is not hard to understand). It’s been used around Chernobyl in the past. Probably the NNSA has the equivalent equipment but I only saw values that separate each isotopes coming from samples, and only gamma levels in the global maps ?

            I thought how the use of this around Fukushima could stop the rumors of massive hidden fallouts, and then I realized that no call for reason can do that, that the nuclear opponents will still claim that there exist hot particles that no detector can see.

            However still maybe more efforts on that kind of thing would be useful in order to convince the ignorant, but reasonable person that the nutcases spreading such rumors are indeed nutcases.

  7. Daniel says:

    Across the pond, France granted a while ago a permit to operate the Fessenheim 1plant until 2021.

    Now the French president Hollande wants to close it because it is the ‘oldest’ plant in France.

    Last week, nuclear union workers went on strike over this saying that there will always be an ‘oldest’ nuclear plant.

    Today, a major paper in France – ‘Le Figaro’ – had an article on the matter. You should see the comments. 100% pro nuclear and anti green.

    I reiterate that reversing the nuclear culture is not going to happen in France.

    • Daniel says:

      And some of the comments are just plain wicked like only the french can word them.

      Here is the link for those who can enjoy:

      http://www.lefigaro.fr/mon-figaro/2012/10/22/10001-20121022ARTFIG00694-lacoste-je-crois-qu-il-est-difficile-de-diriger-l-asn.php

    • jmdesp says:

      Well yes, but Le Figaro is the main right wing newspaper in France (reasonable, and senseful right wing, but still right wing), so what they print is unfortunately really not what will convince Hollande. Actually he could even make a point of doing what will enrage Le Figaro in order to win votes on the left.

      And the departure of Lacoste from the nuclear security agency is bad news. He had been there for 20 years (with several organizational and job title change, but during all this while, he was the top guy responsible for nuclear security), that longevity had given him the power to just ignore short lived blasts of wind from the government.
      Actually strategically the way he lashes out in this interview might not be a good thing. The ASN is supposed to be perfectly neutral politically, so the next president will more or less have to exaggerate his position in order to show he is.

      OTOH Holland will decide who the next president will be, and in this interview Lacoste makes sure everyone realizes how important that decision will be, and that Hollande can just not select anybody. But the next holder of the position will very certainly not, unlike Lacoste, be a graduate of the Mine school, that has the reputation of being the abusively influent top engineering school that force-feeded France with nuclear (X-Mine actually, but … the subtleties of this are just too complex to explain shortly).

  8. Daniel says:

    Fitch: Domino Effect Unlikely from US Nuclear Plant Closure at Kewaunee

    http://www.bloomberg.com/article/2012-10-22/aNgwl4b1tDFo.html

  9. Rich Lentz says:

    I can only surmise, but I would bet that they have been hit by the NRC to evaluate and protect for a seiche, or an earthquake related seiche on Lake Michigan $XXX Million (with the first digit larger than 5). Add that to the equation that includes cheap gas and “free” subsidized wind power that the green wingnuts would gladly pay for over NPP improvements and it is very easy to throw in the towel.

    One major reason for not bringing a NPP out of mothballs is that the clock is still running on the 20 (+ extension if any) license when shut down. The NRC has never given back this wasted time. Additionally ALL “improvements” the NRC issued while mothballed would need to be installed and tested and a fairly extensive re-start test (NRC approved) would need to be done. This would be a very big deal – ala – TMI-I restart, Davis Bessie restart, etc. – many millions of dollars.

  10. Jim says:

    I am wondering what effect if any can be attributable to the utilities being forced to buy renewable power at way above market rates.

    The renewables then need balanced by natural gas plants. So in effect you are buying gas fired generation along with your renewables.

  11. john lien says:

    As a Wisconsin resident I have witnessed a new power line in northern Wisconsin added to bring power down from Canada ( just completed a couple of years ago). I think that power is generated by hydro plants in Saskatchewan. Meanwhile subsidized wind plants are springing up with horribly bad economics (Its not all that windy in Wisconsin) I know I used to windsurf a lot and the only reliable winds are in the early spring and fall. And meanwhile the DNR makes it nearly impossible to run things like small scale hydro which we have an abundance of. Might impact fishing you know. And a nuclear ban while trainloads of coal still go each day to the giant coal fired plants such as Portage. I remember once in college I was riding past the Portage plant with some friends and they saw the giant stack at Portage spewing coal dust into the air and they said “Look at the Nuke plant over there” I had to explain that the nuclear plants don’t have smokestacks. Some of the best fishing I am told was near the water outlets into lake Michigan from Point Beach and Kewaunee.

  12. gr81 says:

    Still no total truth about the REAL costs of nuclear power, like what to do with the deadly but used fuel, or what to do when the corium leaves the containment.

    Nuke power has only been affordable to us users due to government subsidies which are due to the government/GE war machine demanding nuke weapons.

    Since “foolproof” design is impossible, nuke power is only an oops away from catastrophe at all times, not to mention the intentional destruction by subversives.

  13. Edward C. Childs says:

    … “Fukushima Frenzy” ??? … “overly subsidized wind power”???

    This article and majority of pro-nuke comments shows the U.S. Navy is peopled by pro-nuclear nit wits …

    Briefly: the subsidy to nuclear power from the anti-constitutional Price-Anderson Act is the single, largest and most outrageous subsidy ever offered to any business sector, even one that is responsible for contaminating the entire planet to detectable and dangerous levels; that was never ‘necessary’ (except to rapidly scale up our nuclear weapons stockpile) or (to recover sunk costs spent buying up uranium mines in the 1940′s) …

    Nuclear Power should never have been sanctioned outside of undersea strategic defense assets, space travel or medical research …

    Under several false premises (low radiation level exposures are harmless) (only alternative to carbon based power) etc. the evil nuclear genie has infested the American heartland and will kill its host …. and it was never anything but a gigantic capitalist hoax!!!

    Nuclear power plants have no smokestacks??? No they have giant stacks which emit invisible, ionizing radiation that can combine with water vapor and come back to earth spawning cancers and mutations in people, animals and food crops and which will be bio-concentrated ad infinitum …

    No mention of solar in this thread … which works in Germany, which lies to the north of Wisconsin …

    Sorry to blow the party but this sort of pro-nuclear nonsense is what will kill us, stupid nuclear navy shills!!!

    peace …

  14. bill zhangsun says:

    Well said Edward C. As of today the pro-nukes probably still tell u that the Fukushima damaged reactors r under control, TEPCO n the Japanese government r reporting the true condition of the situation to its people, n THEY KNOW HOW TO N CAN FIX THE PROBLEM!

  15. Bill Rodgers says:

    Someone needs to learn the difference between direct and indirect subsidies versus insurance premiums.

    Wind and solar receive two forms of direct subsidies and at least one form of indirect subsidy.

    So, yes it is correct that wind is overly subsidized compared to other generation sources.

    The first direct subsidy is the PTC that pays $22 per MWh of electricity generated. That money is paid directly to the wind developer/owner. So it is a direct subsidy from the US Treasury (i.e. taxpayer) to the wind developers. That money goes directly into the pockets of the wind farm owners not necessarily the land owners who are leasing their land to wind developers.

    PTC’s were enacted decades ago to help an “infant” industry and has provided billions (with a B) to the industry over its lifetime. AWEA has been campaigning to continue the PTC for their members for years with all sorts of horror stories but wind can no longer be considered an industry in its infancy. Even the DOE is finally agreeing to stop using that language. Thankfully Congress might finally have reached the end of the line in trying to justify a direct cash payout to an industry that has been in operation for over 20 years and now claims GW’s of capacity across the nation.

    The second direct subsidy is the Renewable Portfolio Standards that at least 29 states have enacted into law. These laws (using various names and acronyms) require utilities to purchase power from or own specific, legally defined, power generation sources. Those sources are required to be less then 30MW per individual generation point source but the laws exclude small hydro.

    There are only two sources that typically meet this legal requirement: wind and solar. Biomass can qualify but 30MW biomass plants are generally not cost effective considering the tax and cash subsidies received by wind and solar so do not receive the same level of attention. The RPS’s also requires utilities to increase the percentage of power delivered from those small point sources to be from these approved sources on a regular basis.

    California is looking to force their utilities to increase that percentage up to 33% sometime this decade which is already projected to cost the ratepayers billions unless hydro is allowed to be considered “renewable” under the law.

    Why are RPS’s a direct subsidy you are probably asking…..Because the rate payers in those 29 states are having to pay, or will pay in the near future, higher power bills to subsidize power generation sources that either are not needed or are being built when better power generation sources are available. Most states are seeing lower power demands but are still requiring utilities to build new generation sources to meet the RPS mandates.

    The fact that wind, solar and biomass are allowed under the RPS’s but large and small hydro are not is not only an example of favored technology (indirect subsidy) but also an example of the level of hypocrisy of the “green energy” movement. Every time the renewable energy figures are released by the EIA, the total amount, which includes hydro, is publicized but the specific amount of wind and solar generation are conveniently buried in the news reports. Why…. Because they are small compared to the amount of hydro. Yet the same groups will not allow the RPS’s to be redefined to include hydro since that would kill wind and solar industries as they would no longer be needed to meet state mandated RPS goals.

    The third and indirect subsidy wind and solar receive is from other generators themselves. The fact that neither source is able to produce high-quality, reliable electricity 24/7/365 must be dealt with by the grid operators. The grid operators must usually rely on the relatively inefficient natural gas peaking units to fill in for the 75% of the time when wind and solar are unavailable due to uncontrollable weather patterns. This lack of power production but reliance on others to maintain a stable grid is an indirect subsidy since the wind and solar generators do not pay for this service. Instead it is the ISO’s such as BPA, ERCOT or ISO-NE, that by their charter must maintain a reliable grid 24/7/365. Those operational costs of dealing with cyclic wind and solar are passed along ultimately to those who pay for the ISO which at the end of the food chain are the ratepayers.

    None of these direct and indirect subsidies are available to nuclear power. Price Anderson is an insurance policy that the utilities pay an annual premium for not unlike fire or car insurance. Not once during the history of the Price Anderson act including TMI has the caps even come close to requiring Congressional involvement

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