Many currently operating nuclear plants are in danger of being permanently shut down due to temporary conditions including low, but volatile natural gas prices, improperly designed markets that fail to recognize the value of reliable generating capacity, quotas and mandates that result in certain types of electrical generators receiving direct monetary payments in addition to wholesale market prices, and insufficient recognition of nuclear energy as a near zero emission power source.
The impulse of current nuclear plant owners to consider permanent closure as a response to current market conditions reminds me of a Jimmy Buffett song that is in frequent rotation on my iPod – Permanent Reminder of a Temporary Feeling.
The song is all about individual people making regrettable, life-altering decisions based on a fleeting feeling. Parents or other responsible people often take the risk of temporary ingratitude to warn their children or charges about the consequences of such actions.
Businesses and governments can be subject to the same kind of regrettable decision making; they need people who are willing to stand up and warn decision makers of the potential consequences of permanent actions — like shutting down well maintained nuclear plants — based on temporary market conditions.
Brief History Lesson
The US has been here once before; during the 1990s natural gas prices went through a lengthy period of sustained low prices and several nuclear plants were closed only part way through their useful life. During the period from 2004-2009 the remaining nuclear plants minted cash as natural gas prices inexorably rose from the 1990s price of $2 per MMBTU to remain above $5 per MMBTU for five straight years with a peak monthly price for electrical power generators in excess of $12 per MMBTU in June 2008.
Nuclear industry stalwarts are making an effort to build momentum to encourage actions that will preserve operating nuclear plants. For example, here is a quote from a May 7, 2014 interview of former Indiana Senator Evan Bayh by EETV’s Monica Trauzzi:
Monica Trauzzi: Senator, you have years of experience on a variety of energy issues. You were a member of the Senate Energy and Natural Resources Committee when you were in Congress. Why have you decided to put your efforts behind nuclear energy right now?
Evan Bayh: Because it’s going to be very important going forward, Monica, to some things I care deeply about, No. 1, the vitality of our economy, No. 2, how we’re going to deal with the issue of climate change and CO2 emissions and, No. 3, the reliability and stability of our energy supply for consumers across our country and across my state. It touches upon all of that.
I’ll just give you two data points. Nuclear constitutes 20 percent of the electricity we generate in the country, so one-fifth, very substantial. Many people aren’t aware of that. It’s also 62 percent of the carbon-free electricity that we generate. You have wind, solar, geothermal, that sort of thing. But nuclear is 62 percent. So if you’re going to be serious about our economy, you’re going to be serious about climate change and CO2, you’ve got to be focused on the vitality of the nuclear industry.
As Trauzzi introduced him, former Senator Bayh is a part of a public relations campaign called Nuclear Matters that is starting with an effort to spread information — like the data points he identified above — about the importance of nuclear energy in America. Later in the interview, Bayh explained a little more about the campaign.
Monica Trauzzi: I recently interviewed Exelon’s Bill Von Hoene, and Exelon is facing a particularly challenging environment right now with several reactors that are considered to be economically challenged. What is Exelon’s role in the Nuclear Matters campaign?
Evan Bayh: Exelon is funding the first year of the campaign. We’re hoping to broaden that to several other stakeholders going forward. So Exelon is paying for the first year, but beyond that we’re hoping to broaden to other people who care about this issue.
As the primary initial funder of the Nuclear Matters campaign, Exelon is supporting an experienced and well-connected group of communicators to carry a timely message. In addition to Bayh, the group includes former New Hampshire senator Judd Gregg, former EPA commissioner Carol Browner, former Secretary of Energy and Michigan senator Spencer Abraham, former Secretary of Commerce and White House Chief of Staff Bill Daley, and former Arkansas senator Blanche Lincoln.
Aside: Neither the About Us page on the Nuclear Matters web site nor the “About Nuclear Matters” section of the organization’s press releases clearly identify Exelon as the funding source. The above quote from Senator Bayh, the campaign’s co-chair, makes it clear that Nuclear Matters is not trying to keep its funding source a secret. The failure to mention Exelon in the press releases and on the web site unnecessarily handed a club to anti-nuclear groups like NIRS to use against the campaign. End Aside.
As reported by EnergyWire, on Tuesday, May 13, 2014, Chris Crane, Chairman and CEO of Exelon, called for a combined push by nuclear and renewable energy advocates to ask states to adopt “clean energy” standards as a replacement for their current renewable portfolio standards.
Exelon Corp. Chairman and CEO Christopher Crane said yesterday that states should implement U.S. EPA’s forthcoming regulations on carbon emissions by adopting new “clean energy” standards that would include nuclear power alongside renewable energy sources.
Speaking to an audience at Resources for the Future in Washington, D.C., Crane acknowledged that his company — the largest owner of U.S. nuclear power plants — would continue to lobby on behalf of its portfolio of generation assets, facing advocates for wind and solar power and other energy options.
But he said it would be better to negotiate comprehensive agreements among all energy providers to meet greenhouse gas reduction goals without undermining nuclear power, which he called a crucial resource for backing up renewable power when it is not available and providing grid stability.
On April 28, 2014, the Center for Climate and Energy Solutions (C2ES) hosted an event titled Climate Solutions, the Role for Nuclear Power at the National Press Club. Exelon and Entergy, another company with a substantial fleet of nuclear power plants, some regulated and some competing as merchant generators, were represented in the panel discussions; Bill Mohl, President of Entergy Wholesale Commodities participated in the first panel, and David Brown, Senior Vice President of Federal Government Affairs at Exelon Corporation, participated in the second one.
Eileen Claussen, a longtime clean air advocate and the President of C2ES, opened the meeting with some remarks about the challenges facing the existing fleet of nuclear power plants in the United States. Here is a sample:
Given nuclear’s current importance as a zero-carbon fuel, losing nuclear capacity will make it harder for the United States to meet its goal to reduce emissions 17 percent by 2020.
Unfortunately, that’s the direction we’re heading.
In the past year-and-a-half, power companies have announced the unexpected retirement of five reactors, representing 4 percent of the U.S. nuclear fleet. More may follow. Earlier this year, Exelon, the nation’s largest operator of nuclear power plants, announced that it, too, is considering early retirements for some of its Midwest reactors.
What’s it take to replace the nuclear power we’re losing? To replace the power from five nuclear plants, you’d need 16 natural gas combined cycle power plants, which would emit a total of 12 million metric tons of carbon dioxide per year. If you turned to renewables, you’d need a lot — roughly 7,600 wind turbines or 3.7 million solar PV rooftop panels — to generate the same amount of electricity as five nuclear reactors. And, as I pointed out, wind and solar can’t currently provide baseload power.
I call these nuclear retirements “unexpected” because some reactors are closing earlier than their useful lifetime. This is happening for a variety of reasons, including depressed power prices, higher operating costs, and power market design challenges. Those were among the reasons cited for the early retirement of Entergy’s Vermont Yankee nuclear power station. By the way, an official with New England’s grid operator recently said Vermont Yankee’s shutdown will mean burning more oil and natural gas next winter. Again: the wrong direction.
Not Too Late
Nuclear Matters is delivering an important message. Along with changes in the markets and some key government decisions, all currently operating nuclear plants, even the one whose owner has announced plans to close, can be protected from an ill-advised early retirement. We need all the clean energy we can get, especially in the form of plants that are just now reaching middle age and entering their most productive, lucrative earning years.
I am just slightly past middle age with a dozen working years remaining before I qualify for full social security retirement, yet every one of the nuclear plants operating in the US today was completed after my 10th birthday. The calls of some people to consider those plants old is ageism and contrary to sound environmental principles of reduce, reuse, repair, recycle.
The well-supported actions to spread the message of nuclear energy’s value in our power system is coming just in the nick of time.
I am pretty sure that the era of unsustainably cheap natural gas has ended and believe that the price increase shown during the past few months on the above Monthly Average Gas Prices for US Electric Generators graph from the Energy Information Agency is not a temporary blip. As was the case in the 1990s, a sustained period of low natural gas prices has discouraged drilling activity and will result in a sustained period of prices that are high enough to enable nuclear plants to operate profitably, especially in markets like the heavily populated Midwest and Northeast.
If more nuclear plants unexpectedly retire, gas prices and electricity prices in competitive markets are at risk of wild oscillations, perhaps even more intensive than those that occurred during the winter of 2013-2014. The below slide came from a sobering briefing titled Winter 2013-2014 Operations and Market Performance in RTOs [Regional Transmission Operators] and ISOs [Independent System Operators] provided from the staff of the Federal Energy Regulatory Commission (FERC) on April 1, 2014.
The fluctuations shown in the above graph are indicative of a system that is already operating very close to its maximum capacity. There is little room to allow for welcome economic growth and no room to allow for premature, permanent shutdowns of plants like Vermont Yankee. It is hard to imagine the effort and cost that would be involved in attempting to replace its output with anything remotely similar to the reliable, emission-free power it produced throughout the winter of 2013-2014 and during the past 42 years of operating excellence.
For people who live in New England, closing Vermont Yankee will not just contribute to wild fluctuations in electricity and natural gas prices during cold spells sometime in the distant future. The New England ISO holds an annual auction for capacity planning that is three years in advance of the actual need. In February of 2014, the auction for capacity during the period of 2017-2018 resulted in bids that soared from $1.06 billion in the previous auction to $3.05 billion this year.
The key events driving that price ratchet were the announced closure of just enough capacity to drive the market from slightly oversupplied to slightly undersupplied. Market players have reported that the prices might not have moved much at all if both Vermont Yankee and Brayton Point had remained in the auction.
Neither plant has actually closed, or taken any irreversible actions to close. Entergy has made some written commitments to the state of Vermont, but any contract can be renegotiated with the consent of all parties to the agreement.
Going back to my analogy of Jimmy Buffett’s song, even though the tattoo artist has been paid and is poised to begin inking a garish design, it is not too late to stop the madness and avoid the permanent reminder of a temporary feeling.
EIA Issues and Trends: Natural Gas (February 7, 2014) High prices show stresses in New England natural gas delivery system
Portland Press-Herald (March 19, 2014) Wholesale power in New England cost 55% more last year
New Hampshire Union Leader (March 22, 2014) Six New England senators call for investigation into natural gas prices
Mass Live (March 19, 2014) ISO New England: High natural gas prices push wholesale electric rates up 55 percent
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