Once again, a full fledged member of “the nuclear industry” has determined that it will shut down an operating nuclear electricity generating station in a market where the available capacity is already tightening.
Today, Entergy “regretfully” announced that it would stop operating the Pilgrim Nuclear Plant in Plymouth, MA.
According to A Message from Bill — Bill Mohl is the President of Entergy Wholesale Commodities — made available to all Entergy employees, the decision was “difficult, but necessary.” Depending on a number of factors, the shutdown will occur sometime between now and June 2019. The plant may or may not be refueled one more time.
Mohl listed the following contributing factors that makes the plant worth more dead than alive to Entergy.
- Lower forecast prices for natural gas. Financial models show low gas prices have already reduced plant revenue by about $40 million per year and will continue to limit revenues in the future.
- Lack of progress in efforts to improve the market structure. Though capacity prices have tripled in recent years, Pilgrim makes most of its revenue by operating at full power most of the time and selling electricity. Cheap gas fired turbines can afford to sit idle and depend on capacity payments with occasional operating periods supplying electricity at peak prices. In contrast, nuclear plants aren’t very good at pretending to be rabbits; they are more like a very large, steady turtle.
- Limited value assigned by regulators and markets to the key attributes of nuclear generation. Massachusetts, for example, excludes nuclear from its clean energy standard and FERC rejected a proposal to compensate nuclear plants for their on-site fuel storage capability, even though ISO-New England has a winter reliability program that provides about $75 million per year to dual fuel facilities to purchase and store diesel fuel on site.
- Proposed Massachusetts energy policies. Bills under consideration in MA could potentially provide financial support for both Canadian hydroelectricity and natural gas pipeline construction to provide more reliable and price predictable fuel to gas fired generators that compete with Pilgrim for electricity sales. The effect would be to lower wholesale market prices and subsequently lower Pilgrim’s revenue while passing the costs to commercial and retail consumers.
- Note: Referring to both of the regulatory bullets, Mohl said:
These types of energy policies, while perhaps attractive at first glance, simply undermine the very foundation of a “competitive market” for existing generators by picking “winners and losers.” In both of these cases, Pilgrim ends up on the losing end.
- Rising costs of a single unit site. For Pilgrim, a few small operating issues have moved the plant into a category that entails increased NRC oversight which adds both NRC fees and the costs of additional effort to respond to the increased oversight. Mohl said it wasn’t the driver behind the decision, but it is the factor on his list that is most closely related to the timing of the rather surprising announcement.
Though not mentioned in A Message from Bill, Entergy has been required to invest tens of millions of dollars in additional equipment for Pilgrim as a result of NRC reactions to the Fukushima accident, even though the coast of Massachusetts is not known for its earthquake and tsunami vulnerabilities.
Unless Entergy took out ads in the same uncirculated media outlets used to let potential customers know that Kewaunee and Vermont Yankee were on the market, there was no effort at all to attempt to sell the plant to another entity that might see the potential for a different kind of return on investment under a revised business paradigm. Even if they did take out ads in the mystery publication, there was no visible effort at finding a buyer.
Entergy has several other facilities that participate in the ISO-NE capacity and energy sales markets. Those facilities will benefit if Entergy’s decision to shutdown a large electricity generating station tightens the markets and raises prices.
Section 105 of the Atomic Energy Act of 1954 includes numerous provisions related to the antitrust responsibilities of the Department of Justice with regard to nuclear power plant licensing.
One of the common ways that cartels and monopolies keep prices elevated is to restrain trade and keep supply capacity under control to the detriment of consumers.
Perhaps it is time to test the system to see if the DOJ has any appetite for applying Section 105 to a decision by one of the big five to shut down a licensed plant instead of offering to sell it to an entity that would keep it running and providing valuable products to the market.
As Atomic Insights has pointed out numerous times, a decision to shut down an operating nuclear plant is virtually irreversible once the operating license has been modified to possession only. Entergy has proven that it knows how to achieve that status within weeks of the final day of critical operations.
This is not “just business.” It has many more layers and implications than that.
Yes Vermont Yankee October 13, 2015 – Pilgrim will close by 2019
Atomic Power Review October 13, 2015 – Entergy: Pilgrim will close by 2019