Palisades Nuclear Plant Will Continue Operating Through 2022; Neighbors Ecstatic
Workers, school system administrators, neighbors, local businessmen and elected officials screamed and danced with excitement when Entergy announced that it would continue to operate the Palisades Nuclear Power Plant through 2022, when its current power purchase agreement expires. Entergy stated that it “will continue to make all necessary investments and maintain appropriate staffing, in accordance with strict licensing standards” but also reminded its employees and investors that “Entergy remains committed to its strategy of exiting the merchant nuclear power business.”
Kevin Kamps, a representative of Beyond Nuclear, a 15-year old antinuclear organization with 7 voting members and total contributions of $1.8 M from 2010-2015 (IRS form 990 2015), expressed his disappointment with the decision.
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Stressful Nine Months
In December 2016 during the season in which people with good, steady jobs living in pleasant, caring communities are normally happily attending holiday parties, Entergy made an announcement that put several thousand people on edge. Via a press release dated December 8, 2016, the company said that it had decided it was a prudent business decision to close the Palisades plant on October 1, 2018.
The news shocked the workers, the local community and the nuclear energy industry, especially since the plant was operating profitably and had a contract known as a power purchase agreement (PPA) with Consumers Energy. Instead of continuing with a comfortable upper Midwest Christmas season, thousands of affected people were forced to begin thinking about their futures without the plant that had been operating since 1971.
Judging from announcements of meetings and proposed response plans, many of those affected have spent a lot of time during the past nine months doing unfamiliar and previously unplanned activities.
Why Did Entergy And Consumers Energy Agree To Close Palisades Early?
The PPA guaranteed Entergy that Consumers Energy would buy virtually all of the power Palisades was capable of generating at a price that was almost guaranteed to remain profitable. As is always the case for suppliers who sign fixed price, long term contracts, there was a non-zero risk of losses caused by unforeseen changes in the operating, maintenance or capital investment budgets.
Closing the plant on Oct. 1, 2018 instead of in the spring of 2022 would have resulted in a reduction of $344 M in cash flow between the electricity supplier and the electricity purchaser. The analysts for both Entergy and Consumers Energy believed that electricity, which Consumers Energy is committed to supplying reliably to its commercial and retail customers, could be purchased more economically from other sources.
The two companies agreed to split the change in cash flow by having Consumers Energy pay Entergy $172 to buy out the contract. Consumers Energy would then seek recovery of that amount from its customers and would have $344 million available to purchase power.
Presumably, customers would benefit when Consumers Energy bought the replacement power at whatever price demanded by the competitive market at the time that the purchases would need to be made.
Reason For Entergy’s Revised Decision
Last week, the Michigan Public Service Commission determined that Consumers Energy would be allowed to recover $136.6 million instead of the requested $172 million.
After a week’s worth of analysis, Entergy and Consumers Energy agreed to cancel their deal for an early termination of the PPA. Instead of stopping production of 811 MWe of virtually emission free electricity, firing 600 direct employees, and cancelling two refueling outages, Entergy would continue running Palisades in a responsible manner under the continued oversight of the Nuclear Regulatory Commission.
Though Entergy stated that it remains committed to its decision to exit the merchant nuclear power plant operating business, the decision to continue operating Palisades provides numerous benefits to a large number of stakeholders.
Beneficiaries
Entergy’s stated that its free cash flow will be $100 to $150 million higher than it would have been if the plant had been closed in 2018. If the recently proposed resiliency pricing rule proposed by DOE is adopted, Entergy might have to fight off potential plant purchasers.
Aside: The FERC issued a request for comments on the proposed rule (NOPR) and established a comment due date of October 23. The short turnaround demonstrates the proper sense of urgency. It’s plenty of time for informed organizations and individuals to compose useful responses. Please take the time to respond. End Aside.
Rep. Fred Upton, the Congressman that represents the district that hosts Palisades, welcomed the announcement as beneficial to the workers and the community. He also reiterated his position as a nuclear energy supporter.
“As a long-time supporter of safe, reliable, and secure nuclear energy, my goal all along was to make certain there was never any political interference with the operations of our nuclear facilities. I will continue to support an ‘all-of-the-above’ energy strategy that includes the safe operation of our nuclear facilities.”
South Haven City Manager Brian Dissette expressed relief that his community would not be losing the residents who had jobs at the plant. “They’re important members of the community.”
Bobbi Moorehead, the Covert Schools Superintendent said that her team was thankful and “over-the-top excited.” Entergy’s annual tax payments to her school system represent half of the $7 M budget.
Dennis Palgen, the supervisor of Covert Township, said he could not think of any negatives from the decision.
Even Kevin Kamps and his Beyond Nuclear organization will benefit, though they might be grouchy about it. The continued operation of nuclear power plants gives his organization a basis to remain in business and to continue to seek sustaining contributions. Its members can continue gathering, strategizing, protesting and occasionally eating brownies together.
Note: A version of the above was first published on Forbes.com. It has been revised and republished here with permission.
I wonder if they will cook the brownies in an electric oven powered by the Palisades facility?
I suppose they will turn on the lights rather than use a kerosene lantern…
Kerosene? Puh-LEEESE! True renewablistas will not STAND for fossil fueled light. It’s beeswax candles or nothing.
Can’t they just turn a crank and run a light bulb in an easy bake oven?
Can’t help but wonder if Meredith’s book gave Rod the idea for the brownies reference.
@JamesEHopf
Good guess. I owe credit to Meredith, but she explained the importance of brownies to activists to me long before she began writing her book, Campaigning for Clean Air. One of many reasons to buy her book is that she wrote it after years worth of deep personal experience.
Thanks for the good story and the good news. The first thought that entered my head when I saw your story was “why?”. Then you gave the obvious reason, “money.” Economic situations are continually volatile. Just a few years ago, merchant plants appeared to be a way to print money. By the year 2022, conditions may change where there will be demands for that plant to remain open.
As for the brownies, I would guess these folks are the type that will be eating vegan gluten free brownies made from purely natural organic preservative free ingredients harvested by indigenous natives of the rain forest.
Chuckling again. Wonder how many of the commentors, above, are overwieght, with unhealthy eating habits. They might not want brownies cooked with healthy ingredients, but you can bet some of them won’t pass on chicken fried steak, hash browns, and sausage gravy.
Michelle Obama tried her hand at being the Food Police and School Lunch Scold. Are you sure you want to follow her lead?
Palisades has been in the news for technical troubles for years. I read something about the control-rod drives a while back, and a persistent issue with some kind of water tank that leaks. Presumably that’s primary coolant, because I can’t think of anything else that would have a significant burden of radioisotopes.
The NRC has to take the blame for that latter issue. If it was any other industry, a troublesome tank would probably just be replaced and that would be the end of it. But because of NQA driving the cost so high, Palisades can’t afford to do that. The bottom line is that NQA has to go. I’ve seen nobody claiming that it actually improves quality over regular commercial QA and its multiplier effect on cost is a deadweight loss on the industry which has devastating environmental effects downstream.
Amen, brother.
If it were up to me, I would fund (out of the nuclear R&D budget) a detailed study on both the frequency and nature of failure for various non-nuclear-grade components. Should be a huge amount of available data, with many decades of use in numerous heavy industries. Then I would plug that failure data into a huge PRA analysis to try and determine would the safety impact would be of getting rid of NQA-1 and replacing it with standard industrial requirements. Then follow up with a cost/benefit analysis. Would probably help nuclear more than anything else ever done with that R&D budget.
The case for eliminating NQA-1 is even stronger for SMRs, given their inherent safety, much lower potential source term, and how many SMR developers are saying that all components could fail w/o significant consequence. As we are giving up economy of scale for vastly increased, inherent safety, we need to “take credit” for that inherent safety and insist on an appropriate level of regulation.
Great news! Now we have 4-5 more years to either have natural gas prices go up or to get some needed policy changes. The Trump grid reliability policy being considered wouldn’t be my first choice, but it would do the trick.
Some comments on Rod’s most recent post (on the Trump/Perry) policy suggest that we may indeed see a significant gas price increase by then. I hope that’s the case, but I’ve been told that gas costs would go up for many years now, and it hasn’t happened yet.