Why can’t existing nuclear plants make money in today’s electricity markets?
What does it mean when nuclear plant owners tell people that their plants are struggling to make money in competitive markets as currently structured?
They are attempting to more precisely state what is often misleadingly dismissed by journalists as “nuclear plants cannot compete.” The more commonly used statement gives the impression that nuclear plants produce more expensive electricity than other sources. That is factually untrue. On a cost per kilowatt-hour delivered to the grid, nuclear plants are consistently one of the lowest cost sources available, just above power from paid off hydroelectric dams.
According to a paper titled Nuclear costs in context issued by the Nuclear Energy Institute in August 2017, the average total generating cost for a US nuclear plant in 2016 was less than $34 per megawatt-hour. That number was 15% lower than 2012’s peak average cost, which happened when Fukushima Frenzy-related costs were being imposed on the industry.
If nuclear plants are still producing electricity for such a low average cost, why can’t they compete?
Existing nuclear plants were designed and built during a period when electric utility companies were legal monopolies with both an obligation to serve and prices established with a government-approved cost plus rate of return. When today’s nuclear plants were built, no one considered the idea that competitors might appear that would decide to occasionally give electricity away for free in hopes of capturing additional market share.
Though reactors were designed to be able to vary their output at the modest rate that loads changed, they operate most reliably and at the lowest cost per unit of electricity generated if they are run steadily at their fully rated, optimized power. If they reduce power too quickly and remain at low power too long, a short-lived neutron absorbing isotope called xenon-135 builds up inside fuel rods. Xenon is such a strong neutron absorber than it can make a reactor sub-critical, even with all control rods fully withdrawn from the core.
Xenon accumulation after a shutdown from full power can prevent a restart until it decays away. Since xenon-135 has a 9.2 hour half life, the xenon precluded start-up period can last from a few hours to several days, depending on factors relating to the reactor’s fuel cycle.
Being shutdown and unable to generate power during a xenon transient can be substantially more detrimental to revenue generation than simply accepting low or negative pricing for a brief period. Though it’s technically straightforward to design and build reactors that can avoid xenon precluded start-ups throughout most of their core lives, it would take a lengthy, expensive, and financially risky redesign and licensing effort to backfit that capability into already operating power plants.
As a result, reactors still operate at full power as much as possible and generate 20% of the electricity sold in the U.S. That is pretty impressive considering that there are less than 100 operating units with total rated capacity that is well under 10% of the total generating capacity of the US electrical grid. In 2017, the average capacity factor of US plants exceeded 92% and the total electric energy generated and sold was close to 800 billion kilowatt-hours.
The economic struggle for nuclear plants is caused by too often having to sell their steady output at prices near or even below zero dollars.
Pricing that is below the true cost for all generators is caused by temporary oversupply situations. These arise as a result of a combination of favorable weather, seasonal excesses of natural gas, and weather/time-of-day driven variations in customer demand. Some of the generators bidding during these periods are eligible for production tax credits that are not tied to demand.
If the generator produces power, even if no one wants it, the generator earns a payment of $23 per MWhr from the federal government. Unlike similar subsidy programs for certain farm products, the government doesn’t actually take delivery and store the product it has subsidized, it leaves that job to the market and shares the low price pain with all suppliers. Because the people who receive these production tax credits have political pull, there is a great hue and cry if anyone tries to curtail their unwanted output.
Permanent nuclear plant shutdowns help alleviate temporary periods of excess supply, but they also narrow – or eliminate – the margin between supply and demand during periods when the weather is contrary, gas demand rises for heating & industry, and the time of day is when nearly everyone wants to use power.
If keeping nuclear plants in the mix reduces risk, why is there so much opposition to all proposed plans?
Discussions about the grid, the electricity market, and pricing mechanisms are fascinating and attract intense interest for a very limited number of people. For most people, the issues are too complicated to delve into with much enthusiasm. If they take any interest at all, it is a result of active efforts to brand and politic with sound or text bites in order to obtain a favorable decision.
For competitors in the market, the nuclear plant shutdowns represent substantial revenue opportunities. For people who have been campaigning against nuclear energy for years or even decades, there are no tears and no sympathy for struggling nuclear plants or for the people who are employed to operate and maintain them.
Despite high level attention and announced intentions to address the problem, the US government is still paying large subsidies to companies that install and operate weather-dependent power sources even in areas that are already subjected to increasingly frequent periods of oversupply during some parts of the day when the weather is favorable. Though the subsidies are currently scheduled to expire, there have been close to a half a dozen last minute extensions in the past.
Without close attention and ready political actions, it seems likely that there will be another successful, last minute effort to save the subsidies.
As an retired Manager with fourty years experience in commercial nuclear power I don’t I have every seen a better explanation of this problem. Your writing and engineering experience has helped make this problem much clearer than the engineers I have worked with. About only thing I think you may have missed is that in the 70’s a plant could immediately restart the plant, if they know the reason of the shutdown. Now, the NRC regulations make that impossible. That adds several more days to an unanticipated shutdown.
Rich what you just described is a severe vulnerability to market manipulation way worse than what Enron did.
Let’s say I am a consolidated competitor to a nuke plant. All I have to do is spike the electricity supply for a brief moment enough to force the nuke plant to shut down from curtailment and now I’ve just bought at least two days of monopoly pricing power.
Reccomend that if a nuke plant gets shut down from the grid operator that a market manipulation complaint gets lodged with FERC.
This act would be legit predatory pricing.
We have SCRAMMED twice in the last couple years from grid disturbances….
Both times we were down for over a week due to the investigations alone. Both had nothing to do with the operation of the plant. Both decrease our INPO rating anyway.
Also, both included articles in the local newspaper that made the situation seem much…..MUCH worse than it was.
Bonds 25, I suggest someone press for an investigation regarding who’s putting in those oversupply orders. Those grid disturbances could very well be intentional to put your plant out of the competition.
Assume a dirty fighter. If all it takes is a brief grid disturbance then the cost of briefly moving the market is a drop in the bucket compared to the profit I could rake in from knocking out a major generator. Then a dirty fighter is going to create a grid disturbance because he will profit from it,
I highly doubt BPA (Bonneville Power Administration) would take us down on purpose…..especially the SCRAM during the winter when record lows (below zero degrees) were happening and our power being vital at the time. In hindsight, should they have been working on the substation at the time of record lows (which ended up being the cause), limited hydro and absolutely no wind power…..probably not.
Thanks Rod for the explanation. I think the public utility model for electricity is much better than something that’s called ‘free market’ but is really distorted by ideologically set rules that have little to do with the engneering reality off keeping power available reliably.
A minor typo:
I think you mean ‘backfit’.
In my state the last-minute rescue of the unreliables subsidies is exactly what happened. And it happened because the unreliable energy interests absolutely inundated and bombarded the state legislators with lobbyists, activists, money, promises of jobs, threats, dire tales of woe to any who would oppose them, basically everything including the kitchen sink was thrown at the legislators. So they caved. Who wouldn’t, if your career is seeking elective office?
Now there are two nuclear plants at risk for premature closure. While people like me have been active in trying to educate the legislators about those issues, the efforts are a pittance compared to the forces mobilized by the unreliables. So there is a slow but sure drift towards a hands-off approach, which means those plants are goners. Nobody seems to care, other than professionals who understand the problem.
Ratepayers will care when they see their electric bills and vote the pro-renewable, anti-nuclear politicians out of office, as has already happened in Vermont and Ontario, Unfortunately, by then the damage has already been done.
One of the massive subsidies available to gas producers in “merchant” markets are capacity payments made necessary by wind/solar variability and lack of baseload plant. 85% of payments to gas producers in some markets come from that subsidy.
That’s one reason why they can bid zero or negative power prices into the power auctions. They don’t need to produce a single microwatt-second of energy. They still get the capacity payments. The whole situation is bordering on absurd. These subsidies for unreliables have really turned what many, perhaps most, would consider traditional economics upside down. Time was you had to produce something or provide a “useful and used” service to be paid. Now, neither is necessary. You simply have to say you are available if and when needed. Sure, you are legally obliged to produce energy if asked, but could you do it? Maybe, maybe not. Its almost like a retainer for a lawyer (as loathe as I am to bring that up). And the gas merchants aren’t stupid. They know that GT plants are really the only ones with the required quick-start capability. That leaves coal and nuclear out in the cold.
Seth, you are right, and the scandalous California electric power crisis in the years 2000, 2001 was caused chiefly by a lack of sufficient snowfall in the previous winters, to provide adequate hydro capacity. So “spinning reserve”, the providing of unused power capacity ready to employ at a moment’s notice, was worth ransom prices.
Hydro turbines can take up loads very rapidly. Pumped storage is I believe even faster, if a turbine is spinning in air. I have seen that one of Dinorwig’s 600 MW capacity generators requiring a mere 2 MW to do this. A 600 MW gas turbine costs a lot more power than that to spin idle and in synch.
@Albert Rogers
An often overlooked contributor to the California power crisis of 2000-2001 was the El Paso system gas pipeline explosion near Carlsbad, NM in August 2000. That single event reduced natural gas supply capacity to California by about 30% and the restriction lasted for about 6 months before it was fully restored.
The rebuttal from anti-nukes and greenies to the subsidy argument is usually that it’s low gas prices, not green subsidies, that make nuclear power non-competitive. With yesterday’s announcement of increasing US exports of LNG to Europe, we can expect reduced supply (or lack of surplus) in the US to result in increasing gas prices so we’ll see if that rebuttal stands up. Hope it’s not too late.
@TakeMe2TheRiver
According to the Energy Information Agency, wind generation grew from 50 to 250 billion kilowatt-hours per year between 2008-2017.
That’s a large enough amount of electricity production to make a big contribution to keeping gas in oversupply and thus “cheap.” Most of the time, the power displaced when the wind happens to be available would have been produced by burning gas.
Simple. No subsidies for renewables unless unless the ‘free’ power can displace fossil based power. That is the reason for the renewables is it not, to reduce CO2 emissions? The subsidy should not exceed the amount needed to make solar/wind competitive with the most expensive online fossil fuel power in the market .
@Thompson David
As much as I like your idea, that is not the subsidy program that was devised and put into law. It’s no accident and not “unintended consequences” that results in payments that do not change even if there is no need or no usefulness for the power produced.
As far as I know, there is no such thing as a 600 MWe gas turbine. Open cycle, fast start gas turbines are generally far smaller, perhaps 20-100 MWe.
Yes, Rod, I didn’t really think there were 600 MWe gas turbines. Should have said 600 MWe OF gas turbines!
GE 9HA.02 is rated at 557 MW. That’s one of those monster industrial units. It’s your aeroderivative GTs which only get up to the 100 MW range or so; you can only put so big an engine on an airplane.
Seth, you are right, and the scandalous California electric power crisis in the years 2000, 2001 was caused chiefly by a lack of sufficient snowfall in the previous winters, to provide adequate hydro capacity. So “spinning reserve”, the providing of unused power capacity ready to employ at a moment’s notice, was worth ransom prices.
Hydro turbines can take up loads very rapidly. Pumped storage is I believe even faster, if a turbine is spinning in air. I have seen that one of Dinorwig’s 600 MW capacity generators requiring a mere 2 MW to do this. A 600 MW gas turbine costs a lot more power than that to spin idle and in synch.
I most heartily agree with Seth above. How should I set about asking my House Represntative and Senators to read the article?
For specifics on one view of nuclear plants at risk see :
https://www.carbonbrief.org/mapped-the-us-nuclear-power-plants-at-risk-of-shutting-down
A few plants like Millstone are conspicuously absent because they withheld data. The potential solutions are quite obvious.
Fake news.
Hej to Rod
Sorry for using this page as a letter-box
Yesterday I got the writings below from The Economist (Introduction to an article)
It is easy to see that they have been caught on a “limed twig”.
Plutonium as a byproduct from reactors is contaminated with Pu240 and can’t be used for weapons.
I have tried to write about plutonium on a WordPress site http://wp.me/s1RKWc-46
But more seriously: Who planted this fake news ?
And who will force The Economist to publish a proper explanation?
I am too old and too tired and I do not subscribe to the full article.
Japanese plutonium
A radioactive problem
A decade after the second world war Japan adopted an “atoms for peace” policy of civilian nuclear power. In 1988 it was allowed to enrich uranium and extract plutonium for energy, employing the same technology used to make weapons. It now has enough plutonium to make 6,000 bombs, a prospect that China and other countries fear and that America considers dangerous. Japan is under pressure to reduce its pile. But it can’t use the stuff fast enough
Rod, thank you for the excellent description of grid payments and the way they are slanted again nuclear.
Here’s a graphic from an article I wrote. This graphic was put together by Entergy from ISO-NE data, and used in one of the Entergy presentations.
You can see that Combined-Cycle natural gas plants get about 1/3 of their money from capacity payments, and straight cycle natural gas plants get 3/4 of their money from capacity and ancillary services payments. Meanwhile, nuclear plants get about 90% of their money from selling energy and only 10% from capacity payments. Of course, in simple understanding, one would hope that all plants would get 90% of their money for actually selling their product (energy) and only a small amount of money from promising to sell their product if it is needed (capacity).
The payment system is rigged against nuclear, and the rigging is clever. Gas plants will argue that, after all, nuclear plants get the same $ per installed MW capacity payment as any other plant. It’s not the gas plant’s fault that energy payments are a higher percentage of the nuclear revenue stream, since the nuclear plants make SO much energy!
http://www.neimagazine.com/features/featurepay-for-performance-and-the-us-grid-4800656//featurepay-for-performance-and-the-us-grid-4800656-474378.html
A Modest Proposal:
Deploy TRIGA reactors and have its revenue be all capacity payments.
@Meredith
Clever is a good word for describing how the grid payment system is rigged against nuclear. I could add the overused adjective of “diabolically”.
I’m an unbeliever when it comes to “unintended consequences” associated with electricity markets. I believe most pricing programs have been carefully influenced to produce exactly the results they are producing.
The first plants built were of the same design used on the US submarines. The US navy did not tell the public there was an overheating problem with the units on the subs.
Plants were built at great expense and found they could only produce at 50% of their capacity while operating in safe heating limits. This low profit had a slingshot effect by causing the companies to work on short resources at times missing things like clearing brush from under power lines.
Over financed because of limited output, Nixon changed the standard away from Gold to market. This caused the already heavily financed plants to triple their debt in many cases. Did survival become a matter of how long?
G
@John Clark
Your version of history is incorrect in so many places that I encourage readers to simply discount your comment as just one more of countless misinformed internet comments.
Load following is possible on large commercial reactors, but it does have its limits. Large BWRs have Turbine Bypass Valves that are analogous to what Navy veterans may call Steam Dumps. PWRs have both Condenser Steam Dumps and Atmospheric Steam Dumps. Current design precludes prolonged Condenser Steam Dump or Turbine Bypass Valve operation because the extremely high steam velocity entering the Condenser tends to destroy baffles, tubes, and supports and anything else in the way in rather short order. Desuperheating would help, if condensate sprays were available to the Steam Dump / Turbine Bypass Valve piping. Two phase Flow Accelerated Corrosion of those lines then becomes an issue, so very heavy wall thickness should be considered.
Both types of plants have Feedwater Temperature reduction issues when Main Turbine Steam flow is bypassed or dumped. So Main Steam lines into final stage Feedwater Heaters may also be advantageous. Low Feedwater Temperature antagonizes MFLPD (Linear Heat Generation Rate) and MFLCPR (Critical Power Ratio) in BWRs. I’m sure PWRs get some similar issues from low Tcold issues.
You could design large LWRs for load following, the tougher fuel produced these days accommodates pretty decent ramp rates after preconditioning.
More effort spent on what reactors can do makes them more competitive in any market.
Rod’s written another excellent analysis of why today’s approach to implementing nuclear power can’t compete in today’s sound-bite, politics, and investor money-driven world. However, the reason why nuclear power’s champions are failing to convince our/their decision makers that our grand kids will actually need a “nuclear renaissance” is equally trans-scientific. Pointing out things such as the fact that nuclear power has (somewhat) reduced the total amount of CO2 dumped into the atmosphere, the inequities of today’s electricity supply market, and how nice it might be to substitute even-safer “small” reactors for today’s bigger and more efficient ones won’t cut it. Selling such a renaissance is going to require a great deal more vision than is being evinced by most of its current champions (for “vision”, see Goeller & Weinberg 1976). Simply building swarms of “advanced”, “small”, and “modular” burner/converter type reactors, can’t possibly solve the by-now-near future’s energy conundrum because such reactors would quickly consume all of the world’s “affordable” uranium.
The nuclear industry’s uranium-from-seawater fallback scheme couldn’t save such proposals either.
The IAEA’s website features a slide set describing research performed by the country (Japan) ….rest of this paragraph is deleted “too wordy”
A properly implemented nuclear renaissance’s “killer apps” (things that are really nice & couldn’t be obtained otherwise) would make “selling” the development of one possessing that characteristic easy – the nuclear industry’s “conservative”* approach to both reactor development and salesmanship isn’t working and never will.
References
Goeller, H. E and Weinberg, A. M., 1976, The Age of Substitutability, Science, 191, 4228: 683, Feb 20, 1976. (paywalled, available gratis at http://www.osti.gov/scitech/servlets/purl/5045860).
IAEA 2009 https://www.iaea.org/OurWork/ST/NE/NEFW/documents/RawMaterials/TM_Vienna2009/presentations/22_Tamada_Japan.pdfs
Mahaffey, J. (2009), “. . .nuclear engineering is to engineering as modern Islam is to religion”, p XVI, Atomic Awakening: A New Look at the History and Future of Nuclear Power,” Pegasus Books.
Regalbuto, C. (2014), Past and Future Efforts to Extract Uranium from Seawater, http://large.stanford.edu/courses/2014/ph241/regalbuto2/
darryl siemer — Light water nuclear reactors extract about 0.7% of the energy available in natural uranium. One requires a fast neutron reactor to extract the rest.
There is enough uranium available, when fully utilized, to last “forever”.
Tougher fuel…. Stand stand by for some recent operating experience to the contrary to come out of one of the largest generating stations in the country. Also, load following is a PITA – the crews have enough to watch without slinging power around.
I put Rod’s article on my feed at Linked In, and there’s a fairly lengthy discussion of it there. I added the words below to the discussion. One man claimed that wind was just less expensive, end of story, and that is why nuclear could not compete.
I put this as my answer.
—-
Well, of course they are not giving the energy away for free! Since the average wind turbine gets a production tax credit, worth 2.2 cents, plus it can sell a renewable energy certificate (price varies, from around zero to 5 cents per kWh for compliance-eligible non-solar RECs) https://www.epa.gov/greenpower/green-power-pricing
But the wind turbine can’t get any of these payments without putting kWh on the grid. So it is worth putting free kWh on the grid to capture the PTC and the REC money. As I am sure you actually know.
Do “end-users benefit from the lower cost”? Well, not really. One utility may be buying less expensive electricity because the wind turbines are lowering the grid clearing price. However, that same utility (or another utility) is paying for those RECs. It puts that REC payment into its rate requirement for the end users to pay. They pay for RECs as an overhead price, not a “market clearing price.” (Which disguises the cost of the renewable energy. )
Far too often, a little digging shows that a supposed renewable cost saving is actually a cost transfer to another group.
Keep all of your nuclear waste in your own state. We don’t want it in Texas.
From Wikipedia there are 4 nuclear power plants at 2 stations in Texas. Just now all the once-through nuclear pins are stored on site, in the station, everywhere in the USA. Only the navy moves theirs to the Idaho National Laboratory reservation outside of Idaho Falls.
I should add that I don’t consider once-through nuclear pins to be waste. Such still contain about 99.3% of the extractable energy of the uranium. Thus the pins can be further consumed in a fast neutron reactor, resulting in no long-term waste to store.
@Art Anderson
Are you speaking for all 28 million residents of the great state of Texas? If not, do a majority of the citizens agree with you?
I hope you realize that the total US inventory of high level “nuclear waste” in the form of used nuclear fuel is less than 80,000 tons. How do you feel about the millions of tons of potentially toxic oil and gas drilling waste that is currently being produced and disposed of in Texas.
http://insideenergy.org/2014/10/02/millions-of-tons-oil-and-gas-waste-hazardous-or-not/
I live in Texas too, and I’d be happy to store the nation’s nuclear waste here in Texas. Especially, if the State of Texas took ownership. So when we start using all that valuable material as fuel, it will be a public resource like the oil and gas tax was for Texas.
Just reading this, some info for you Rod.
All commercial BWRs have sufficient hot excess reactivity at all times to prevent being xenon precluded. There are no xenon precluded startups for BWRs. When you scram your void fraction drops to essentially zero. Voids are worth about 40% of your power defect and getting that back allows the unit to restart in peak xenon. (The startup will be weird though, I’ve done two peak xenon startups in my BWR and the core behaves oddly and doesn’t couple as quickly as we are used to).
For about 95% of cycle a pwr is never xenon precluded, and for the remaining 5% it’s very specific on timing, core dynamics, etc.
Only PHWRs can be xenon precluded.
As for load following in general, there are a number of load follow plants in the US, including the unit I’m at. It’s interesting to load follow a nuclear unit.
Very interesting, this seems like a very interesting subject that doesn’t get a lot of attention. Can you tell me more about the $23 per MWhr that comes from the government? What law is this? What does it apply to?
Thanks, this really has helped me open my eyes!