Grid reliability at risk as nuclear plants priced out of energy markets
By The Pittsburgh Tribune-Review
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Its latest struggle to compete in wholesale electricity markets, which puts its operation into the next decade in jeopardy, highlights a trend that threatens grid reliability and the future of the country's nuclear fleet, observers say.
Nuclear power, with its heavy regulation and higher capital costs, is being priced out of markets by cheaper natural gas and subsidized solar and wind.
"It's a quandary not only for the nuclear industry, but for regulators like us," said state Public Utility Commissioner Robert Powelson, who is part of a growing group raising concerns about the implications of retiring nuclear plants without a reliable, carbon-free alternative that can provide the same baseload capacity to the grid.
"When that reactor shuts down, it's not coming back online," he said. "There is certainly a need to have an adult conversation around the viability of these units."
Operators and regulators have voiced concerns about that viability for some time. Years after some analysts predicted a boom in reactor building, only five are under construction in the United States, with few on the drawing boards.
Meanwhile, closure notices and warnings are building.
A year after closing its Vermont Yankee nuclear plant, New Orleans-based Entergy Corp. said last fall it would close its Pilgrim station in Massachusetts and its James A. FitzPatrick plant in New York, citing high costs and tough competition.
This month, Chicago-based Exelon Corp. announced the early retirements of two Illinois plants, one of which failed to clear regional grid operator PJM Interconnection's auction last month to provide capacity power in 2019-20. The annual auction sets payments to power plants that agree to operate and provide baseload electricity to the grid in case demand suddenly rises.
Because nuclear plants are large and designed to run for 18 months at a time, they have traditionally served that baseload role, especially as stricter environmental rules push coal plants to close.
Three Mile Island -- operated by Exelon -- failed to make the cut in its second consecutive capacity auction, leading the company to say, "If we do not see a long-term path to sustainable profitability for a particular unit, we will consider all options, including unit shutdown."
The news from the sector has turned up the volume of concern, leading lawmakers and regulators to call for discussions on what to do. "I believe that the clean, reliable energy generated by nuclear plants and the impact the loss of these plants may have on the electric transmission grid requires continued investigation and an exploration of any and all options available to the commonwealth to assure grid reliability," Rep. Robert W. Godshall, R-Montgomery County, chair of the House Consumer Affairs Committee, wrote in a legislative memo last week.
Powelson and others note that nuclear has been left out of programs that encourage carbon-free power, such as the state's Alternative Energy Portfolio Standards AEPS Act of 2004, which requires utilities to source their power from a growing share of renewables. "It's not an even playing field," said Kevin Sunday, director of government affairs at the Pennsylvania Chamber of Business and Industry.
He and others acknowledged the lower wholesale price of electricity coming from natural gas and subsidized renewables benefits consumers. But the market setting that price does not acknowledge that nuclear helps utilities and states meet stricter limits on greenhouse gas emissions.
"What if there's a Clean Power Plan and we don't have nuclear units to get us to compliance?" Powelson asked, referencing a pending federal program that could require Pennsylvania to cut its carbon emissions by a third. As the country's second-biggest nuclear state behind Illinois, state officials are counting on the nuclear fleet to help them meet such requirements.
Godshall's memo said his committee will examine complaints that the AEPS artificially picks "winners and losers." Utilities have pushed for rule changes in other states to push some of the added cost of operating large plants to ratepayers.
Exelon sought that in Illinois, and Akron-based FirstEnergy has fought for it in Ohio. The company operates coal and nuclear plants in the region, including the two-reactor Beaver Valley plant in Shippingport. FirstEnergy does not comment on how plants perform in the capacity auctions and has made no announcements about closing plants, but it shares industry concerns, said spokeswoman Jennifer Young.
"We agree that a significant number of power plants, including nuclear stations, are at risk of early retirements," she said. "Environmental mandates and energy markets don't put a unique value on nuclear and what they bring to market."
