Why don’t we “mothball” shutdown nuclear plants?

By Rod Adams

In May 2013, the United States lost a perfectly functional and well-maintained nuclear power plant, the Kewaunee Nuclear Power Plant. Last week, Entergy announced that it would be shutting down a second such plant, Vermont Yankee, after its current fuel load has been consumed. In both cases, the owners indicated that the plants were no longer economical due to market conditions; namely, the low price of natural gas, the presence of subsidized renewable energy suppliers that can pay the grid to take their power and still receive revenue for every kilowatt-hour generated, and an insufficient market demand for electricity in the markets where the plants were attempting to sell their output.

Vermont Yankee Nuclear Power Plant

Vermont Yankee Nuclear Power Plant

Under similar market conditions, conventional power plant owners might decide to shutdown the plant but make provisions to ensure that the plant could be restored to service if needed, or if the market conditions change by either increasing revenue opportunities, lowering operating costs, or both. However, in each of the nuclear power plant cases under discussion, the owners decided that their best course of action was to announce a permanent shutdown with the concurrent action of giving up the plant operating license. In both cases, the plant operating licenses had been recently extended for an additional 20 years.

Giving up an operating license for a nuclear power plant in the United States is a permanent choice with implications that run into the many billions of dollars; there has never been a situation where a plant owner gave up an operating license and was subsequently granted another license to operate that plant.

The closest precedent available is the Tennessee Valley Authority’s Browns Ferry. All three units were shutdown in 1985, each was later restored to operating status (1991, 1995, and 2007). The difference at Browns Ferry was that the owner (TVA) never gave up the operating licenses.

Unfortunately, there are several aspects of current rules that discourage nuclear plant owners from choosing to mothball plants.

There are only two license choices available for the owner of a nuclear power plant. The owner can maintain an operating license, which costs a minimum of $4.4 million per year in fees to the Nuclear Regulatory Commission, or the owner can choose to give up the operating license for a “possession only” license. That costs just $231,000 per year, plus the cost of any additional regulatory services, which are billed to licensees at a rate of $274 per staff hour. (Note: Some operating licensees pay more than the minimum because they have special conditions that require additional regulatory services. If that is true, those services are billed at the same $274 per staff hour rate.)

In addition to the annual operating license fee, a company that seeks to maintain an operating license must maintain a certain level of staff proficiency and must maintain a security force sized to prevent a design basis threat from gaining control of the facility and causing the plant to release radioactive material. Of course, a plant that is in a state of semi-permanent shutdown could probably make a successful case for maintaining a substantially reduced staff compliment; there might already be a reduced staffing precedent available from the long-term shutdown and eventual restoration of TVA’s Browns Ferry.

The owners of a plant that is being held in a semi-permanent shutdown state could also make a good case to the NRC that they should be allowed to defer any required investments in new capabilities until such time as they decide that they are going to restart the plant. A semi-permanently shutdown plant would not need to purchase any new fuel or pay any additional contributions to the nuclear waste fund; those contributions are based on the amount of nuclear electricity generation.

However, during any period of semi-permanent shutdown, a nuclear plant will be consuming days of potential operation; nuclear plant operating licenses are issued on a strict calendar basis with no ability to reclaim days. Even if there is no stress or strain put on any plant components because the plant is shut down and cooled down, the calendar keeps turning pages. Owners are logically reluctant to keep up the spending on a plant that might only have a few years of life remaining after the market finally turns around.

Without access to the detailed financial analysis used by Dominion and Entergy to determine that the best course of action was to permanently shutdown Kewaunee and Vermont Yankee, I have to make an educated guess about the considerations that drove their decision. It seems highly unlikely that the operating license fee difference was enough to cause utilities to give up an asset whose replacement cost would be at least $3 billion–$5 billion. The ongoing personnel costs might have been high enough to tip the balance, but I doubt it.

I got a hint in a Bloomberg article about Entergy’s decision to shut down Vermont Yankee.

The reactor was expected to break even this year, with earnings declining in futures years, the company said. Closing it will increase cash flow by about $150 million to $200 million through 2017.

(Emphasis added.)

That’s right. Entergy has determined, and announced to the investment community, that closing down a production facility that produces about 4.8 billion kilowatt hours of electricity each year using fuel that costs just 0.7 cents per kilowatt hour will result in a substantial improvement in their cash flow. That is true even though the plant will not be producing any product and even though the company will incur some transition costs.

The jewel for Entergy is that the owner of a plant in a decommissioning status has access to the decommissioning fund that was set aside at the time that the plant was built and received additional funds over the years that the plant operated. In the case of Vermont Yankee, the decommissioning fund balance is $582 million. Tapping that fund will allow the company to book more revenue.

There is one more factor that is probably more important for Entergy than it was for Dominion. Removing production facilities in a market that is suffering from low prices as a result of insufficient market demand is a tried and true strategy for commodity suppliers. If enough production facilities stop producing the oversupplied product, it will enable the remaining facilities to raise prices to a more profitable level.

Since Entergy has a number of other facilities that sell into the Northeast U.S. electricity market, it will benefit when those price increases happen. Since Dominion’s Kewaunee was its only facility in the Midwest, it is hard to see any direct benefit to Dominion in the form of increased market prices.

I hope that your reaction to reading this explanation is to start thinking about ways to change the situation, before we lose any more emission-free, reliable, low-cost nuclear electricity production facilities.

Kewaunee Power Station

Kewaunee Power Station

______________________

Adams

Adams

Rod Adams is a nuclear advocate with extensive small nuclear plant operating experience. Adams is a former engineer officer, USS Von Steuben. He is the host and producer of The Atomic Show Podcast. Adams has been an ANS member since 2005. He writes about nuclear technology at his own blog, Atomic Insights.

16 Responses to Why don’t we “mothball” shutdown nuclear plants?

  1. Rod, that is exactly what my reaction is. I’m still in a funk over the closing of VY, for the sake of the plant, its employees, their community, and nuclear power itself. But I’ve not been shedding tears for Entergy.

    I can’t even begin to understand the ins and outs of energy markets, but it is clear that something about the situation desperately needs to change.

  2. Excellent idea, Rod! Now, the ball is in the court of your national government (not solely the USNRC). Do they choose to destroy the outstanding opportunity to protect the people of Vermont against future change? After all, it is unlikely that oil and natural gas prices will remain low in the long term.

    It appears that creation of a new legal category for mothballed plants (as already exists for seagoing capital reserves) would require only a few strokes of a pen.

    Dan

  3. @Rod: I think your point about “reclaim” days on the license is incredibly important – I was thinking exactly the same thing as I was reading your post right before I got to where you pointed it out as well. In my mind, this is no different than standard industry issues like burnup credit for spent fuel storage – which also took years of scientific studies (and no small amount of wrangling) to make happen.

    If one could take “outage credit” on the license, strategies like SAFSTOR to weather out market conditions, rather than scrapping a viable energy production facility, would make far more economic sense.

  4. My colleagues at CNS-Quebec are preparing a memorandum for an upcoming commission on the future of energy in the province, in which they talk about the recent decommissioning of Gentilly-2.
    They note that in Ontario, which has North America’s largest nuclear power plant at the Bruce station on Lake Huron, two of the Bruce units (BA1 & BA2) were brought back to service last year, following 13 and 17 years of shutdown (and a recent refurbishment).
    They propose that G2 be mothballed rather than dismantled, lest a future government decide that nuclear is needed – particularly since much of the equipment for the refurb project has already been bought.
    It seems that a similar case could be made for VY – considering that the NRC figures it’s good for another 20 years of operation.

  5. Rod, this makes so much sense,yet it requires some regulatory action. This opens the door for our critics to start their opposition. Watch this space!

  6. Sergio Perillo

    Nice article, Rod. It makes so much sense.

  7. Rod, thank you for writing this. I have been scratching my head, wondering why Kewaunee and VY weren’t just being temporarily shutdown. It sounds like our regulatory system has no reasonably economic choice to shutdown a plant with the option to re-open it in the future if prevailing economic conditions become more favorable. That is, indeed, a shame and a waste.

  8. Rod,
    Chances are, it was never contemplated as being an option when the rules were written, not a deliberate choice by the regulator.
    Would need a petition for rule making to fix. Somebody feel like filing one?

  9. No big company, including Entergy, will reveal too detailed a bunch of line items about any particular facility. I am trying to guess and interpret the factors of the VY shut-down. I keep scratching my head about why they chose to close the plant. It’s still breaking even, yes? Gas prices are going to rise, yes? Etc.

    We are the blind men, and why-they-closed-the-plant is the elephant. Personally, I am trying to figure out some of the effects of ISO. For example, a Power Engineering article about the closing said that the Pennsylvania/New Jersey/Maryland ISO had different rules than the New England ISO, and they pay more for capacity (ability to deliver power) in Pennsylvania/New Jersey, etc.

    Your comments about the decommissioning fund also made a lot of sense.

    There’s another aspect of decommissioning, too. The fund is a relatively fixed number. While the plant is running, the legislature comes up with one new fee and new tax after another. With the decomm fund, Entergy could conceivably just pay these new fees (if imposed). Then it could smile and say: “Well, I guess we will have to wait a little longer to make up that money and get the plant fully decommissioned. There’s only so much dough there, dear fellows in the legislature. Get used to it. Entergy isn’t a bottomless well anymore. ”

    The state has very little bargaining power about the decommissioning. Here’s a Vermont Business Magazine op-ed, pointing out that Vermont doesn’t have much leverage against Entergy at this point.
    http://vermontbiz.com/news/august/opinion-vermont-yankee-decomissioning-dilemma

  10. As has been pointed out from the Platt’s interview Rod referred to in his own blog, there was also an ongoing cost of 500 milions dollars to update the plant for post-Fukushima security measures. That might have had quite a significant weight on the decision. I think the best would be to find a way so that the operator could financially spread that spending over for example all the remaining years of the licence.

  11. I assume that if an interim spent fuel storage facility was built, the cost of decommissioning would go down since you’d now only need minimal security staffing to make sure the general public doesn’t wander in, seeing as there’s no longer any spent fuel there to protect.

  12. No public regrets over shutting down nukes tells me global warming isn’t a hazard anymore.

  13. Sad.
    I trained for years at the VY Simulator. I knew people who worked there and at Kewanee. Yes, from a purely economic stand point, it all makes sense. From a fair market standpoint it stinks. Subsidies make wind power and solar power and ethanol production “look” like America’s answer to breaking ties with oversees supplies of energy.

    Local wind turbine production factories were laying people off when the wind power subsidy was in jeopardy. No one was investing in those landscape trashing towers until they knew they’d get paid for it. Ethanol Plants in the midwest were being shutdown when that subsidy was going away. It couldn’t stay competitive without the help.

    Given the choice, I would rather live across the street from a nuclear plant then be surrounded by 500, 2.5 MWe towers. Frankly, until they can build an “renewable energy source LIKE nuclear power” electrical facility in the same footprint as a nuclear plant, I don’t consider the trade off worth it.

    Sad, very sad.

    (I worked in the nuclear industry from before TMI and Chernobyl and shortly before the tragedy in Japan. I was privileged to earn the FIRST Bachelor of Science Degree in Nuclear Engineering from Iowa State University, so I know a little something about nuclear power)

  14. Entergy has expressed its intention to place VY in SAFSTOR, theoretically a well maintained cold standby could allow the plant to be reactivated after a future refurbishment/inspection as at Bruce & Brown’s Ferry (far cheaper anyway than the $2.4-5 billion minimum for a new reactor of its size). Today’s regulatory barriers blocking the simple reissuance of an operating license are bureaucratic artifices and could simply be changed in the near future with a minimum of fuss. As has been pointed out some $500 million in added regulatory compliance was recently imposed on VY by the NRC, I suspect this was the primary reason behind Entergy’s decision.

    Statistical data is going to be gathered in the wake of the VY shutdown concerning VT air quality, electricity rates (EIA already reports Boston hub gas futures are up), the productivity of wind and the other renewable resources which have long represented that they could fill the gap, regional tax revenue, employment, and post VY VT & system wide ISO-NE CO2 emissions. If ISO-NE cannot at least maintain the status quo it will form a powerful future case for wholesale reform.

  15. @Aaron:

    I agree with you, in principle. The “bureaucratic artifices” are, however, quite real and will require a focused, well resourced effort to remove. They were not erected by accident and the people who worked hard to make sure that Vermont Yankee would permanently disappear as a competitor in “their” market will not stand idly by as nuclear technology advocates work to prevent them from benefitting from the fruits of their labor.

    That said, it is an immensely important and potentially rewarding endeavor. It is definitely on my list of important actions that need to be started in an effort aimed to help Americans – and the rest of the people who live in countries where the antinuclear opposition has been so active and effective – understand the value of nuclear fission power to reduce our dependence on hydrocarbon suppliers.

    (I want to be clear; I LIKE natural gas as a product. I just do not like the way that its suppliers manipulate the market and the public and I like the characteristics of fission much better. I guess some might say I am a fission fan-boy.)

  16. Rod Adams | September 13, 2013 at 01:52 |
    @Aaron:
    I agree with you, in principle. The “bureaucratic artifices” are, however, quite real and will require a focused, well resourced effort to remove. It is definitely on my list of important actions that need to be started in an effort aimed to help Americans

    So who do we write?