Closure of FitzPatrick and Other Plants – Reasons and Possible Responses – Part 1

by Jim Hopf

Entergy Corporation just announced that it would close the FitzPatrick nuclear plant in upstate New York.  This follows the recent closure announcement for the Pilgrim nuclear plant in Massachusetts, as well as the closures of other small, single-unit plants like Vermont Yankee and Kewaunee.

New York state politicians, including governor Andrew Cuomo and Senator Charles Schumer, expressed anger at Entergy’s decision to close the plant, and have vowed to explore actions that could be taken to prevent the plant’s closure.

Reasons Given for the Closure Decision

The reasons Entergy gave for closing the plant include competition from low-cost natural gas, subsidized wind, and skewed markets that give nuclear no credit for its non-polluting nature.

Given these factors, nuclear plants are economically vulnerable in “merchant” electricity markets where existing power plants must make all their money though power sales in the wholesale market, where those power plants compete on price.  Small, single-unit plants are particularly vulnerable, given that many nuclear operating costs (staffing, security, etc.) do not scale down with power output.

It should be noted that Cuomo stated that he would not discuss measures that may be taken to keep the plant open unless Entergy made a formal closure announcement.  Cuomo’s reasoning was likely that he didn’t want to provide any state aid unless it was necessary to prevent the plant’s closure (and would not merely go to Entergy’s bottom line).  It’s possible that Entergy “called Cuomo’s bluff” by announcing closure plans.

Possible Solutions

While there’s little hope for Pilgrim or the plants that have already closed, there may be some hope for FitzPatrick, and for other nuclear plants that could yet close.  Cuomo and Schumer are considering options to keep FitzPatrick open.  I don’t know what options they are discussing, but here are some possibilities (in my opinion):

The New York Power Authority (NYPA) had a long-term power purchase agreement (PPA) with FitzPatrick that expired in 2004.  The loss of that PPA is one of the reasons for its economic struggles.  Cuomo, Schumer, and others could get the NYPA to make a new PPA, at a power price sufficient to keep the plant open.  Yes, this price may be a bit above the (current) wholesale market price.  That difference would reflect the support (“subsidy”) that the state would be providing to keep the plant open.  It would be a far lower subsidy than those given to renewable energy.  (Based on the annual losses quoted by Entergy, the required price would be less than 1 cent/kW-hr above current market rates.)

More generally, the state could opt to outright subsidize the plant’s operation.  That may require legislation, however (I’m not sure).  Ideally, they would make it so that nuclear and renewables are treated the same.  That is, nuclear would get the same subsidies and be included along with renewables in portfolio standards.  Such an ideal policy would be a political stretch, but providing just enough support to keep the plant running could be more politically palatable.

Another possibility would be to negotiate a large reduction in the ($17 million per year) local taxes paid by the plant.  After all, if the plant closes, the taxes paid will greatly drop anyway.  Why not keep the local jobs at least?  It should be noted that relief from local taxes is often offered to lure major employers into a local area.  This would be essentially the same thing.

Reasons for Hope?

With ever more nuclear plants announcing closure plans, there is finally increasing political momentum to try and do something about it.  Several prominent politicians as well as the administration, members of Nuclear Matters, and others) are calling for action to halt nuclear plant closures.

Possible policy responses may (and should) include some financial incentives to keep plants open and give credit for their non-polluting nature.  Although justified, reexamination of regulations that are placing undue burden on these plants is less (politically) likely, although some politicians (e.g., Llamar Alexander) are making some efforts in this area.

It unfortunate that multiple plant closures were needed to provide the necessary wake-up call and actually spur people into action.  But better late than never.

In Part 2 of this post, I will discuss the reasons for many nuclear plants’ economic struggles in more detail.  I will also discuss possible changes that could be made at the national level to address the situation.


jimHopf

Jim Hopf is a senior nuclear engineer with more than 20 years of experience in shielding and criticality analysis and design for spent fuel dry storage and transportation systems. He has been involved in nuclear advocacy for 10+ years and is a regular contributor to the ANS Nuclear Cafe.

 

6 thoughts on “Closure of FitzPatrick and Other Plants – Reasons and Possible Responses – Part 1

  1. Dr. Gene Nelson

    See the July, 2015 NEI Nuclear Energy Factsheet This factsheet shows that 2014 U.S. annual nuclear power production was 797 TWh, with a CO2 avoidance of 595 million metric tonnes (MMT.) Assuming a CO2 avoidance value of $50.00/metric tonne, this means the value of the total U.S. nuclear power carbon avoidance would be $29.75 billion, which is a significant sum. (Note for comparison that if 1 kWh is valued at $0.10, the market value of the total U.S. nuclear electricity production would be $79.7 billion. The carbon avoidance is therefore worth about 37.3% of the value of the electricity.)

    Diablo Canyon Power Plant (DCPP) has a typical annual production of 18 TWh. Its annual CO2 avoidance is 13.44 MMT. Using the above values, DCPP’s annual electricity production is valued at $ 1.8 billion and its carbon avoidance is valued at $672 million

  2. Dr. Gene Nelson

    See the This factsheet shows that 2014 U.S. annual nuclear power production was 797 TWh, with a CO2 avoidance of 595 million metric tonnes (MMT.) Assuming a CO2 avoidance value of $50.00/metric tonne, this means the value of the total U.S. nuclear power carbon avoidance would be $29.75 billion, which is a significant sum. (Note for comparison that if 1 kWh is valued at $0.10, the market value of the total U.S. nuclear electricity production would be $79.7 billion. The carbon avoidance is therefore worth about 37.3% of the value of the electricity.)

    Diablo Canyon Power Plant (DCPP) has a typical annual production of 18 TWh. Its annual CO2 avoidance is 13.44 MMT. Using the above values, DCPP’s annual electricity production is valued at $ 1.8 billion and its carbon avoidance is valued at $672 million

  3. mulp

    If subsidies for heavily subsidized nuclear power plants need to continue 40 years after the plant is in operation, is this justification for continuing wind and solar subsidies 40 years after wind and solar farms have been built?

    The reason this plant is closing is the high profits from the plant two decades ago were not banked to pay for rebuilding the capital assets being consumed by use then and expensed as depreciation. Instead dividends were paid from effectively liquidating the capital assets of the plant. Now after the capital assets have been liquidated and consumed, too little invested capital remains to justify any return so the plant is unprofitable. MBA thus call for creative destruction to create scarcity to drive up the price of competing production and capital.

    I bet if NY offered to buy the plant for $1 and take over its operations so the utility was a dollar richer, the utility would suddenly claim the plant is worth hundreds of millions from the profits from power sales.

  4. R. L. Hails Sr. P. E. (ret.)

    The writer’s proposal is understandable but is a band aid on a cancer patient. The United States nuclear power governance has been a shambles for generations and is simply grinding to a halt. Long ago, France took a design developed in Pittsburgh PA and supported their national grid with it. Their spent fuel is stored in a basement. Our spent fuel storage program, screwed up for generations, is an unsupportable disaster. The center of excellence in nuclear energy has been shoved off shore. China is, or will soon lead the world in nuclear power (If their corrupt government does not cheat. Nuclear power is unkind to dummies and crooks.)

    IF our nuclear technology survives, which I doubt, several basic reforms must occur. The NRC must be totally reorganized. The major corporations must be totally restructured (AEs, NSSS suppliers and utilities). And competing technologies must be assessed in an ongoing manner. The sole criteria are cost, safety, and reliability, as defined by technical people, not half naked actresses in some committee of gawking politicians. Hyman Rickover’s dictatorship must end. People who cut corners for schedule or profit must be purged. And the American people must weigh the risks and benefits of technology, e.g. chronic low level radiation as a carcinogen, vs a low standard of living.

    Our root problem is a profession of highly trained engineers and scientists who do not exist. The veterans are dead or dying off. Some have been laid off for a generation so their technical skills no longer exist. The new nukes under construction are staffed, in every position, by people who never designed, reviewed or built one nuke. Screw ups are inevitable.

    The US spends more on war every few months, than the entire Atoms for Peace effort since Eisenhower. Hence the sole purpose of uranium fission is megadeaths. This is our defacto energy policy, an exothermic reaction in one microsecond.

    This is our decision issue.

    I engineered a score of nukes, led the first real ISFI in America (the first was a boondoggle), and two score fossil power plants. Am retired.

  5. Engineer-Poet

    Simple, minimal-cost way to prevent the closures of nuclear plants in “deregulated” electric markets.

    1.  Require all dispatchable thermal powerplants to pay a fee between $50 and $100 per ton of CO2 emitted from their fuel(s).
    2.  Rebate the funds monthly as a per-kWh subsidy to the same dispatchable thermal plants.
    3.  Require that all “portfoilio standards” include nuclear as a non-emitting energy source effective immediately, regardless of existing language to the contrary.

    This would only require a bit of overhead for accounting.

  6. James Greenidge

    The almost unprotested closure of so many nuclear plants kind of rings totally hollow the “critical peril and emergency” of and practical proven ways to address global warming.

    James Greenidge
    Queens NY

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