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Five US states have introduced support measures for nuclear power plants

Source: 
Asharq Alawsat

According to the US Energy Information Administration (EIA), nuclear power generation has been facing an increasing pressure due to declining prices in wholesale power markets, leading several nuclear plants to close: eight nuclear plants have retired since 2013, the Three Mile Island power plant shut down in late September 2019 and another five reactors are expected to stop by the end of 2025. Consequently, five US states have implemented policies to support nuclear power plants, namely New York, Illinois, Connecticut, New Jersey and Ohio. Ohio was the latest state to enact policies providing for compensation or other assistance for in-state nuclear power plants in July 2019.

These five states have unbundled, retail-choice electricity markets, where the cost of electricity generation is not regulated by state commissions and where nuclear power plant owners don't receive cost recovery from state regulatory commissions. The support measures in the five states allow nuclear power generators to make up for unrecovered costs that are usually financed by surcharges to electricity customers or by allowing nuclear plants to take part in clean energy markets initially planned for renewables. Most support programmes include zero emission credits (ZECs) that power utilities must buy from nuclear generators; they range between US$10/MWh and US$17.5/MWh in Illinois, New York, New Jersey, and Ohio. In Connecticut, the Millstone nuclear power plant is allowed to participate in a CO2-free power auction: in 2018, nearly half of the power plant's capacity cleared that auction and signed a power purchase agreement (PPA) with an in-state utility.

Discussions

Bob Meinetz's picture
Bob Meinetz on Oct 10, 2019 4:02 pm GMT

"The support measures in the five states allow nuclear power generators to make up for unrecovered costs that are usually financed by surcharges to electricity customers or by allowing nuclear plants to take part in clean energy markets initially planned for renewables."

"Unrecovered costs?" Asharq, there's an ongoing misperception, furthered by gas and renewables advocates, claiming nuclear plants are currentlty "uneconomical".

This meme deliberately confuses economy with profitability. There is no nuclear plant in the country which can't generate electricity less expensively than gas, solar + gas, wind + gas or any other form of generation. PG&E, in its FERC Form 1 filing, reveals Diablo Canyon (nuclear) Power Plant generates electricity at a cost to the company of $.028 / kWh. PG&E is unable, however, to charge ratepayers for the cost of gas provided by its affiliates - reducing Diablo Canyon's profitability, not its economy.

Instead of applying California's fraud of "renewable energy certificates" to nuclear, Eastern states have permitted both renewable and nuclear generators to add a surcharge specifically based on an avoided social cost of carbon. By cancelling Ohio's ineffective Renewable Portfolio Standard, customers in the state are rewarding all clean energy sources on a level playing field - and unlike subsidies for intermittent renewable sources, they're getting something of value in return.

Matt Chester's picture
Matt Chester on Oct 10, 2019 9:06 pm GMT

 PG&E, in its FERC Form 1 filing, reveals Diablo Canyon (nuclear) Power Plant generates electricity at a cost to the company of $.028 / kWh.

Is this operational cost or is this accounting for the capital costs it took to get to this point? Discussing the economics/profits of nuclear is different with new plants vs. existing plants, and I think that's where a lot of the conflation of data and arguments comes. Regardless of the feelings about and numbers behind new nuclear, though, there's compelling reason to let those nuclear plants already built to remain open and operational for as long as updates are allowed to keep it safe and functional

Bob Meinetz's picture
Bob Meinetz on Oct 11, 2019 4:31 pm GMT

That's marginal operating cost, Matt. Operation, maintenance, and fuel. Capital costs are added to the top of that, but the plant will be paid off 100% the day it's shut down in 2024, thanks to an accelerated depreciation schedule awarded to the company by California's corrupt Public Utilities Commission.

Why would PG&E want to shut the plant down the day it's paid off, when it's generation is most "economical"? Because PG&E doesn't care whether it's economical or not. Like any unregulated monopoly, they want to earn as much profit as possible - and the way to do that is by selling natural gas to the public at a price they set themselves, then using as much of it as possible to generate electricity while dumping CO2 into the atmosphere with abandon.

Matt Chester's picture
Matt Chester on Oct 11, 2019 11:34 am GMT

Interesting. Help me understand more since I know you are more knowledgeable about the day-to-day workings of the market than I am. You're saying they want to sell gas (rather than nuclear or anything else) because it helps them maximize profit-- is that profit because the gas is cheaper and they can sell the electricity for the same price and thus make more profit, or is their ability to sell 'at a price they set themselves' simply meaning that with gas they are able to increase electricity prices to customers artificially while bringing in more profit?

Gary Hilberg's picture
Gary Hilberg on Oct 11, 2019 3:36 pm GMT

$28/MWH is a relatively low price on average, the issue is that in deregulated markets, power is sold in 15 minute increments.  Here in ERCOT wholesale prices can be well under $20/MWH for most of the day and then in excess of $100/MWH for minutes or even hours.  This is the challenge for any baseload technology.  With fuel costs being a smaller percentage of the COE for nuclear, running through the negative hours is the strategy for baseload generators.  They can also sign bilateral contracts which match their generation to end users with base load power demands.  In ERCOT several of the large generators (Vistra - they own Comanche Peak Nuclear, NRG - they own South Texas Nuclear, and Calpine) now own retail electric providers so they can match the end users' desire for fixed price power with their plants ability to deliver it.  Each market will be different. 

Bob Meinetz's picture
Bob Meinetz on Oct 11, 2019 4:21 pm GMT

Gary, nuclear generators typically bid $0 at all hours of the day. Why? Because gas generators can't possibly bid that low and remain profitable:

"In competitive wholesale electricity markets, the price paid to all generators is set by the most expensive unit that is needed to serve the demand at a given time. Since nuclear plants run all the time, they act as “price takers” effectively bidding at zero and allowing fossil fuel plants to set the market price. If the nuclear units were removed from the system, fossil plants that would have been too costly to be called upon would now be used to fill the gap left by the nuclear plants, increasing the market price that would be paid by all customers."

Gas, and renewables + gas, are never more economical than nuclear for meeting baseload demand, the reason why gas and renewables interests continue to herald "the end of baseload" (they wish).

 

Bob Meinetz's picture
Bob Meinetz on Oct 11, 2019 4:35 pm GMT

"...or is their ability to sell 'at a price they set themselves' simply meaning that with gas they are able to increase electricity prices to customers artificially while bringing in more profit?"

Exactly. Energy "holding companies", since 2005, are able to order their electricity subsidiaries to buy gas from their own gas subsidiaries, which charge a markup on the gas. Then, the electricity subsidiary lists the inflated price as an expense, and is reimbursed by hiking its customers' rates. All profits flow through to the holding company. You might wonder:

Q: Isn't that an abuse of public trust? After all, utility customers don't have a choice to switch electricity providers.
Q: Wouldn't that encourage electricity generators to be less efficient, to burn as much gas as they possibly can?
Q: Is it possible renewables actually increase consumption of gas, that gas plants are required to maintain "spinning reserve" (gas plants constantly idling) to be ready to plug gaps in renewable generation?
(A: All of the above.)

The scam of holding companies using affiliate transactions to gouge ratepayers is almost a century old. It was ended in 1935 when FDR signed the Public Utility Holding Company Act (PUHCA), which permitted the new Securities and Exchange Commission to break up utility holding companies. It was mercilessly effective, despite multiple court challenges, and by 1949 utility holding companies ceased to exist.

Utilities chafed at this oversight, however, and over time figured out ways to get around it (one of the first exceptions from PUHCA was granted in 1988 to a company named Enron). In 2005 PUHCA was finally repealed by George Bush's pro-oil administration, and now holding companies and affiliate transactions are back with a vengeance.

References:

PUHCA For Dummies (by former FERC attorney Lynn Hargis).
Public Utility Holding Company Act of 1935 (note last sentence)
When Utility Gas Affiliates Play by Monopoly Rules, Consumers Are Likely to Lose
 

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