By Russell Gold and Cassandra Sweet
Utilities are closing U.S. nuclear-power plants at a rapid clip
as they face competition from cheaper sources of electricity and
political pressure from critics.
New York's Indian Point plant about 35 miles north of Manhattan,
a major source of power for the city and its surrounding suburbs,
is the latest casualty. Owner Entergy Corp. said Monday that it
will close the facility as part of an agreement with the state of
New York, whose governor, Andrew Cuomo, has long criticized the
plant as a safety threat.
Its closure would bring the tally of plants set to close by 2025
to four, including PG&E Corp.'s Diablo Canyon plant in
California and Entergy's Palisades unit in Michigan. Four others
have already closed in the past four years, including Dominion
Resources Inc.'s Kewaunee plant in Wisconsin.
The retirements are poised to leave 61 nuclear plants in the
U.S. by the middle of the next decade. That includes two facilities
that are building new reactors. A small number of nuclear plants
have closed in the past because of safety concerns or the need for
expensive repairs. What's new is the number of plants closing that
are licensed and operational, but no longer profitable in
competitive markets.
Nuclear plants everywhere are facing a powerful economic foe:
fracking. The extraction technique has unlocked vast amounts of
natural gas, making generating electricity from that fuel much less
expensive and lowering power prices across the U.S.
Entergy cited competition from natural gas as a key factor in
the closure of Indian Point on Monday, disclosing that it will
recognize a $2.4 billion pretax impairment charge in connection
with the closure of the plant's remaining units.
"Record low gas prices, due primarily to supply from the
Marcellus Shale formation, have driven down power prices by about
45%, or by about $36 per megawatt-hour, over the last 10 years, to
a record low," said Bill Mohl, president of Entergy Wholesale
Commodities. That reduced annual revenues by about $160 million for
power plants such as Indian Point, he added.
Despite making the decision to close the facility, Mr. Mohl
worried that if the country loses too many nuclear plants, the
result could be relying too much on natural gas. "We know that with
natural gas, at some point, there will be price movements," he
said.
Nuclear plants generated 20% of U.S. power in the past 12
months, following natural gas at 35% and coal at 30%, according to
federal energy data. The remaining balance was 7% hydro, 6% wind
and 1% solar.
The increasingly poor economics of nuclear power have led
nuclear-plant operators in New York, Illinois and elsewhere to seek
new state subsidies to keep the plants operating. The owners argue
that they create high-paying jobs in rural areas, and are critical
tools to combat air pollution and climate change because they
produce emissions-free electricity.
Lawmakers in Connecticut, Ohio and Pennsylvania are expected to
face tough choices in the next couple of years: Approve rate
increases or other changes to bolster the finances of nuclear
plants, or prepare for them to close.
Exelon Corp., the largest U.S. nuclear-power-plant operator, has
succeeded in persuading states to provide new financial incentives
to keep its nuclear-power plants open.
Last month, Illinois lawmakers voted to allow Exelon to collect
as much as $235 million annually from customers in exchange for
keeping two nuclear-power plants open. Earlier in 2016, the New
York Public Service Commission agreed to pay as much as $480
million annually to keep three upstate nuclear plants open. Exelon
operates two of the three, and has a deal to purchase the third
from Entergy, pending federal approval.
Joe Dominguez, Exelon's executive vice president for public
policy, said states were paying for clean electricity, similar to
how the federal government subsidizes wind and solar energy.
Nuclear power "is the cheapest and most reliable zero-carbon
resource," he said.
FirstEnergy Corp. said recently that it could close three plants
in Ohio and Pennsylvania if it couldn't arrange better compensation
for the power they provide.
A FirstEnergy spokeswoman said the company had watched the
Illinois legislation closely and hoped to negotiate something
similar.
Kristine Hartman, who tracks energy laws for the National
Conference of State Legislatures, said she expects Arizona, New
Jersey and New Mexico to consider modifying laws that encourage
wind and solar to include nuclear as a power source free of
greenhouse-gas emissions.
Without more support, "you will continue to see plants that are
challenged," said Maria G. Korsnick, the president and chief
executive of the Nuclear Energy Institute, an industry advocacy
group.
An analysis by the U.S. Energy Information Administration found
that when nuclear plants were closed, states raised their use of
natural gas and coal to generate power.
Jessica Lovering, director of the energy program at the
Breakthrough Institute, an environmental think tank, said a modern
gas plant can have just a dozen employees, while nuclear plants
need upward of 1,000.
But those large workforces are proving to be a political selling
point as owners argue to state legislators that nuclear-power
plants have great economic importance in rural areas. All five
nuclear-power plants receiving new subsidies in Illinois and New
York are located in rural areas.
Still, the deals have been controversial. "I am pronuclear
power, but I am not pro-bailing nuclear out," said Jeanne Ives, a
Republican state representative from Wheaton, Ill.
In New York, the deal brokered by Mr. Cuomo, a Democrat, to keep
three upstate nuclear-power plants alive has been met by protests
against what activists claim is a nuclear tax.
The new subsidies have also riled up independent power
producers, which claim that nuclear operators are being given an
unfair advantage.
Dynegy Inc. and NRG Energy Inc., which operate coal- and
natural-gas-fired power plants, are suing New York regulators to
reverse their decision to provide what they estimate could be more
than $7 billion in subsidies to nuclear plants.
Bob Flexon, chief executive of Houston-based Dynegy, said he
hopes the Trump administration will set a national energy policy
that allows for a level playing field. "Someone needs to let them
know that you're killing coal if you throw billion-dollar subsidies
to nuclear," Mr. Flexon said.
--Mike Vilensky contributed to this article.
Write to Russell Gold at russell.gold@wsj.com and Cassandra
Sweet at cassandra.sweet@wsj.com
(END) Dow Jones Newswires
January 09, 2017 11:43 ET (16:43 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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