By Rich Heidorn Jr.
Though its generators emit no carbon, the nuclear industry finds itself — like coal — struggling to remain relevant in the electric business.
The U.S. has lost eight plants totaling almost 4,800 MW since 2013, and at least three more (3,500 MW) are expected to retire by 2025. Any boost that the industry hoped to get under the Clean Power Plan likely evaporated with the election of Donald Trump.
But at the Nuclear Energy Institute’s briefing to Wall Street last week, CEO Maria Korsnick insisted things are getting better — or are about to. The industry is “reaching a tipping point as policymakers have come to appreciate the risk of losing nuclear plants,” she said. Last year, she added, “we began to see the ocean liner change its bearing.”
Mixed metaphors notwithstanding, 2016 did bring some welcome news, as New York and Illinois approved zero-emission credits that will provide billions in additional revenue for Exelon’s James A. FitzPatrick, R.E. Ginna, Clinton and Quad Cities plants — assuming the state plans withstand legal challenges. Korsnick also talked about “policy opportunities” for similar supports in Connecticut, Ohio, Pennsylvania and New Jersey. (See Connecticut Lawmakers to Draw Up Millstone Rescue Plan.)
The Tennessee Valley Authority’s 1,123-MW Watts Barr 2 went into service in June, the first new nuclear plant in two decades. Combined with South Carolina Electric & Gas’ Summer Units 2 and 3 and Southern Co.’s Vogtle Units 3 and 4 — which are expected to go into service by 2021 — the new plants will add 5,500 MW of nuclear capacity.
In addition, six proposed nuclear units received licenses from the Nuclear Regulatory Commission last year: Austin Energy, CPS Energy and NRG Energy for South Texas Project Units 3 and 4 (February 2016); Duke Energy Florida, for Levy Units 1 and 2 (October 2016); and Duke Energy Carolinas, for William States Lee III Units 1 and 2 (December 2016). This followed DTE Electric’s May 2015 license for Enrico Fermi Unit 3.
Last month, NuScale became the first company to apply to NRC for a small modular reactor (SMR) design certification. NuScale has its first SMR customer, Utah Associated Municipal Power Systems, and should be able to put plants into service by the mid-2020s, NEI said. “These are designs that use their smaller size to maximize safety and rethink how nuclear plants could be configured. They will offer flexibility in deployment and operation,” she said.
‘A Very Good Business Proposition’
Getting licensing approval isn’t easy or cheap. But the bigger challenge will be convincing regulators and financiers that nuclear plants can be built in the future without long construction delays and massive cost overruns — and that they can compete against combined cycle plants during a period of near-record low gas prices.
Nuclear power still provides almost one-fifth of U.S. electricity production. And it will certainly have a role for years into the future. Virtually all of the reactors in the U.S. have received license extensions to boost their lifespans to 60 years and some plants may seek another 20-year extension.
But with the expected loss of Pilgrim and Oyster Creek in 2019 and Diablo Canyon by 2025, the U.S. will have lost a net 2,800 MW since 2013.
“The static, top-heavy, monstrously expensive world of nuclear power has less and less to deploy against today’s increasingly agile, dynamic, cost-effective alternatives,” wrote Jonathon Porritt, former chairman of the U.K.’s now defunct Sustainable Development Commission, in the forward to the 2015 World Nuclear Industry Status Report.
“It may seem strange to think about the construction of more nuclear plants at a time of low natural gas prices and slow load growth,” Korsnick acknowledged. “But like other major infrastructure investments, it is critical to anticipate gaps with long-term planning and early investment.”
Korsnick defended cost overruns at the Summer and Vogtle projects, saying the first generation Westinghouse AP1000 models are providing “lessons learned” for future development and that “schedule challenges are not unusual.”
She cited as an example the placement of the 1,000-ton CA20 module in the AP1000. “It took over 15 hours to place it in position for Vogtle 3,” she said. “The same task took less than an hour for Unit 4.”
And thanks to a lucky circumstance — a lower cost of capital than assumed — Summer and Vogtle are “still a very good business proposition, and a better proposition than promised to the customer,” she insisted.
Yet one analyst in the audience noted that Toshiba — which purchased Westinghouse in 2006 hoping to capitalize on a nuclear “renaissance” — has indicated it is quitting the nuclear construction business because of its experience in its current projects. The company is expected this week to announce a write-down of as much as $6.1 billion to cover cost overruns — more than it paid for Westinghouse.
Korsnick responded with a glass-half-full view, noting the company has not indicated it will quit nuclear engineering or procurement.
The Long Game and Short Game
Korsnick said the industry must play “the long game and the short game” — both preserving existing capacity and ensuring the U.S. has the talent and infrastructure to remain a player in the future.
The 2016 World Energy Outlook from the International Energy Agency forecasts an 80% increase in nuclear power generation worldwide by 2040. But nearly two-thirds of the plants currently under construction are using Russian or Chinese designs — largely because the two countries are host to 27 of the 39 plants now being built.
What the U.S. industry could use is something like the carbon tax proposed by what The Washington Post called “senior Republican statesmen” including former secretaries of state George Schultz and James Baker III. Under the proposal, carbon would be taxed at $40/ton, with proceeds returned to citizens: about $2,000 annually in dividends for a family of four, the group says.
Policy Initiatives
Even supporters of a carbon tax don’t expect it to happen any time soon, however. As a result, the industry’s best near-term hope may be to seek support for additional revenue streams in recognition of its lack of carbon emissions, as the states have begun to do, or its “resiliency” value — nuclear plants’ ability to run for more than a year without refueling; the price hedge it provides as an alternative fuel against a natural gas price spike.
NEI pointed to FERC’s actions to improve price formation. “Accurate price formation in the energy markets is particularly important, because a baseload nuclear plant derives most of its revenue from the energy markets,” Korsnick said.
The group is also looking to RTOs such as PJM, which is planning to release a white paper on resiliency in March that should provide encouragement to the industry. The PJM effort, like New England’s Integrating Markets with Public Policy initiative, is an attempt to get ahead of, or at least catch up to, states looking to take action.
Jobs
For state legislators and regulators, the appeal of retaining an at-risk nuclear plant goes beyond climate change concerns.
According to NEI, a two-unit plant creates the equivalent of 1,000 jobs for 60 years. “When a nuclear plant closes because the markets do not fully value the services they provide, the negative economic consequences of these shutdowns cascade. In many areas, the local nuclear power plant is the economic anchor of the community.”
The 2014 shutdown of Entergy’s 630-MW Vermont Yankee pinched the economy of Vernon, Vt., a town of 1,200, with housing prices and sales in the region falling.
Entergy had paid about $1.1 million in annual property taxes to Vernon, nearly half the town’s tax revenue. Entergy’s “tax stability payments” to aid the transition ratchet down before ending after 2022.
Dominion’s Kewaunee plant had provided $350,000 in annual utility tax revenues for Carlton, Wis., more than half of its budget. The closure of the plant triggered a tax hike on residents and a fight over the tax assessment of the 900-acre plant site on Lake Michigan.
New Role for Nukes
While the industry seeks to prevent more plant closings, it also is looking at changing its role to complement intermittent renewables.
“Some [plants] will make electricity around the clock. Others will produce electricity when it’s needed, then produce other products when it is not,” Korsnick said. “Some will supply the transportation market. Nuclear electricity will charge batteries, and nuclear process heat will make alternative fuels. Some reactors will make fresh water. Some will drive industrial production. Some reactors might even produce energy from today’s used fuel, reducing the disposal burden.”
Stakeholders expressed concern over the costs of replacing a phase angle regulator that failed at Consolidated Edison’s Ramapo substation last June.