U.S. Nuclear Power Plants are Shuttering

Five U.S. nuclear power plants have shuttered in the past 5 years and more are on the way due primarily to competition from low cost natural gas, onerous regulations from the Nuclear Regulatory Commission (NRC), low prices in the regional market for electric generating capacity and artificially low prices caused by the production tax credit for wind power. Crystal River in Florida, Kewaunee in Wisconsin, and San Onofre in California were retired in 2013. More recently, Vermont Yankee retired in 2014, and Fort Calhoun in Nebraska retired last month. Several other nuclear plants have announced plans to retire: the Clinton plant in central Illinois is expected to retire by June 2017, followed by the Quad Cities plant in northwestern Illinois by June 2018, and both the Oyster Creek plant in eastern New Jersey and the Pilgrim plant in eastern Massachusetts are expected to retire in 2019. Further, Pacific Gas and Electric has announced that the Diablo Canyon plant in California, consisting of two units, will be retired by the time their current operating licenses expire in 2024 and 2025.

When plants are retired, electric utility companies must decide how to replace their power. Power at the San Onofre Nuclear Generating Station and the Crystal River plant was replaced primarily with natural gas-fired generation. Kewaunee’s generation was replaced by coal-fired generation while Vermont Yankee’s generation was replaced by purchasing electricity from other states and Canada. The following graph shows how in-state generation was replaced in each affected state after these four nuclear plants were no longer operating, but not necessarily officially retired.

Reasons for Shuttering of Nuclear Power Plants

A few years ago, it was assumed that most existing U.S. nuclear plants would easily obtain 20- or 30-year license extensions from the NRC, which would carry the bulk of the U.S. nuclear fleet into the 2040s and beyond. However, extremely long and uncertain reviews by the NRC have resulted in early retirements rather than life extensions. Two units at the San Onofre Nuclear plant in California were shuttered because of the NRC not granting life extensions after extensive work had been done on the units. The NRC reviews were taking so long that the plant operators had to close the plants due to the expense of keeping them in operating condition and purchasing power to replace their output.

Electricity deregulation also caused problems for nuclear plants. Merchant power plants, whose rates cannot be recovered through regulated cost-of-service rates, have found it difficult to compete with low natural gas prices and increasing regulations. The Kewaunee Power Station and the Vermont Yankee plant are both merchant plants. The Vermont Yankee nuclear power plant had supplied 75 percent of Vermont’s power. In retiring Vermont Yankee, Entergy cited a number of financial factors, including: low wholesale electricity prices—driven in part by lower natural gas prices, which have reduced the profitability of the plant— increasing capital costs for maintaining the unit, low prices in the regional market for electric generating capacity, and increased costs to comply with new federal and regional regulations.

Source: Institute for Energy Research
Date: Nov 3, 2016