Dive Brief:
- The trend of retirements and financial woes of the United States nuclear fleet is a result of market failure and the weakness of the merchant generator business model, according to panelists at the U.S. Energy Information Administration's annual conference.
- Panelists from the nuclear industry and analysis firms pointed to full compensation for the benefits of nuclear and potential policy intervention similar to subsidies in New York and Illinois as possible avenues for keeping those plants afloat.
- The panelists did acknowledge the likelihood of new nuclear buildout is unlikely, with the exception of small modular nuclear reactors.
Dive Insight:
By now, nuclear generation's struggle is a familiar story in the power sector.
Much of what was said at the EIA's nuclear panel has been said many times over: Cheap gas prices, subsidized renewables and high operating costs have made nuclear uncompetitive in wholesale power markets. Those factors are also impacting the larger merchant generation model, putting pressure on all types of independent generation.
"I’m blaming the market to some extent for nuclear’s problems, and the merchant model," said Edward Kee, owner of Nuclear Economics Consulting Group (NECG) and panelist.
U.S. wholesale power markets right now favor the lowest-cost resource, and don't take into account many public benefits of certain resources, such as zero-carbon generation. But panelists said the trend toward a deep decarbonization in some states and efforts to hedge against volatile natural gas prices could provide a good excuse for utilities to argue for the nuclear plants' survival.
Some of the problems stem from the fact that "short-term market prices would send signals to build new capacity," Kee said. "That hasn't worked out so well,"
"The markets only look at the short-term bits," he said. "They may result in short-term prices that may be higher than the long term costs."
Other panelists spoke in favor of a sort of carbon price and zero emission credits similar to ones in place in New York and Illinois. Those ZEC credits, however, have met hefty backlash from generators who fear depressed power prices.
The Department of Energy is also reviewing the grid to ascertain if subsidized generation, i.e. renewables, are pushing coal and nuclear plants offline. The study is due in July.
It's doubtful if nuclear plants can stay online without the help of some kind of government intervention, the panelists suggested. Carbon pricing and state-driven energy policies are key to their survival.
"I don't think we're going to see a national energy policy in the next 10 years," said Exelon's Vice President of Northeastern operations, Chris Mudrick. "So we're going to have to depend on states and how much they value our resources."
