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Page added on March 25, 2017

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America’s Nuclear Sector Braces for More Closures

Alternative Energy

America’s nuclear sector is under immense economic pressure – a consequence of both its high operating costs and low natural gas prices anchored under US$3.00 per million BTU. As a result, the long-term profitability of America’s fleet of over 60 nuclear plants is at risk, which has hastened the retirement of some nuclear assets from the grid – and left others on the verge of closure.

Casting further doubt, the Trump administration has not, thus far, reaffirmed nuclear’s importance to America’s energy strategy – though has appeared unequivocal in its support for reinvigorating America’s waning coal-fired generation assets.

In this respect, S&P Global Ratings believes that although nuclear power will continue to play a crucial role in America’s generating grid, the industry’s outlook could deteriorate further – with diminished margins likely to continue during 2017 and 2018 amid weaker power demand growth. In this respect, while the industry may be grateful of any policy developments to allay these concerns, we expect the closures to continue.

Natural gas threatens nuclear profitability

A perennial nemesis of the nuclear industry is the natural gas price; and its persistent decline in recent years has left many nuclear generators struggling to compete in wholesale markets. Although nuclear has enjoyed temporary respite in the past quarter as a consequence of a marginally higher gas price, the longer-term outlook remains doubtful. We rate to an assumption that the Henry Hub price point will stay at approximately US$3.00 per million BTU until at least 2019, and we believe – along with the ISOs themselves – this will be coupled with lower power demand growth.

While intermittent pricing spikes could alleviate some nuclear assets’ profitability, more generally, the industry may not feel reassured. Indeed, many merchant generators are facing decisions about whether to embark on costly re-licensing in the near future – hefty financial requirements that may be difficult to justify if power prices do not recover.

What’s more, slowing net power demand growth has also weakened nuclear assets’ market position. Caused by both gains in energy efficiency and renewables’ increased penetration throughout the United States, the continued fall in demand growth has been a crippling factor for nuclear generators that rely heavily – indeed, almost wholly – on high energy margins to operate efficiently; low margins, even with a robust capacity market, makes bleaker the outlook for nuclear.

These pressures have led to a flurry of nuclear generator closures, and others remain at risk. For instance, the low price environment has hastened Louisiana-based energy company, Entergy Corp.’s exit from the merchant nuclear market: with its Palisades plant in Michigan set for closure in 2018, this coming on the heels of its sale of the FitzPatrick plant to Exelon.

Meanwhile, FirstEnergy Solution Corp. has been unable to sign a power purchase agreement (PPA) for its ageing Davis-Beese plant in Ohio. Moreover, if the owner is unable to secure subsidies, the plant’s future is uncertain.

Is President Trump A Boon for Nuclear?

Given these fears, Donald Trump’s elevation to the nation’s highest office has provoked speculation about whether his administration will come to nuclear’s rescue.

There could be some positive outcomes for nuclear as Trump has pledged to tackle the industry’s unwieldy regulatory costs and, more generally, to return industrial jobs to America’s heartlands, which would significantly expand power demand.

Whether nuclear is the intended beneficiary of his industrial strategy seems unclear; in fact, it could be disadvantaged by Trump’s endorsement for revitalising the coal industry.

Indeed, plans to reverse job losses caused by the closure of 100 gigawatts (GW) of coal assets over the past seven years could depress wholesale energy prices further; while we don’t expect new coal assets to be built, existing generators may last longer than under an Administration with a greater focus on environmental regulations.

Of course, nuclear power remains a vital contributor to the grid – still accounting for almost 20 percent of America’s electricity generation. Yet, building more nuclear reactors in the mid-term appears unlikely. Any recently-opened nuclear plants – approved for utility ownership during a period of higher power prices – seem less economical now.

Given that the low natural gas price has played a significant part in nuclear’s decline, President Trump’s administration may offer only partial relief. But, regardless of who resides in the White House, the outlook for nuclear is not likely to reverse in the mid-term, absent subsidies from states with fledgling nuclear units. With this in mind, we await policy developments aimed at improving nuclear’s performance, although their efficacy remains to be seen.

Michael Ferguson is Director, U.S. Energy Infrastructure with S&P Global Ratings.

RIGZONE



25 Comments on "America’s Nuclear Sector Braces for More Closures"

  1. makati1 on Sun, 26th Mar 2017 12:50 am 

    Shut them all down. Oh, wait! That would cost trillions of dollars. Who is going to pay the bill? Guess! YOU!

    Many of the 100+ reactors in the U$ are well over their design limits.

    “The average age of U.S. commercial reactors is about 36 years. The oldest operating reactors are Oyster Creek in New Jersey, and Nine Mile Point 1 in New York. Both reactors entered commercial service on December 1, 1969. The newest reactor to enter service is Tennessee’s Watts Bar Unit 2, which began operation in 2016. The next-youngest operating reactor is Watts Bar Unit 1, also in Tennessee, which entered service in 1996.

    The U.S. Nuclear Regulatory Commission (NRC) licenses U.S. commercial nuclear reactors for 40 years. Prior to termination of the original license, companies may apply to the NRC for 20-year license extensions.”

    https://www.eia.gov/tools/faqs/faq.php?id=228&t=21

    The fun is only beginning…

  2. Davy on Sun, 26th Mar 2017 1:15 am 

    Makati not a bad thing on the other hand being able to shut these plants down while there is still a functioning economy to do it. You didn’t think that one out did you?

  3. Cloggie on Sun, 26th Mar 2017 3:40 am 

    America’s nuclear sector is under immense economic pressure – a consequence of both its high operating costs and low natural gas prices anchored under US$3.00 per million BTU. As a result, the long-term profitability of America’s fleet of over 60 nuclear plants is at risk, which has hastened the retirement of some nuclear assets from the grid – and left others on the verge of closure.

    Good news. There is only one sort of energy generation worse than fossil and that’s nuclear.

    Act like Germany and close down the suckers. Next replace fossil with renewable over the coming 5 decades.

    Oh and for the nuclear engineers there is hope for alternative employment:

    https://www.youtube.com/watch?v=Wlxz-KzebbQ

    [0:39] nuclear engineer ending up in the renewable business.

  4. GregT on Sun, 26th Mar 2017 3:46 am 

    We don’t have viable solutions for long term storage of the nuc waste already accumulated. A functioning economy is kind of a moot point. Besides, a functioning economy requires the electricity generated by those 100+ reactors. A catch 22.

  5. deadlykillerbeaz on Sun, 26th Mar 2017 4:53 am 

    We’re not in Kansas anymore, it’s down the rabbit hole.

    The complete arsenal of nuclear weapons between the US, Russia, China, Britain, France, Israel, India, Pakistan and whomever else maybe totals 25,000. Regardless of the number, it’s all there.

    A few hundred nuclear power plants is icing on the cake.

    An aircraft carrier uses about 100 lbs of uranium to power the carrier for one year.

    How many tons of oil would the aircraft carrier need if it was using a power plant fueled by oil or coal?

    The choice is obvious. The same goes for a nuclear powered submarine.

    Use uranium to fuel power plants so there can be more electricity.

    As someone suggested, if nuclear power plants meltdown, blow them up with a nuclear bomb. What difference will it make?

    Ecologically, it is the thing to do.

    There have been more than 1500 tests of nuclear bombs the past 60 years or so, the earth is still here. The gamma rays do cause malignant neoplasms.

    Life still goes on.

  6. makati1 on Sun, 26th Mar 2017 5:04 am 

    Nuclear electric is ~20% of the total electric generated in the U$. Difficult to eliminate that without serious problems. Not going to happen until …

  7. Cloggie on Sun, 26th Mar 2017 5:24 am 

    Nuclear electric is ~20% of the total electric generated in the U$. Difficult to eliminate that without serious problems. Not going to happen until …

    Mwaoh…

    https://en.wikipedia.org/wiki/List_of_countries_by_electricity_consumption

    kwh/year/capita

    USA 12077
    Germany 6600
    Netherlands 6346
    Croatia 3933

    Life in Germany and the Netherlands is fine and so is Croatia (verified that personally last Summer).

    America could easily live with 20% less electrickery.

  8. makati1 on Sun, 26th Mar 2017 5:46 am 

    Cloggie: “America could easily live with 20% less electrickery.”

    Could but won’t until they are forced to.

    Philippines. ~100 million people at ~700 kwh/year/capita. Proves how low you can go and still have a good life. ^_^

  9. dissident on Sun, 26th Mar 2017 7:03 am 

    Funny how all the people endlessly yammering about collapse are the ones that want the collapse to happen faster.

    I hope that US political and business leaders have enough of a clue that those natural gas prices will not stay low forever. In fact, it is hard to see how they will stay low past 2025. Art Berman has debunked all the ludicrous reserve estimates of shale gas.

    So shutting down nuclear power plants will mean that America will be in a frenzy to burn coal and oil in about a decade. Yeah, real smart and economical. And don’t invoke solar and wind if you want to have any credibility.

  10. Boat on Sun, 26th Mar 2017 9:56 am 

    Clog,

    The US is growing renewables at 1 percent per year of the electricity market While that may not sound impressive it is one heck of a big market. Losing credibility over what is actually happening on the ground is a natural state of affairs in my 4 years on this site.

  11. Cloggie on Sun, 26th Mar 2017 10:05 am 

    The US is growing renewables at 1 percent per year of the electricity market While that may not sound impressive it is one heck of a big market.

    The scale of he market is irrelevant. In big markets there are proportional more people help realize the transition.

    In reality it is a matter of policy decisions, not the size of a country/market.

  12. Boat on Sun, 26th Mar 2017 10:14 am 

    Clog,

    Pricing per MW is what’s driving renewables to capture market share and pressure closures of coal and nuke plants. Solar and wind simply are cheaper now in many areas of the US.

  13. Midnight Oil on Sun, 26th Mar 2017 10:18 am 

    It’s a contagion, First Sears & Roebuck… And now this! If we are lucky a going out of business sign will be posted on the White House lawn…Making America Great….the Swamp is winning, LOL

  14. Davy on Sun, 26th Mar 2017 10:28 am 

    “The scale of the market is irrelevant” & “In reality it is a matter of policy decisions, not the size of the country or markets”. What?

  15. Davy on Sun, 26th Mar 2017 10:31 am 

    “Wind and solar are simply cheaper in many parts of the US”. Only because they are an addition to the fossil fuel system. Total cost are not represented in your thinking.

  16. Boat on Sun, 26th Mar 2017 10:42 am 

    Davy,

    I would agree with that. If you look at a nat gas US map you will see nat gas power plants covering most of the nation. It’s coal and nuke that is in trouble because of pricing. I suspect nat gas will still play a big roll even decades from now.

  17. Bob on Sun, 26th Mar 2017 10:46 am 

    It’s hard to believe that Nuke plants can be so expensive, uneconomic and dangerous and still be long-lived. But here we are. With any luck wind and solar will put them in their coffin forever. And, hopefully, we won’t have any meltdowns before they are gone. No matter what you may think about wind/solar, at the end of the day it will be all we will have! Keep that thought in mind.

  18. Kenz300 on Sun, 26th Mar 2017 10:46 am 

    Wind And Solar Now Cheapest Unsubsidized Electricity Sources In The U.S.
    http://seekingalpha.com/article/4031497-wind-solar-now-cheapest-unsubsidized-electricity-sources-u-s

    World Energy Hits a Turning Point: Solar That’s Cheaper Than Wind – Bloomberg
    https://www.bloomberg.com/news/articles/2016-12-15/world-energy-hits-a-turning-point-solar-that-s-cheaper-than-wind

    Solar cheaper than natural gas and coal. Climate Change will be the defining issue of our lives.

    Nuclear energy is too costly and too dangerous.

    Fukishima and Chernobyl have shown us how costly and how dangerous….

    Solar is the future No monthly fuel costs. Solar WINS long term. fossil fuels are the past
    Batteries are a game changer. Solar with batteries winds over nat gas, coal and nuclear.

    Batteries allow for solar power 24/7, game over.

  19. penury on Sun, 26th Mar 2017 11:26 am 

    The problem of course is that the U.S. and other nations cannot afford to shut down the nuclear power plats, not for the loss of energy but the cost of closing the plant. The easy way would be like Chernobyl bury the sucker in concrete,walk away and report situation solved.Or like Hanford in the U.S. billions of dollars, fifty years a lot of sick people and still twenty years of work ahead to close it. The total cost of nuclear power will never be known by the people. We have been paying the cost in health wealth and well being since the forties and are not done yet.

  20. Boat on Sun, 26th Mar 2017 12:01 pm 

    Kenz,

    Solar and wind seem to have proven to be cost effective up to 30 percent saturation. Then the costs start to rise. Nat gas ramping up and down is the low cost solution because we use so much of it already. Battery solutions may happen in the future if electric cars take off and the price of batteries drops significantly. For now battery solutions are a work in progress. Not a mainstream solution.

  21. Anonymous on Sun, 26th Mar 2017 1:17 pm 

    Rigporn, home to some of the dumbest writers working in the amerikan disinformation industry today. Its like reading the work of a simple-minded child, isn’t that right boat-tard?

    One, amerika has over 100 nuclear power stations, not ’60…ish’

    Two, the amerikan nuclear industry’s numerous problems would exist regardless of the cost of NG. Nuclear had problems when NG was ‘expensive’, and they still do now that NG is ‘cheap.

    The only thing ‘threatening’ nuclears ‘profitability’ is nuclear itself. The very idea that nuclear can, or should be made ‘profitable’, is itself, a bizarre proposition. Maybe rigporn should stop and think for 10 seconds, what exactly would change if nuclear was ‘more profitable’ ?

    Besides executive bonuses that is….

  22. GregT on Sun, 26th Mar 2017 3:46 pm 

    “America could easily live with 20% less electrickery.”

    Not if Trump plans on making America great again by bringing industrial manufacturing jobs back home. America would need to increase electricity usage dramatically, and much of that increase would need to come from coal. Not that it really makes much difference in the big scheme of things anyways. The US is currently exporting it’s emissions overseas in exchange for cheap consumer goods..

    “We’re a fossil-fuel-exporting super­power that goes around lecturing the rest of the world about cutting emissions,” said Paul Bledsoe, who was an adviser on climate change during the Clinton administration. “The United States is reducing its domestic coal use and then simply exporting some of those emissions abroad.”

    https://www.washingtonpost.com/world/us-exports-its-greenhouse-gas-emissions–as-coal-profitable-coal/2015/10/08/05711c92-65fc-11e5-bdb6-6861f4521205_story.html?utm_term=.89a878176bf6

  23. makati1 on Sun, 26th Mar 2017 6:10 pm 

    LOL, GregT, we both know that Trump’s plan to “make America great again” is never going to happen.

    Americans waste at least half of the electric they use. How many of those little ‘instant on’ pilot lights are on 24/7/365 on every techie toy in their house? How many have huge refrigerators or even doubles and maybe a chest freezer, all with automatic defrosters? 72″ TVs? Old incandescent light bulbs in rooms where the lights are left on even when no one is in them? Probably even more waste that I don’t remember because I am not exposed to it anymore.

    Yes, America, the lying braggart, sent most of its dirty factories to China and now blames them for the pollution. Maybe Mother Nature will send a nice EMP from the sun and take it all down? Now wouldn’t THAT make America great again! lol

  24. SOB on Sun, 26th Mar 2017 7:33 pm 

    Couple of comments:
    1) Nuclear decommissioning costs are already collected during operation of the plant. So the nukes clean up there sites, there already are over 6 shutdown plants completely cleaned up (e.g., Maine Yankee). The one exception is the used nuclear fuel that the industry paid the government to collect but failed to meet their commitments.
    2) If you think solar, wind, and batteries are the answer, why don’t you check out Germany’s CO2 emissions. Every time they close a nuclear plant there is an uptick as the coal plants pick up more business.
    3) If you think nuclear will go away, you probably are correct for the U.S., but China does not appear to think so and they will be the leaders in nuclear et al. industries in about 20 years

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