Monday, July 25, 2016

No Country for Old Nukes? Mike Twomey Guest post

Vermont Yankee

In a scene from Cormac McCarthy's novel, No Country for Old Men, a professional assassin taunts his rival (who is cornered, defenseless, and about to meet his maker) with the following query:

"If the rule you followed brought you to this, of what use was the rule?"

It is a profound question intended to raise doubts about the decisions we make, the principles we follow, and the assumptions that guide our behaviors.  A version of this concept is applicable to a wide range of situations:  If the road you traveled brought you to a negative outcome, was it the right road? (Where could you have made different or better decisions?)  Or, in the positive:  If the road you traveled brought you to a positive outcome, it was the right road. (Do not waste your time or energy second-guessing the seemingly unhelpful detours along the way.)

I work for one of the largest nuclear operators in the U.S. and my responsibilities over the last several years have included advocacy on behalf of the continued operation of nuclear plants in New York and New England.  Working with a large team, this effort has involved complex, technical presentations to state and federal agencies with jurisdiction over the related matters that affect the licenses under which the nuclear plants operate, as well as extensive stakeholder outreach to educate the public, the media, elected officials, and others about the important benefits of nuclear power, from an electric reliability perspective, from an economic perspective, and from an environmental perspective.

Over the last six or seven years, the wholesale market for electricity has dramatically changed due to persistent low natural gas prices.  In most "organized" markets (New York, New England, Mid-Atlantic, for example), the price for power typically follows the price for natural gas.  Therefore, as the price for natural gas has plunged, wholesale power prices have also plunged to historic lows.

While wholesale power prices have plunged, the cost to run a nuclear power plant has increased, for a variety of reasons.  You do not have to be a finance professional to conclude that increasing costs and decreasing revenues will eventually lead to unprofitability.  Faced with these grim economic prospects, in 2013, Entergy announced the retirement of the Vermont Yankee Nuclear Power Station in Vernon, VT.  Vermont Yankee delivered electricity to the New England electric grid for the last time on December 29, 2014, ending a more than 42-year run of providing clean, reliable energy, employing more than 600 nuclear professionals, and paying millions annually in state and local taxes.

Due to the same economic forces that led to Vermont Yankee's closure, Entergy also announced the retirement of the Pilgrim Nuclear Power Station in Plymouth, MA in May 2019.  Pilgrim produces more than 80% of the carbon-free energy generated in Massachusetts.  In addition to inflicting the same type of economic harm in and around Plymouth that Vermont Yankee's retirement inflicted on southern Vermont, Pilgrim's retirement will make it very difficult for the Commonwealth to meet its legal obligation to reduce greenhouse gases.

During the last ten years, while we have been seeking federal (and, in some cases, state) approvals to continue to operate our existing nuclear plants, many federal and state officials have separately been pursuing efforts to reduce carbon emissions.  These efforts have included federal agency actions (most notably, the EPA's Clean Power Plan) and various state actions, including legislation, agency actions, and "encouragement" provided to utilities to take steps to reduce electric sector carbon emissions (e.g., the recent multi-state "clean energy" RFP issued by utilities in several New England states).

In general, these federal and state carbon reduction efforts have focused on providing significant subsidies and/or long term contracts to renewable energy sources, primarily wind and solar.  But, these carbon reduction efforts have not included any proposals to support the continued operation of existing nuclear facilities.  For example, the Clean Power Plan provides no incentives to states to maintain their existing nuclear plants.  And, the multi-state "clean energy" RFP issued by several New England utilities in 2015 excluded existing nuclear facilities from participating.  In short, carbon reduction advocates have tended to be single-minded in their objective: Increase the use of renewable energy.

According to data from ISO-New England, reliance on natural gas for electricity production in New England more than tripled from 2000 to 2015 (15% to 49%).  During that same period, contributions from hydro resources and renewable energy resources remained essentially flat (7% and 8-9%, respectively).  Nuclear also remained essentially flat (31% to 30%), with uprates and increased availability offset by Vermont Yankee's retirement.  The big declines have come in the use of oil-fired (22% down to 2%) and coal-fired (18% to 4%) generation.  And, from 2000 to 2014, New England saw steady reductions in CO2 emissions as natural gas-fired plants replaced oil- and coal-fired plants.

In 2015, however, Vermont Yankee's retirement increased New England's CO2 emissions by 5 percent, or more than two million metric tons.  The reason? Natural gas-fired generation replaced Vermont Yankee's output.  A similar outcome followed the retirement of the San Onofre Nuclear Generation Station in California, which resulted in meaningful increases in CO2 emissions.  Future nuclear plant retirements can be expected to produce the same results.  This means that we can expect increased CO2 emissions.

The takeaway for New England, therefore, is this:  The mix of federal and state actions (and inaction), combined with market forces, has led to (1) substantially increased reliance on natural gas-fired generation, (2) nuclear plant retirements followed by increased CO2 emissions, and (3) no meaningful increase in renewable energy's contribution to the grid. ISO-New England, the non-profit, independent entity responsible for maintaining the reliability of the region's electric grid, identified the following challenges in its most recent report:
  • Inadequate natural gas pipeline infrastructure is at times limiting the availability of gas-fired resources or causing them to switch to oil, which is creating reliability concerns and price volatility, and contributing to air emission increases in winter.
  • Substantial nongas generating capacity is retiring, limiting the options for reliable grid operation when natural gas infrastructure is constrained.
  • The weather-dependent output from wind and solar resources and the increase in [distributed generation] adds complexity to how the ISO must operate the power system to maintain reliability.
  • Expensive transmission infrastructure upgrades are needed to connect more wind and hydro resources.
  • Efforts to meet state policy goals to inject more clean energy into the system through long-term contracts may undermine confidence in the markets and inhibit future investment in competitive power resources.
We are left to ponder the consequences of a single-minded focus on supporting renewable energy and a lack of support for the existing nuclear fleet.  Even if you disagree about the relative merits of carbon reduction efforts, it is inarguable that additional nuclear plant retirements will lead to increased CO2 emissions.  Moreover, the increased dependence on natural gas-fired resources reduces fuel diversity and exposes customers to potential price volatility.  An important additional fact to recognize is that, once a nuclear plant retires, there is no opportunity to bring that plant back into service (it is not technically impossible, but it is infeasible from a regulatory standpoint and an economic perspective).

If we are, through application of a "renewable energy is the only future" rule, moving toward an electric future of increased carbon emissions, less grid reliability, insufficient fuel diversity, and increased consumer prices, then stakeholders (customers, elected officials, businesses, etc.) will be entitled to ask:  If the rule you followed brought you to this, of what use was the rule?

There is another path to follow.  In New York, the Public Service Commission is considering the adoption of a program that would compensate nuclear facilities for their non-carbon emitting attributes.   It would be the first in the U.S. to explicitly -- and financially -- acknowledge the importance of the existing nuclear facilities to carbon reduction goals.  All who desire a future electric grid that is clean, reliable, and affordable should applaud New York's efforts.  And, we should decline the pitch of renewable energy advocates who peddle the fantasy that wind and solar alone can power the grid.

About the author:

Mike Twomey is Vice President for External Affairs at Entergy. He is involved in many areas of negotiation and outreach concerning the nuclear plants.  His most recent guest post at this blog was The Replacement for Vermont Yankee Was...Natural Gas.

This post first appeared on LinkedIn and is republished by permission.


seth said...

Nobody can run a gas plant on what the "market" is paying these days. Look at the EIA's cost per kwh of new gas investments.

There are enormous subsidies available to gas producers for their capacity that let them stay afloat providing load balancing for nearly 100% subsidized wind/solar.

I doubt there are many planning new capacity additions in this "market".

Well deserved blackout's await the citizen that elected the politicians that are letting it all come down on their heads.

Travelogue for the Universe said...

Thank you for explaining what Vermont Administration wants to ignore. Canadian Gas Metro has bought the power companies and natural gas (fresh fracked from Alberta). Now the Vermont public (or not so public) board is crammed a pipeline Through Addison county. They said to serve 3,000 of 17,000 homes in Addison County. Quebec said no to pipeline to the Sea. New York said no to a pipeline. Vermont Administration welcomed fracked gas after lawyering Yankee to death. Now environmentalists have the dirty reputation. Being blamed for delays with peaceful protests. If you could see the crooked path of the pipeline construction, you would wonder, as I do, what if big power lines energize the pipeline and it goes from 50·F to 40 below? Will it all hold?