The Future of Nuclear in RTO Areas

RTO areas in North America.  Based on FERC data

FirstEnergy plans to close or sell its nuclear plants

In a recent post at ANS Nuclear Cafe, Will Davis wrote about some changes that may happen  in the nuclear landscape in the near future.  He reported on statements made by FirstEnergy CEO Charles E. Jones at the Edison Electric Institute financial conference on November 7.

Here's a direct link to Jones' presentation: FirstEnergy: Transforming to a Regulated Company As Davis describes in his article, FirstEnergy is attempting to get out of the competitive electricity markets and become a fully-regulated utility. If it cannot support marginal plants in competitive markets, it will sell or shut down those plants.

Looking at the Earnings Per Share slide (slide 12 of the Jones presentation), you can see why FirstEnergy might get out of the competitive market.

• At a "basic Earnings per Share" level,  Competitive Services are losing around $2.50 per share.  
• Adjusted with "special items," Competitive Services are earning around $0.50 per share.  
• Regulated Distribution and Regulated Transmission are always in the black, with or without "special items."  
• Regulated Distribution, for example, earns around $1.80 per share, overall.

This is a big deal, because FirstEnergy operates in Ohio, Pennsylvania and New Jersey.  Selling its nuclear plants (and coal plants) will be a major change and disruption.  I encourage you to refer to the Davis article for more specifics on this, and for other links.

Is FirstEnergy following the Entergy exit pattern?

In all the excitement about Entergy announcements of Vermont Yankee closing, Pilgrim closing, and the sale of Fitzpatrick to Exelon,  it is easy to overlook the fact that Entergy may be following a similar strategy of exiting the "deregulated" areas.  In December, 2015, Entergy announced the sale of its gas-fired plant in Rhode Island to Carlyle Power Partners.

At this point, except for Indian Point in New York, I think all Entergy power plants in deregulated areas are either slated for closing or slated for sale.  To me, this looks like the same "exit the deregulated areas" strategy that FirstEnergy is now pursuing.  Both companies have extensive regulated operations, as well as operations in deregulated areas.

Oops: I should have said Entergy has been exiting its holdings of plants in the Northeastern RTO areas.  Entergy Wholesale Commodities also owns Palisades in Michigan. http://entergy.com/ewc/

RTO areas

Clearly, there's a lot to say about these exits, and about the implications for our power plants of all kinds. And of course, if you know me, you know my deep and abiding cynicism about the deregulated areas: see The Oddness at the Heart of RTO.  These areas seem to be more about "tweaks R us" than about market forces.

For now, I will reprint my comment on the Davis article. This subject needs far more discussion than is possible in a single blog post.

It's not just about the price per kWh

Will

Thank you for this article. The RTO areas are basically stacked against nuclear and other baseload plants.

People will say: “Yeah, well, those plants just can’t compete with cheap natural gas.” That is not the case. Actually, in RTO areas, many or most natural gas plants get much of their income from selling “capacity” and “ancillary services,” not from selling kWh. Look at this slide from one of my articles: Payments for various types of power plants on the New England grid

As you can see, nuclear gets most of its income from selling kWh (gold bars) while NG/Oil GT (gas turbines) get around 80% of their income from “capacity” and “auxiliary” payments (blue and brown bars). That’s because the gas plants don’t sell as many kWh as nuclear sells, and you can also see that if the price of a kWh goes down but the capacity payments go up…the gas plants are all right. The common description of the “low price of natural gas on the grid” accounts for low-price sales of kWh, which are nuclear energy’s life and breath. It doesn’t account for all the ways the grid supports low kWh prices and makes up the difference…for plants that don’t run very much.

This has also been called the “search for the missing money.” Natural gas plants, without capacity payments, would have to charge more per kWh or go out of business. But…most RTO areas supply the gas plant’s “missing money” in a way that hurts any high-capacity-factor plant on the grid.

(Note: CC is combined cycle, ST is steam turbine, GT is gas turbine.)

- See more at: http://ansnuclearcafe.org/2016/11/16/november-news/#sthash.EyWLASTY.dpuf

Exelon Buys FitzPatrick

Exelon has just purchased FitzPatrick  from Entergy.  More information at this Times Union article.

Fitz will keep operating!

FitzPatrick

Mostly about Vermont Yankee: The Boston Meeting on the future New England Energy Mix

Looking forward to Nuclear Going Forward

On June 24, in Boston, Bloomberg BNA and Nuclear Matters co-sponsored an event about the future of nuclear,  Nuclear Going Forward.  The two organizations are holding a series of these joint events.  The June meeting was A Chain Reaction: The Role of Nuclear Energy in New England's Energy Mix.

The June meeting had an absolutely stellar line-up of speakers, including nuclear plant owners and nuclear start-up companies.  In this meeting, nuclear energy (current and future) was not compartmentalized, but rather presented as a whole. And the conference focused on New England!  I was delighted to go to it.

I wrote about my plan to attend the meeting in this blogpost, and you can see the videos of the meeting at the Nuclear Going Forward website.

Vermont Yankee and Nuclear Going Forward.

There were three main sections to the meeting.  I will discuss only the second section: a panel focused on existing power plants.

The panel started with extensive discussion about Vermont Yankee (video below). Topics included the reasons for Vermont Yankee shutting down, the consequences of Vermont Yankee shutting down, and the risk factors for other plants in the Northeast. Many of the statements made on this panel will be familiar to readers of this blog.  However, there were some factors that were new to me.

What is a "single plant? I knew that single, stand-alone plants are more vulnerable to being shut down. However,  I didn't remember that Millstone 2 and 3 have different vendors. They do not have the economies of "sharing" (operators, training, etc.) that most dual-unit plants can  boast.   They are more vulnerable than other dual-unit plants because their labor costs are higher.  It would be a disaster for the New England grid if these plants closed.

Do capacity payments help? I had been heartened to see that the forward capacity auction has been yielding higher prices.  That fact, coupled with grid-level "pay for performance," seemed to favor nuclear plants.  However, Mohl of Entergy pointed out that nuclear plants run with a very high capacity factors.  Most of their revenue comes from kWh produced, and only a  small part of their revenues are capacity-type payments (capacity and pay-for-performance).  Nuclear plants receive 15-20% of their revenue through the capacity auctions.  Plants that run a small percentage of the time get much higher percentages of their revenue from the capacity auctions.  In other words, increased prices at the capacity auctions don't help nuclear plants all that much.

Laughing all the way to the bank? During the Polar Vortex, prices on the grid soared and merchant plants gathered a lot of revenue.  All businessmen like extra revenue. Still,  Mohl of Entergy pointed out that this kind of volatility of energy prices is not good for anyone.  Businesses that can't predict their costs will begin to leave the area.  Consumers will have less to spend in the area as their utility bills take up more of their income.  The result can be a downturn. General economic downturns aren't good for consumers or for energy producers.  In other words, during the polar vortex, merchant plants weren't really laughing all the way to the bank.

Forward with Nuclear Going Forward

Nuclear energy is good for

• reliability (of course), 
• economic sustainability (prices are low and not volatile), and 
• environmental sustainability (no carbon, no acid gases, small quantity of mined material compared to fossil fuels of all kinds).  

The general consensus of the meeting, however, is that unless the grid begins to value these benefits, nuclear may have a rocky future.

Endnotes: 

About the meeting as a whole

You can see videos of the entire meeting at this link: http://nuclear-going-forward.bna.com

The first section of the meeting was an interview with John Kotek of DOE about DOE's funding for nuclear-based research.

The second section was a panel discussion about current plants.  The panelists were:
Judd Gregg, former Senator from New Hampshire, now with Nuclear Matters
William Mohl, President, Entergy Wholesale Commodities;
Daniel Weekley, VP, Corporate Affairs, Dominion Resources
(This blog post covered this section of the conference.)

The third section was a panel which included executives from forward-looking nuclear companies, such as LightBridge and NuScale.

Chris Gadomski (Lead Analyst, Nuclear) from Bloomberg New Energy Finance was the moderator for all sections.  As you can see in the videos, Gadomski asked excellent questions. He kept the meeting interesting and (miracle!) on schedule.

Attending Nuclear Going Forward

It was difficult to get to the meeting.  Appearing at 8:30 a.m. for a meeting in an expensive hotel in Boston's Back Bay is do-able if:

• you live in Boston and know the T
• you have the money to stay overnight in Boston, preferably at an expensive hotel in Boston's Back Bay.  

Neither was true for me.  I left my driveway in Vermont at 5:17 a.m. for what Google describes as a two-hour-and-ten-minute drive if there was only light traffic. I arrived at the meeting room at 9:05.  (Breakfast was over and the first session was starting.) Yeah, traffic was bad.  I wasn't the only one who was late.

Once I got there, it was worth it.  However, the choice of time and place did make me wonder. What audience were the meeting planners hoping to attract?  Why was the meeting set up in this difficult manner?

Rod Adams and Nuclear Going Forward

Rod Adams was also at the meeting, and his blog post about the meeting is here.  He has some interesting observations, including illuminating conversations with panelists.  There are over twenty comments on his post, and I encourage you to read both his post and the comments.

Update: Vermont and Entergy Make Nice

The Agreement and the Comments

This Sunday, my op-ed on the Vermont -Entergy agreement was printed in the Valley News. I will reprint  the op-ed on my blog in a day or so. For now, I encourage you to read it at the Valley News.

In this op-ed, I summarize the agreement between Vermont and Entergy.  I described the four points of the agreement:

1. State and Entergy agreeing to appear together before the Public Service Board
2. Both sides dropping their lawsuits 
3. Entergy making payments to the state 
4. Resolution of some issues on decommissioning 

I encouraged readers to support this agreement before the Public Service Board by commenting on the docket.

Here's the op-ed:

http://www.vnews.com/opinion/10546138-95/column-vermont-and-entergy-make-nice

And here's the docket, where you can read the agreement and you can comment.

http://psb.vermont.gov/docketsand%20projects/electric/7862

Aww heck...here's the comment form, too!

http://psb.vermont.gov/docketsand%20projects/electric/7862


Update: The op-ed was published this morning by Vermont Digger in the Commentary section.  At VTDigger, it has a less catchy title, but one that better reflects the tone of the op-ed:


Entergy settlement before the PSB is good for the state.

The Valley News does not allow comments, but VTDigger often has long comment strings.  I encourage people to comment.

The Art of the Deal: Shaffer at ANS

Howard Shaffer

The Art of the Deal: ANS Nuclear Cafe post by Howard Shaffer

Yesterday, ANS Nuclear Cafe posted Howard Shaffer's blog post The Art of the Deal.  In this post, Shaffer summarizes the Entergy-Vermont deal which will be presented to the Public Service Board. In the hearings about the deal, Entergy AND Vermont state agencies will be in support of the deal. They will mutually support the Public Service Board granting Entergy a  Certificate of Public Good for operation through 2014, based on the agreement. The sight of Entergy and state agencies supporting each other in front of the Public Service Board--Wow. What a wonderful sight that will be.  It surely has not happened since Governor Shumlin was elected!  And now it will happen.

This is truly a New Deal and a Big Deal, and Howard describes it very well.  He also describes the ways the opponents are likely to fight it, and why they are unlikely to win.
At the price of a small spoiler-alert, I want to share some of Howard's conclusions:


Where does this leave the PSB? With an easier task than before.... Now, with the state and Entergy together—...—it will be hard to find something that will not be in the public good. It is expected that the PSB will complete the hearings to give the opponents their “day in court,” and perhaps impose a few administrative conditions, and then approve the CPG.

The opponents can be expected to continue to fight to the end, and to try to make it even more bitter.


But really: read the whole Art of the Deal, not just this excerpt!

Natural Gas and Nuclear: A Local View

The View from the Corner Office

This month, the CEO of Exelon and the CEO of Entergy both gave speeches about the future of nuclear power. As reported in Platts, John Rowe of Exelon spoke about the Exelon/Constellation merger and looked at the future of nuclear. These are his words:

The Calvert Cliffs-3 project is "utterly uneconomic," Rowe said after a speech at the Bipartisan Policy Center in Washington....

"At today's [natural] gas prices, a new nuclear power plant is out of the money by a factor of two," Rowe said, echoing one of the main points of his speech. ".... It's economically wrong. Gas trumps it," he said.

Well, okay, that's clear.

Meanwhile, Entergy President J. Wayne Leonard was honored by the National Wildlife Federation. National Wildlife Federation Honors J. Wayne Leonard with Achievement Award: Entergy CEO Honored for His Commitment to Gulf Coast Restoration, Addressing Climate Change. Some quotes from National Wildlife's description of that event:

With Leonard’s passion, leadership and strong points of view, Entergy has accomplished the following during his 10 years as CEO:

Entergy became the first US electric power company to establish a voluntary stabilization target for carbon pollution emissions and established a $30 million Environmental Initiatives Fund to support internal and external carbon pollution reduction projects. From 2001–2010, Entergy was 14% below its stabilization goals, achieving emission reductions which were 69 million tons below the goals.

The Time-Picayune reported the awards ceremony, partially reprinted by the National Wildlife Federation:

In an emotional speech to executives of the National Wildlife Federation on Friday night, Leonard said his controversial support for what would amount to a carbon tax stems from his attempt to face his own mortality...

"I can think of no time in history when the planet is in as much peril as it is today," he said. "We were not supposed to be facing the possibility of mass extinctions in anybody's lifetime ... but here we are."

These CEOs have very different views of the future of fossil fuel combustion! However, both Leonard and Rowe are CEOs, with CEO-type obligations. Rowe of Exelon faced building an expensive new nuclear plant, and he walked away from it. While he was walking away, he took the opportunity to lob a few cracks at nuclear. Meanwhile, Entergy is committed to low-carbon power, but Entergy recently announced it is going to buy a 550 MW natural gas plant in Rhode Island. Both Entergy and Exelon own fossil and nuclear units.

Such is the view from the corner office.

The View from the Peanut

My own office is a corner. It's a corner bedroom in my house. My view of fossil fuels and nuclear is more limited than the view of the CEOs, but it is also less constrained.

I have always admired George Washington Carver, a man who protected the soil of the South and prepared many products from peanuts, thereby partially weaning the South from cotton. Oh, and did I mention he was born a slave?

Carver said:“When I was young, I said to God, 'God, tell me the mystery of the universe.' But God answered, 'That knowledge is for me alone.' So I said, 'God, tell me the mystery of the peanut.' Then God said, 'Well George, that's more nearly your size.' And he told me.”

Inspired by Carver, I decided to look at two power plants as the examples of nuclear and natural gas: Vermont Yankee and a local combined cycle gas turbine (CCGT) plant in New Hampshire. Not a Big Picture, just two plants.

My blog post comparing the plants is posted at ANS Nuclear Cafe: Gas and Nuclear: A Comparison of Two Local Plants. The post grows out of the Energy Safari course that just finished. Here's a link to the course blog post about the natural gas plant. The course blog post has many excellent pictures, taken by Bob Hargraves.

The Peanut Draws Her Conclusions

Here are some conclusions about the two plants. For a more complete picture, please see the ANS post and the Energy Safari post.

• The natural gas plant is very new, clean and efficient.
• It doesn't take many people to operate a natural gas plant. This is good (efficiency) but also bad (not a good source of employment, unlike a nuclear plant.)
• The economic choice between natural gas and nuclear is not a slam-dunk, even if Mr. Rowe thinks it is.
• Despite the historically low price of natural gas, and the high thermal efficiency of the CCGT plant, the local gas plant is still forced to shut down more often than it would prefer. Its power is among the most expensive power on the grid. Many times, its break-even price is too high for the grid, and the grid operators don't buy its power.
• The CCGT is a good plant for load-following.
• Choosing between natural gas and nuclear is a false choice, anyhow. They are both reliable sources of electricity.
• Fossil fuels, including natural gas, contribute a lot more to global warming than nuclear does. Despite all the hoopla about global warming, this is not usually taken into account in power choices.

I encourage you to read the ANS blog post, and tell me what you think of my view-from-the peanut.

Think locally, act locally, perhaps?

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Diagram of a turbo-electric COGAS power-plant. Such installations are used stationary and on some ships. 1. Electric generators. 2. Steam turbine. 3. Condensor. 4. Pump. 5. Boiler/heat exchanger. 6. Gas turbine. From Wikipedia article on combined cycle plants

George Washington Carver in his laboratory, photo from Wikipedia.