Tuesday, November 29, 2016

Nuclear vs. Gas Economics, a Three Year Projection. Guest post by Nick Escu

Nuclear Power vs. Natural Gas Power 
A Three Year Projection
By Nick Escu

The power industry continually looks for a stabilized grid demand to operate profitably, economically and reliably.

There are several key factors the power industry looks at to determine these needs are met.

Profitability is determined by how much generation costs, plus outstanding production and grid costs are entailed. Factors affecting generation are fuel costs, labor costs, parts costs, plus new regulations, plus changes in overall demand.


We’re going to look at current nuclear power costs and three-year projected nuclear power costs, as well as current natural gas power costs and three-year projected natural gas costs.

We are not going to look at the huge increase in air pollution and power production costs caused by natural gas versus nuclear. These facts are readily seen in Germany which eliminated nine of its nuclear plants in favor of natural gas and a little wind and solar.  It has shown a 25% increase in power costs. Similarly,  Japan has at present, shut down all of its nuclear plants, with a huge increase of air pollution and power costs. Similarly in California which shut down two nuclear plants with subsequent air pollution increases and rising power costs. Enough has been written  about these examples, and will continue to be written in the future.

Let’s begin our analysis.

Selling price

We will first look at basic selling price of nuclear power per megawatt hour versus natural gas power per megawatt hour.

The EIA actual selling prices as of January 2013 for Mid-Atlantic generators were $32.00/ megawatt hour, and for the Midwest were $25.00/ megawatt hour.

Nuclear power plants are base load plants. They operate at 100% of their capacity for over 90% of their operating time. So when a nuclear plant is contracted to produce power to maintain the electricity grid in their region, they must operate. For most nuclear plants, the breakeven costs for power production are between $32.00 and $35.00 per megawatt hour. Anything less and that plant is losing money. And most businesses, unlike the federal government, do not operate on a loss revenue basis. They are in business to make money.

Natural gas

Now let’s look at natural gas power production costs.

In February of 2003, according EnergyOnline  the electric production costs were $990 per megawatt hour in Texas and New York City costs were $175 per megawatt hour.

But because of the tremendous fracking, current natural gas electric power production costs have dropped to $28.50 per megawatt hour in November, 2013, according to 4 Traders.

So we can see that if you have a nuclear plant that runs very economically producing power at $32.00 per megawatt hour and you also have a natural plant that generates power at $28.50, the logical choice would be to turn off the nuclear plant and make $3.50 for every megawatt hour.

Let’s put it in simpler terms. A 1000 megawatt power plant should run 8760 hours per year (the total hours in a year 365 X 24 =8760). Normal maintenance is about 10% of that time, so let’s subtract 876 hours for a net total of 7884 operating hours. Now let’s multiply that $3.50 more money the gas plant makes over the nuclear plant, times those hours, and those megawatts.

$3.50 X 7884 X 1000 =$27,594,000. This is the yearly gross profit a natural gas plant has over the nuclear plant.

If that was all we had to determine profitability and future projection, it would be a No Brainer. We’d shut down the nukes today, as long as we had plenty of natural gas plants.

But there another factor we must consider for the bottom line.  Short term versus long term.

Short term and long term

I’m an electrical contractor working in the power industry. A few years ago someone came to me and offered me $100 per hour to work, and the work involved 80 hours per week. Since I was between contracts, I took the assignment for a 2 month period of time, and made a nice chunk of change.

Shortly thereafter I took a 2 year assignment at $65 per hour, for a 60 hour work week. In the middle of that assignment the contracting group I’d previously worked at attempted to get me to go on an assignment to the same place, for a 3 week assignment. If I had known they were going to call me back, I could have let the new group know I’d be away for 3 weeks.

My decision was simple. I stayed with the 2 year assignment. Why? Because for the long haul, it was more profitable.

Sometimes short term profits cloud our judgment over the long haul.

Fuel cost trends

Back to natural gas.  I began this section by stating that in 2003 natural gas production costs were between $175 to $990 per megawatt hour.

So now let’s look at the consistent biggest cost to nuclear plants, the cost of nuclear fuel.

In 2003 nuclear fuel costs averaged $57,000,000 for a 2 year fuel cycle for a 1000 megawatt power plant. 2013 average cost for the same fuel is $60,000,000, or a 5% increase over the past 10 years or an average of 0.5% per year increase for nuclear fuel.

Natural gas prices decreased from $990 to $28.50 or a 97.2% decrease in power production cost.

But is that price of $28.50 per megawatt stable or is it changing?

The World and Us

Let’s look at the world prices. The prices vary from $57.00 per megawatt hour in Europe to $116.00 per megawatt hour in Asia. Why? Because of fracking here in the US, our prices are so low. That guy on TV says “We have enough natural gas for 100 years” remember him?

But a new factor has risen, LNG exporters. The President has signed 17 permits to now export liquid natural gas to all those places willing to pay a little less than what they have now. So what will that do to our US prices of natural gas??? Do you really believe our gas prices will decrease?

No, all of you are realistic. Our prices will increase.

A good example is that gasoline in the Emirates was a few years ago $0.25 per gallon, but today it’s about $0.70 per gallon. Why? Exporting your home product raises your costs locally. In the Emirate’s case, almost 300% increase.

Let’s be conservative and say our natural gas prices will only double here in the US after we start exporting. How long will that be?

The LNG export sites are even as we speak, running new power lines for the 11,000 and 12,000 horsepower compressors that turn the gas into a liquid. Estimates at present are 3 years (or 2020) for the last permit construction completion and production beginning and exporting.

Cheniere began production and first export happened in mid-February, 2016. Natural gas price in late February, 2016, was $1.71/MMbtu (Henry Hub). As of the end of September, 2016, the price for nat gas had risen to $2.99/MMbtu, a 75% increase in less than 9 month.

So do we really want to completely shut down a minimum producer like a nuclear plant today, when in 2 years it will be worth twice its value?  It’s a penny wise pound foolish decision.

Nuclear and Us

The optimum plan would be, pay for, build and use the gas generation now, and temporarily place the minimal nuclear plants in a hold status, much like had been down at Brown’s Ferry and Bellefonte. The stability we’ve seen with nuclear power far outmatches in price fluctuations what we’ve seen in natural gas.

Let’s see how a closed nuclear plant power production has been supplied.

Vermont Yankee closed December, 2014. VY was a 620 MWe plant supplying most of the electricity generated in Vermont (72%). Gets a little tricky here. So what replaced the nuclear baseload power?

Right, natural gas.  The rise of gas on the grid almost exactly replaced the fall of nuclear on the grid.  Green Mountain Power distributes most of the power in Vermont, and they are wholly owned by Gaz Metro of Quebec.  Gaz also distributes nat gas through Vermont Gas Systems.  This is a company that is always happy to see more gas on the grid, and more energy imports from Canada.

Additionally, the Vermont government and Green Mountain continue to purchase power produced by YES, You Guessed It, Seabrook Nuclear Plant.

Now most all of Vermont is dependent on nat gas. And everyone is begging for larger natural gas pipelines, because no nat gas, NO POWER! Great move ecologically minded Vermont. 200,000 Vermont homes using electricity from natural gas instead of nuclear produce the following: 38,000 tons of NOx, 78,000 tons of SO2, 96,000 tons of CO2, and 104,000 tons of particulates. But all those numbers were at or near ZERO tons with Vermont Yankee Nuclear plant????

How about Connecticut? What’s their gas situation like? Legislators were just denied new nat gas lines, because under FERC guidelines, all required consumption must be contracted prior to build out of pipelines. Sorry Connecticut. No contracts, no new nat gas pipelines.

To be continued


Nick Escu is the pen name of a person with long experience in the power industry.

Sunday, November 27, 2016

Meeting on Entergy Sale of Vermont Yankee, December 1

Vermont Yankee and NorthStar and Decommissioning

Events are moving fast in the world of decommissioning decisions about Vermont Yankee.

Entergy announced that it hoped to sell Vermont Yankee to NorthStar, which is partnered with Waste Control Specialists for the decommissioning job. Waste Control Specialists already handle all the low-level radioactive waste for Vermont and Vermont Yankee. Waste Control Specialists have also applied to be an interim storage facility for high-level waste.

Dry cask
The sale of Vermont Yankee to NorthStar is intended to speed up the decomm process by decades.  I discussed the possible sale in a previous blog post.

But wait, there's more!

And then it gets complicated:

But wait, there's less!

Richard Saudek is a Vermont attorney who previously served as Chairman of the Vermont Public Service Board, and as Commissioner of the Vermont Department of Public Service.  In other words, he is very knowledgeable  about utility issues in Vermont.  In a recent article that appeared in several local papers, Susan Smallheer reported:  Richard Saudek....said he didn’t think the anti-trust suit would have an effect on the proposed sale.

In other words, unless you own stock in EnergySolutions or Waste Control Specialists, the merger and the Department of Justice lawsuit and so forth.... may well be much ado about nothing.

Meanwhile, there's a meeting

The Vermont Nuclear Decommissioning Citizen's Advisory Panel (NDCAP) will meet on the evening of  December 1 in Brattleboro. The main item on the agenda is the possible sale of Vermont Yankee to NorthStar.  Senior executives of Entergy and NorthStar will make presentations.  If you cannot attend the meeting in person, you can sign up in advance to attend it as a webinar.

For more information about NorthStar itself, I recommend this well-referenced blog post by Guy Page of VTEP, which describes many of NorthStar's previous decommissioning projects.

It turns out I won't be going to the NDCAP meeting, due to a commitment to be at a ISO-NE Consumer Liaison Group meeting the same day.  I think the NDCAP meeting will be very interesting, and I trust my friends to give me a full report.

Monday, November 21, 2016

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


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

Saturday, November 12, 2016

Facts and Opinion on Entergy Sale of Vermont Yankee: Update

Dry casks at Maine Yankee
Who What Where When Why etc

In a press release  Tuesday, Entergy announced its intent to sell Vermont Yankee to NorthStar.  NorthStar would then be responsible for decommissioning Vermont Yankee.  The NorthStar website shows that their main businesses include demolition, hazardous material abatement, and clean-up services of various types.  NorthStar will partner with three companies for the Vermont Yankee work: Areva, Burn&McDonell, and Waste Control Specialists.

Significantly, Waste Control Specialists already operates the Texas Compact Facility that accepts Vermont Yankee low-level wastes, and has applied to  be an Interim Storage facility for high-level wastes.  This is mere speculation, but Waste Control might well accept Vermont Yankee high-level wastes, if Waste Control becomes an Interim Storage facility.  In the meantime, Waste Control does accept Vermont Yankee low-level wastes. Waste Control participation in the decommissioning process will probably make the process go more smoothly.

Fast decommissioning

The NorthStar team of decommissioning experts expect to fully decommission the site (with the possible exception of continued dry cask storage) by 2030, while Entergy's timeline stretched to 2068 and beyond.

A more rapidly-completed decommissioning is what the state of Vermont wants, and this transfer should provide that rapidity. The transfer of the plant from Entergy to NorthStar has to be approved by both the NRC and the Vermont Public Service Board.   The sale is expected to be complete by the end of 2018, according to a Mike Faher article in Vermont Digger.

Power companies and decommissioning companies

On WAMC, Pat Bradley interviewed me (and others) about this sale. I said that organizations that
Vermont Yankee
when it was operating
operate nuclear plants don't have expertise in nuclear decommissioning, and vice versa.  Entergy would not be able to do a decomm as fast and as well as a decomm company could do it. I pointed out that the Zion plants had also been transferred to a decommissioning company (in that case, Energy Solutions) for decomm.

Looking again at the Zion plant, the decomm project run by Energy Solutions is ahead of schedule and below budget.  That is the sort of outcome that one can expect from a company that specializes in decomm.  Vermont Yankee can expect a similar performance from NorthStar. I think this is a good move, from Entergy's point of view.

How to Decomm

In an earlier blog post about decommissioning, I noted that industry articles say that two steps are necessary to ensure fast, cost-efficient decommissioning:

  • a quick downsizing  of existing workers
  • a contract decomm workforce that changes as the tasks change 

Decomm is more like building a house (the carpenters doing the framing don't do the electrical work) than running a power plant.  Decomm needs a flexible workforce, but a power plant needs a steady workforce.

(Yes. This is pretty nasty for the economics and stability of the locality. )

How to supervise these contractors?  As I note in the earlier post, power companies have hired contractors to supervise the decomm contractors, but this usually didn't work very well.  Nowadays, (Zion, LaCrosse), the company that owns the power plant transfers the whole NRC license to the decomm company. That company works with the subcontractors.

Finally, my opinion

This transfer was inevitable.  I don't like it, because the new company has no incentive to retain workers from the old company.  That is, my friends who work for Entergy will probably not continue to have local jobs after the plant is transferred to NorthStar.

Quoting Bill Mohl of Entergy in an article in Vermont Digger: "Mohl said he expects that NorthStar would want to retain some of the plant staff’s expertise, and he said those employees who lose their jobs will have opportunities to find positions at other Entergy facilities."

On the other hand, Entergy itself has little incentive to retain workers locally, since the people who ran the power plant at Vermont Yankee are not the people who would be best suited for the tasks of a decommissioning job.

In other words, what I really don't like is the fact that Vermont Yankee is closed and will be decommissioned.   This transfer is just a logical consequence of that sad fact.

Contracts: I think that "selling the plant" (Entergy) and "transferring the license"(Zion, etc)  are not quite the same.  License transfer seems to be temporary (until decomm is finished) while "sale" sounds final. At Zion, the license was transferred to Energy Solutions, and Energy Solutions also has control of the decomm fund.  However, the land and spent fuel remained with Exelon.

Since I have don't have first-hand knowledge of the the terms of either situation, I cannot comment on the contractual implications.  It is clear, however, that in either sale or transfer, the decomm company has full responsibility for the decomm, including the decomm fund.

UPDATE: This article by Dave Gram of AP states that the plan to sell VY is first-of-a-kind. As I noted above, other plants have transferred licenses to decomm companies, not been sold to those companies.

Upcoming meetings Updated: There are an  upcoming meeting of the Vermont Nuclear Decommissioning Citizen's Advisory Panel. The meeting is December 1 in Brattleboro.  It is a special meeting to discuss the sale of Vermont Yankee to NorthStar.  More information is at the Vermont  Department of Public Service site, including a link for submitting comments. (Note that the November 17 meeting, announced earlier,  has been cancelled. )

Saturday, November 5, 2016

Nuclear plants, films and trains

Breakers opening at Vermont Yankee when it went offline for the last time 2014
Photo courtesy of Entergy
Film night

Two nights ago, I went to a "sneak preview" of Power Struggle, a new documentary that chronicles the activism to close Vermont Yankee.  Robbie Leppzer, the filmmaker, has been filming this story for about 7 years.  Here's a balanced review in VPR.

Leppzer gives nuclear proponents a voice in the movie.  Howard Shaffer, Mike Hebert and I all appear several times, and we are depicted sympathetically, for the most part. Leppzer wanted us to attend, and he called me and Howard personally to extend his invitation. (He probably called Mike, too.  I just haven't spoken to Mike about it.)

That said, it must also be said that the preponderance of film time was spent following anti-nuclear activists and Arnie Gundersen.  They didn't just appear in the movie: they were the heroes. There was a panel discussion after the movie.  From the discussion and the major content of the movie,  it was clear that Leppzer thinks nuclear power is a very bad idea.

I am not doing a movie review here.  In some ways, it was a hard movie to watch because almost every nuclear opponent that I have ever met was in the audience.  Jeff Potter of The Commons introduced the movie, and he warned the crowd that there were pro-nuclear people in the audience also, and the crowd should not be too exuberantly anti-nuke, but be respectful.   Still, at various points, the joy of the crowd could not be contained.

I may do a movie review at a later time.
Tank car, wikipedia

Coffee shop and fuel trains

Instead of a movie review, I am going to post something I wrote on Facebook almost exactly a year ago today.  I have edited it slightly.   I hope you like it.

I got up in a sort of blue mood. So George and I went over to Tuckerbox for coffee. This sometimes helps: leave home, go somewhere cheery.

Tuckerbox is right by the rail yard, and we saw (as usual) a train which was being made up. So we are sitting in a coffee shop in downtown White River Junction watching tank car after tank car that contains "Liquefied petroleum gas, no odorizer added." First the train traveled in one direction, then in the opposite direction. That is usual, when they are being made up. The cars bumped together and joined, then moved away and then a new car bumped together with the train. As a friend of mine said: "I like to sit in Tuckerbox and watch the trains couple."

We do what we can for voyeurism, here in Vermont. It's not the Riviera.

And I am thinking: some of these people, sitting here in the coffee shop, right next to a fuel-train being made up….are undoubtedly feeling SO much safer because Vermont Yankee is shut down.

So I guess Tuckerbox didn't completely help my mood.

But the coffee is good. If you come to this area, let's go over there and have coffee. The food is good, too!