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

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.