nuclear-news

Costs are killing American nuclear power plants

A pattern is developing. It may take a few years, but it appears small nuclear plants will face increasing pressure to retire early. They cannot compete, particularly in soft markets. Some plants will find their costs consistently exceed any benefits they earn and their owners will be forced to retire and dismember plants.

The Nation’s Nuclear Plants Are Nuked, AOL Energy By Glenn S. K. Williams December 18, 2012 While the nation has been focused on new sources of natural gas and shale oil, few noticed the slow decline of an older energy source, nuclear power. Today, commercial nuclear power is struggling to stay in the game.

The power markets are hammering the nation’s nukes. Over a decade ago, several regions decided to create Regional Transmission Organizations (or Independent System Operators) and use the market to set power prices. Today, North America has ten independent RTOs/ISOs, where wholesale power is auctioned every few minutes.

Power auctions are about energy, not power plants. Auctions don’t care how power plants produce energy; they only care about the bid. The primary focus is on the last bid that clears the auction; it sets the price for all participants. That’s why the last bid is called the market-clearing price.

The difference between the market-clearing price and the generator’s production cost is the gross margin. The last bid is technically on the margin and it earns little to no gross margin. But every dollar above production costs contributes towards the generator’s fixed costs.

Most nuclear units are “must run plants” and they will produce power even if market-clearing prices fall below production costs. Recently, some nuclear plants have been booking negative gross margins. They hope they can make up losses with subsequent gains and average a gross margin.
A gross margin is not always enough. Nuclear units must pay all their bills and leave something for shareholders. Recently, some nuclear units are achieving modest gross margins, but not enough left to pay all the bills or achieve any earnings……
New Jersey regulators already negotiated the early retirement of Exelon’s Oyster Creek Nuclear Generating Station. Oyster Creek is 630-megawatt facility and it will go on the scrap heap ten years early in 2019.

A pattern is developing. It may take a few years, but it appears small nuclear plants will face increasing pressure to retire early. They cannot compete, particularly in soft markets. Some plants will find their costs consistently exceed any benefits they earn and their owners will be forced to retire and dismember plants…..http://energy.aol.com/2012/12/18/the-nation-s-nuclear-plants-are-nuked/

December 19, 2012 - Posted by Christina Macpherson | business and costs, USA