Bearish nuclear CEOs lament subsidized rivals

Subsidized generation poses a threat to the future of nuclear energy and other large-scale baseload investments, a group of CEOs told the Nuclear Energy Assembly May 14 in Washington, D.C.

Lucrative production tax credits (PTC) for renewable energy along with efforts by certain nominally competitive states (such as Maryland and New Jersey) to subsidize conventional natural gas generation hurts the nuclear power market, said FirstEnergy (NYSE:FE) CEO Anthony Alexander and Exelon (NYSE:EXC) CEO Christopher Crane.

While Southern (NYSE:SO) CEO Thomas Fanning noted that his company is actually building two new nuclear reactors, Fanning doesn’t think new nuclear construction is viable in merchant markets with no rate base.

The panel, moderated by Dominion (NYSE:D) CEO Thomas Farrell III struck a tone tended to veer toward sobering. The four CEOs agreed that today’s climate is not one that favors nuclear plants that cost billions to build and take a decade to plan, license and construct.

“Well, that was uplifting,” Farrell deadpanned, drawing laughter from the crowd.

Exelon, which has the nation’s largest nuclear power fleet, has actually had to curtail plans for some nuclear plant power upgrades.

Weak market conditions have forced Exelon’s 1,100-MW Clinton nuclear plant in Illinois to go to a 12-month refueling cycle. Most nuclear units today use an 18-month refueling cycle. Clinton is not, however, at risk of shutting down, Crane said.  

This large amount of subsidies for renewable power and energy efficiency occurs while some existing baseload nuclear plants are actually producing power at a loss, the CEO panel said.

Crane went so far as to say that he would not rule-out a power market crisis, akin to the one that hit California years ago, in PJM within a decade. No one really knows the full implications of a one-two punch of retirements – starting with coal units in 2015, followed by large increments of nuclear retirements between then and 2040, the CEOs said.

Alexander also said that many of the state renewable portfolio standards were enacted during times when demand growth was booming – but that’s hardly the case now, he added.

Small modular reactors could be a positive “game-changer” for the nuclear industry but true commercial development is probably a decade away, the CEOs said. The Tennessee Valley Authority (TVA) is working with a Babcock & Wilcox (B&W) affiliate to commercialize the first SMRs in 2022.

Dominion, which shut down the Kewaunee merchant nuclear plant in Wisconsin May 7 for economic reasons, is still keeping open the possibility of building a third nuclear unit at its North Anna complex in Virginia, Farrell said.

Dominion is investing heavily in gas — from new gas-fueled power plants to interstate gas transmission projects to plans for exporting liquefied natural gas (LNG) from a site in Maryland. At the same time Dominion realizes that power generators can’t rely too heavily on one fuel source.

Fanning, once dubbed a “natural gas skeptic” by the Wall Street Journal, noted that Southern gas generation exceeded coal in 2012. The Southern CEO also noted that cheap lending markets have enabled its Georgia Power subsidiary to keep rate increases building the new Vogtle Units 3 and 4 less than expected.

The conference is sponsored by the Nuclear Energy Institute (NEI).

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.