After fending off many legal challenges over time, economics rather than local opposition, is what sank the Vermont Yankee nuclear plant, an Entergy (NYSE:ETR) official told GenerationHub Aug. 27.
“Vermont Yankee is the smallest of all our [nuclear] plants,” Entergy Wholesale Commodities (EWC) President Bill Mohl said in a telephone interview hours after the company announced plans to close the roughly 600-MW boiling water reactor in late 2014.
“While we have a long history” with nuclear opponents in Vermont, closing the plant is “purely an economic decision,” Mohl said.
UBS Analyst Julien Dumoulin-Smith estimates the “all-in cost” for electricity at Vermont Yankee is in the neighborhood of $50/MWh. Mohl wouldn’t discuss such specific, but said projections suggested the plant would not make money long term.
So despite having secured a 20-year license extension from NRC and having defeated a Vermont legal challenge in federal courts, Entergy plans to close the plant and decommission it.
Entergy will soon file a formal shutdown notification with NRC. A detailed study on decommissioning costs and other details will follow. That study must be done within two years after the plant is closed. So if the plant closes in 4Q14 then the study must be done by 4Q16, Mohl said.
ISO-New England has effectively capped prices, exec says
During the conversation, Mohl elaborated on the company’s earlier statement that New England energy and capacity prices are “artificially” low.
“They are far from a competitive market with all the rules and regulations imposed,” Mohl said of ISO-New England (ISO-NE). The Entergy executive said he considers ISO-NE more of a hybrid market than a competitive one.
The ISO has effectively capped energy prices with its procedures, Mohl said.
Carbon-free nuclear energy is not properly rewarded, Mohl said. The Entergy official also said the ISO actually pays a premium for electricity from fuel oil in certain situations when there might not be enough natural gas available in the region for both power generation and home heating.
Mohl said Entergy looked at all options, including a possible sale, before deciding to retire Vermont Yankee.
No reductions are planned in the plant’s 630-person workforce prior to late 2014. Even then, Entergy anticipates that much of the staff will be employed in the decommissioning work.
All of Entergy’s nuclear plants are different and people should not assume that the company’s single-unit FitzPatrick plant in Oswego County, N.Y., or its single-unit Pilgrim plant in Massachusetts are going to close, Mohl said.
Union of Concerned Scientists Nuclear Safety Project Director Dave Lochbaum speculated that the closure of Vermont Yankee makes Pilgrim’s future a little brighter. “For while Vermont Yankee might not have been a large generator of electricity, its output must still be replaced by somebody,” in New England, Lochbaum said in an email.
Vermont Yankee 4th nuclear plant to throw in the towel recently
Now that two merchant nuclear plants have announced retirements due to financial reasons, the head of the Nuclear Energy Institute (NEI), said it points to the need for market reform to ensure diverse generation portfolios.
NEI President and CEO Marvin Fertel made the statement Aug. 27 following the Entergy (NYSE:ETR) announcement that it would permanently close Vermont Yankee.
Earlier this year, Dominion (NYSE:D) closed its Kewaunee nuclear plant in Wisconsin for economic reasons. Like Vermont Yankee, Kewaunee was a single-unit merchant nuclear reactor.
The reasons stated by Entergy for closing Vermont Yankee, sounded a lot like those cited by Dominion when it announced in 2012 that Kewaunee would be closing.
Entergy cited the sustained low cost of natural gas and low wholesale energy prices; the high costs of operating a single-reactor nuclear plant and “artificially low local electricity and capacity prices” that don’t adequate compensate nuclear plants for fuel diversity.
“Vermont Yankee reliably produces nearly three-quarters of the electricity generated in the state while employing some 600 highly skilled professionals,” said NEI’s Fertel.
“Design flaws in wholesale markets such as New England continue to result in artificially low electricity and capacity prices,” Fertel said. “This announcement, and the retirement of Wisconsin’s high-performing Kewaunee nuclear facility earlier this year, is jarring evidence that market reform is essential to ensure that the nation maintains a diversified portfolio of electricity options. Failure to do so will jeopardize reliable electricity supplies and leave consumers vulnerable to steep or long-term electricity price swings,” Fertel said.
Two other nuclear stations have announced their permanent retirement in the past year. But in addition to being run as regulated utilities, both the Duke Energy (NYSE:DUK) Crystal River 3 plant in Florida and the Edison International (NYSE:EIX) San Onofre 2 and 3 in Southern California were only formally retired after prolonged outages.
Foes glad to see Vermont Yankee exit the scene
The state has been trying to shut down the nuclear plant for years. In a radio interview, Gov. Peter Shumlin said shutting down the plant is the right decision.
Sen. Edward Markey, D-Mass., a longtime nuclear critic, also welcomed the news.
“While the nuclear industry is blaming today’s closure on competitive electricity markets, they should be looking into the mirror with the rest of the energy industry,” Markey said. “Had the Senate passed the Waxman-Markey bill in 2009 that would have put a price on carbon, nuclear power today would be better able to compete,” Markey said.
“The closure will allow Vermont to focus on leading the nation toward safer and more economical sources of sustainable and renewable energy like solar, wind, geothermal and biomass,” said Sen. Bernie Sanders, I-Ver., a critic of the plant. Sen. Sanders is also a member of the Senate energy and environment committees.