Citing weak market conditions and other factors, Entergy (NYSE:ETR) announced early Oct. 13 that it plans to close its Pilgrim nuclear plant in Plymouth, Mass., no later than June 1, 2019.
Poor market conditions, reduced revenues and increased operational costs were cited by the company. Subsidized renewable energy and a state plan to import significant amounts of hydroelectric power from Canada were also cited by Entergy.
The company notified the independent system operator of the electric grid, the ISO New England Inc. (ISO-NE), that as of that date, Pilgrim would not participate as a capacity resource in the market. The exact timing of the shutdown depends on several factors, including further discussion with ISO-NE, and will be decided in the first half of 2016.
The Pilgrim Nuclear Power Station generates 680-MW of nearly carbon-free electricity, enough to power more than 600,000 homes, Entergy said. The boiling water reactor (BWR) began operating in 1972, according to GenerationHub data. It had a capacity factor of 73.8% in 2013.
Pilgrim would become the second New England-based nuclear unit to be retired by Entergy in recent years. Entergy halted commercial operations at the 600-MW Vermont Yankee nuclear plant in December 2014.
There is also speculation that more nuclear retirements could be on the way in the Northeast. The Entergy FitzPatrick plant in the state of New York is also believed to be economically endangered.
“The decision to close Pilgrim was incredibly difficult because of the effect on our employees and the communities in which they work and live,” said Entergy’s Chairman and CEO Leo Denault.
“Our people at Pilgrim are dedicated and skilled, a wonderful blend of young professionals and seasoned, experienced veterans, who for decades have been generating clean power and contributing millions of dollars of economic activity to the region,” Denault said. “But market conditions and increased costs led us to reluctantly conclude that we had no option other than to shut down the plant.”
Host of factors cited in Pilgrim decision
Entergy Wholesale Commodities President Bill Mohl was expected to provide additional details about the shutdown later Oct. 13.
In its press release on the closure, Entergy identified the usual list of contributing factors for the nuclear retirement – ranging from cheap natural gas to subsidized renewable power generation.
The factors include low current and wholesale energy prices drive by record low natural gas prices from shale production.
As a result, current and forecast power prices have fallen about $10 per megawatt hour, an annual loss of more than $40m in revenues for Pilgrim, Entergy said.
Also “design flaws” in wholesale energy markets continue to suppress power and capacity prices in the region, Entergy said. The prices don’t provide adequate compensation for the around-the-clock carbon-free electricity provided by nuclear power, Entergy said.
Entergy also cited a Massachusetts proposal “to provide above-market prices to utilities in Canada for hydro power representing about one-third of Massachusetts’ electricity demand and a recent state agency’s order that would further lower the price of natural gas and increase the region’s reliance on it.”
Entergy also said it was facing significant additional investment in Pilgrim to improve its rating under the Nuclear Regulatory Commission (NRC) performance rating system. NRC recently announced that it was tightening oversight of Pilgrim in connection with issues related to unplanned outages.
The preliminary estimate of direct costs of the plant’s response to a planned NRC enhanced inspection ranges from $45m to $60m pre-tax in operation and maintenance expense, not including any potential capital investment or other costs to address issues that may arise in the inspection.
After shutdown, Pilgrim will transition to decommissioning. The Pilgrim nuclear decommissioning trust had a balance of approximately $870m as of Sept. 30, 2015, representing excess financial assurance of approximately $240m for license termination activities above NRC-required assurance levels.
Filings with the NRC for planned shutdown activities will determine whether any other financial assurance may be required and will specifically address funding for spent fuel management, which will be required until the federal government takes possession of the fuel and removes it from the site, per its current obligation. No additional funding is anticipated at this time.