Closure of FitzPatrick and Other Plants – Reasons and Possible Responses – Part 1

November 17, 2015, 4:20PMANS Nuclear CafeJim Hopf

Entergy Corporation just announced that it would close the FitzPatrick nuclear plant in upstate New York.  This follows the recent closure announcement for the Pilgrim nuclear plant in Massachusetts, as well as the closures of other small, single-unit plants like Vermont Yankee and Kewaunee.

New York state politicians, including governor Andrew Cuomo and Senator Charles Schumer, expressed anger at Entergy's decision to close the plant, and have vowed to explore actions that could be taken to prevent the plant's closure.

Reasons Given for the Closure Decision

The reasons Entergy gave for closing the plant include competition from low-cost natural gas, subsidized wind, and skewed markets that give nuclear no credit for its non-polluting nature.

Given these factors, nuclear plants are economically vulnerable in "merchant" electricity markets where existing power plants must make all their money though power sales in the wholesale market, where those power plants compete on price.  Small, single-unit plants are particularly vulnerable, given that many nuclear operating costs (staffing, security, etc.) do not scale down with power output.

It should be noted that Cuomo stated that he would not discuss measures that may be taken to keep the plant open unless Entergy made a formal closure announcement.  Cuomo's reasoning was likely that he didn't want to provide any state aid unless it was necessary to prevent the plant's closure (and would not merely go to Entergy's bottom line).  It's possible that Entergy "called Cuomo's bluff" by announcing closure plans.

Possible Solutions

While there's little hope for Pilgrim or the plants that have already closed, there may be some hope for FitzPatrick, and for other nuclear plants that could yet close.  Cuomo and Schumer are considering options to keep FitzPatrick open.  I don't know what options they are discussing, but here are some possibilities (in my opinion):

The New York Power Authority (NYPA) had a long-term power purchase agreement (PPA) with FitzPatrick that expired in 2004.  The loss of that PPA is one of the reasons for its economic struggles.  Cuomo, Schumer, and others could get the NYPA to make a new PPA, at a power price sufficient to keep the plant open.  Yes, this price may be a bit above the (current) wholesale market price.  That difference would reflect the support ("subsidy") that the state would be providing to keep the plant open.  It would be a far lower subsidy than those given to renewable energy.  (Based on the annual losses quoted by Entergy, the required price would be less than 1 cent/kW-hr above current market rates.)

More generally, the state could opt to outright subsidize the plant's operation.  That may require legislation, however (I'm not sure).  Ideally, they would make it so that nuclear and renewables are treated the same.  That is, nuclear would get the same subsidies and be included along with renewables in portfolio standards.  Such an ideal policy would be a political stretch, but providing just enough support to keep the plant running could be more politically palatable.

Another possibility would be to negotiate a large reduction in the ($17 million per year) local taxes paid by the plant.  After all, if the plant closes, the taxes paid will greatly drop anyway.  Why not keep the local jobs at least?  It should be noted that relief from local taxes is often offered to lure major employers into a local area.  This would be essentially the same thing.

Reasons for Hope?

With ever more nuclear plants announcing closure plans, there is finally increasing political momentum to try and do something about it.  Several prominent politicians as well as the administration, members of Nuclear Matters, and others) are calling for action to halt nuclear plant closures.

Possible policy responses may (and should) include some financial incentives to keep plants open and give credit for their non-polluting nature.  Although justified, reexamination of regulations that are placing undue burden on these plants is less (politically) likely, although some politicians (e.g., Llamar Alexander) are making some efforts in this area.

It unfortunate that multiple plant closures were needed to provide the necessary wake-up call and actually spur people into action.  But better late than never.

In Part 2 of this post, I will discuss the reasons for many nuclear plants' economic struggles in more detail.  I will also discuss possible changes that could be made at the national level to address the situation.

Jim Hopf is a senior nuclear engineer with more than 20 years of experience in shielding and criticality analysis and design for spent fuel dry storage and transportation systems. He has been involved in nuclear advocacy for 10+ years and is a regular contributor to the ANS Nuclear Cafe.