Electricity Demand, Renewable Energy and High Fixed Costs Pressure Nuclear Fleet
By the end of 2021, twenty-four of the operating nuclear power plants in the United States are either set to close or will no longer be profitable according to a report by Bloomberg New Energy Finance (BNEF) that was issued on May 15, 2018. In addition, the report cautions that more plants are likely to close. In March 2018, a similar analysis found that half of U.S. coal-fired power plant capacity is also facing significant financial challenges.
According to Power Magazine, which reported on the BNEF study, the struggling plants have a total generating capacity of 32.5 gigawatts. The U.S. Energy Information Administration lists the total capacity of the U.S. nuclear power fleet at slightly over 100 gigawatts.
In the BNEF report, analyst Nicholas Steckler and co-author Chris Gadomski state that it would cost approximately $1.3 billion to address the revenue gaps for all of the struggling plants across the country. The industry has successfully convinced policy makers in states including New York, Illinois and New Jersey to take steps to assist struggling plants in recognition of their emissions-free generation and concerns about job losses.
Despite the cautionary tone, the report finds that the average U.S. nuclear plant still is expected to make money before taxes, especially on the East Coast.
According to the BNEF study, the industry is increasingly challenged by sluggish power demand, inexpensive natural gas and the rise of renewable energy. This is especially true in the Midwest, where the use of wind power and other renewable power options are being used increasingly.
In this regard, a February 2018 report from BNER and the Business Council for Sustainable Energy found that renewable power had reached 18 percent of the U.S. electricity generation capacity. The expansion has been spurred, in part, by an increase in hyrdopower investments in the West. Nuclear power recently contributed about 20 percent, but that figure is declining as operating facilities continue to shut down.
In addition, the U.S. Energy Department (DOE) is currently weighing a March 2018 request from the competitive power unit at FirstEnergy Corporation to declare that an emergency exists its PJM market. The PJM Energy Market procures electricity to meet consumer’s demands both in real time and in the near term. It includes the sale or purchase of energy in PJM’s Real-Time Energy Market (five minutes) and Day-Ahead Market (one day forward). If DOE Secretary Rick Perry agrees to the request, it would mean the PJM would have to compensate both nuclear and coal generators in the at-risk market in order to protect the stability of the grid.