During the past few months alone, three of America’s largest nuclear power plant operators — Exelon, Dominion and Constellation Energy — have announced they are either closing a nuclear generating station early or not continuing their immediate pursuit Federal loan guarantees needed to make the economics work for “next generation” plants they’ve been contemplating. The cause: competitive markets for electricity supply that increasingly are valuing lower-maintenance and lower carbon-emitting sources of electricity.
The latest announcement comes from Exelon. It said growing maintenance costs at what is the nation’s oldest nuclear plant — Oyster Creek in New Jersey — compel the huge energy utility company to close it 10 years early in 2019.
Exelon President Chris Crane said Wednesday the plant “faces a unique set of economic conditions and changing environmental regulations that make ending operations in 2019 the best option for the company, employees and shareholders. He said low market prices and demand and the plant’s need for continuing large capital expenditures have reduced its value.
Both Constellation Energy and Dominion said shifting economics and rules in loan applications, significantly darkened the outlook for the viability of new units planned at the existing Calvert Cliffs, MD and Lake Anna, VA sites, respectively.
Dominion Chairman Thomas F. Farrell 2nd, told financial analysts in late October, “We have concluded that the capital required for other new generation, pending environmental compliance and electric transmission upgrades requires us to slow development of the third reactor at this facility.” Hat tip to Matt Wald for his coverage published November 1 in The New York Times.
Taken together, these setbacks for the industry do not bode well for the so-called “nuclear renaissance” that proponents aspire to realize. There were to form the foundation — and build confidence among investors — that such a comeback could begin and gain traction during the the 2010-2020 decade.
In an Oct. 8 letter to Dan Poneman, deputy secretary of the U.S. Department of Energy, Constellation Energy Chief Operating Office Michael Wallace said Constellation Energy does not see a “timely path to reaching a set of workable set of terms and conditions” to build a third unit at Calvert Cliffs in an “economically reasonable and statutorily justifiable manner.”
The statement also said that the high estimate of the credit subsidy would force Constellation and its partners to pay the U.S. Treasury 11.6 percent, or $880 million, in order to obtain the loan guarantee for the third unit at Calvert Cliffs. “Such a sum would clearly destroy the project’s economics (or the economics for any nuclear project for that matter) and was dramatically out of line with both our own and independent assessments of what the figure should reasonably be,” the statement read.
The industry trade group — Nuclear Energy Institute — seized on Constellation’s reversal to call on the Obama Administration to “reform” the loan guarantee program. Critics see this nothing less than a desperation call that only serves to underscore the degree to which nuclear’s share of U.S. electric generating capacity (currently about 20%) will start declining without massive subsidies. Any objective comparison of these subsidies overwhelms subsidies and other incentives intended for cleaner and safer sources of electricity.