CES Spotlight Blog
Another Nuclear Plant is Steamrolled By Cheap Natural Gas
Nuclear Power, deemed by some to be a necessary component of achieving significant reductions in greenhouse gas emissions, is increasingly finding it hard to compete against cheap electricity from natural gas fired power plants. Progress Energy, announced on Tuesday that it will decommission its nuclear plant in Crystal River Florida. The 860 MWs of power produced by the plant is likely to be replaced with natural gas. The decision by Progress comes on the heels of Dominion’s October 2012 announcement that it would decommission its Kewaunee Nuclear plant in Carlton, Wisconsin during 2013. Nuclear power is increasingly joining coal and renewables on the sidelines as natural gas continues its surge to predominance as the fuel of choice for industry and power plants.
The Crystal River plant has not operated since 2009 when cracks were discovered in the concrete containment building during a refueling and upgrade project. After spending $348 million to repair the plant, a process that succeeded only in creating more cracks, Progress is betting that low natural gas prices will make additional investment in the plant, estimated to need between $1.5 and $3.5 billion, uneconomic.
[Interesting side-note: Progress Energy was acquired by Duke Energy of North Carolina in 2011. The CEO of Progress prior to the merger, Bill Johnson, had been slated to take over leadership of the combined company. Duke created some fine soap opera drama by firing Mr. Johnson just hours after the merger was completed. The charismatic Chairman and CEO of Duke Energy, Jim Roger, took control of the combined company instead. The Crystal River nuclear plant is rumored to have played a party in Mr. Johnson’s untimely departure.]
Florida is still a fully regulated electricity market and Progress will seek recovery of $1.65 billion in stranded costs related to Crystal River from its 1.6 million ratepayers located in central and northern Florida. Although Florida ratepayers may start payment on the requested $1.65 billion in 2017 - and running for the next 20 years – full decommissioning of the plant could take as long as 60 years. Removal of the containment vessel may be delayed as the facility is allowed to “cool” overtime to reduce the radioactivity of material that will need to be disposed.
The Dominion decision was perhaps even more surprising, given that the Kewaunee Facility was operating normally and was apparently not facing significant near term investments. And, unlike Crystal River which was facing a license renewal in 2016, Kewaunee’s license had already been extended until 2033. Despite these attributes, Dominion, which had decided that it did not have the economies of scale necessary to run a single small nuclear plant in Wisconsin, was not able to find a buyer for the 556 MW Kewaunee facility. What deterred potential bidders? Low market rates for electricity. Kewaunee is facing the expiration of an attractive Power Purchase Agreement in 2013, and replacement PPA prices – set by natural gas - are simply too low to make the plant an attractive investment.
(Tags: Nuclear, Kewaunee, Crystal River, Florida, Wisconsin, natural gas)