Under Competitive Pressure, Nuclear Industry Doing All It Can, NEI Head Says

The nation’s paramount nuclear power trade group has launched a wide-ranging strategy to help generators stay profitable in tight markets, the head of the Nuclear Energy Institute (NEI) told Wall Street analysts on April 12.

In an address broadcast on Facebook, Maria Korsnick, NEI president and CEO, said that nuclear plants that operate in competitive wholesale markets “are obviously under significant economic stress.” Six reactors have retired over the last five years, and plant owners have announced intentions to shutter another 12 in the coming years. “If nothing is done to save those plants, the impacts will be devastating,” she said, pointing to job losses and resiliency worries.

“We didn’t have to stress these virtues 10 years ago, but in today’s market we do,” she said. The nation’s fleet of 99 reactors produces no air emissions, which is important especially in places where downwind air quality is already bad. A unit can operate for months or years after a refueling, making it immune to problems with pipelines, barges, and railroads that sometimes afflict fossil fuel generators, Korsnick noted. Weather doesn’t affect nuclear generation, and “we either ride through hurricanes or we’re ready as soon as the grid gets restarted.”

Since 2013, low natural gas prices, market dynamics, technical issues, and policies that favor renewables have precipitated the closure or announced retirement of several nuclear reactors. Source: POWER

Since 2013, low natural gas prices, market dynamics, technical issues, and policies that favor renewables have precipitated the closure or announced retirement of several nuclear reactors. Source: POWER

A National Nuclear Strategy

The NEI’s “National Nuclear Energy Strategy” is seemingly aimed at policymakers. It seeks to provide a framework to help them understand the impact of their decisions.

The strategy has four priorities, Korsnick said. The first is focused on preserving the operating nuclear fleet by working to ensure nuclear power attributes are valued properly, which could help stem the tide of premature retirements. Second, the trade group wants to sustain efficient operation, which means “ensuring that we’re running our plants as efficiently as we can while applying regulations that are appropriate for the risks that we face,” Korsnick said. Third, it backs innovation by developing and deploying advanced technologies, and fourth, “The U.S. nuclear industry needs a level playing field to thrive internationally,” she said.

Korsnick specifically pointed to Ohio and Pennsylvania, which, without policy intervention, are poised to lose power from four uneconomic nuclear units owned by a bankrupt FirstEnergy subsidiary. Losing these plants, which she noted cost billions of dollars, “would more than reverse the emission benefits of all the renewable generation in PJM installed over the past 25 years.”

“Here’s the issue,” she said. “If our markets forced nuclear plants to close, we’ll create risks that we’ve just not thoroughly thought through.” ISO-New England, which increasingly relies on natural gas, investigated a future without nuclear and “sees a reason for alarm,” Korsnick said.

Policymakers were taking note, she said. The Department of Energy and the Federal Energy Regulatory Commission had sparked a conversation about resilience. States, too, are taking steps. “Three years ago, we saw only about maybe a dozen nuclear-related bills in the state houses. Last year we saw more than a hundred of them, and this year we’re on track for a very similar number,” Korsnick noted.

State Support Is Proliferating

Outside of New York and Illinois, which passed laws subsidizing ailing nuclear facilities in 2016, Connecticut’s governor last year signed a bill allowing Dominion’s Millstone plant to participate in its clean energy procurement process, and New Jersey’s lawmakers are poised to vote on a zero-emission credit (ZEC) program today, Korsnick said. Meanwhile, Pennsylvania’s lawmakers have established a first-of-its-kind nuclear energy caucus, and Maryland’s House of Delegates recently formed a similar group. Two weeks ago, the Minnesota Legislature advanced a bill out of committee to create more certainty for Xcel’s Monticello and Prairie Island plants.

Korsnick acknowledged these proposed measures have opponents. New York and Illinois’ subsidy measures, which critics deem “bailouts,” have been legally challenged by several independent power producers—including Dynegy, Eastern Generation, NRG Energy, and Calpine Corp.—and, prominently, competitive power producer trade group the Electric Power Supply Association. The consortium has long argued that the state rules interfere with FERC’s jurisdiction over wholesale electric rates and unlawfully interfere with interstate commerce.

However, she noted that federal district courts in Illinois and New York separately rejected claims by the multiple plaintiffs, and that the cases are now being heard separately by the Second and Seventh U.S. Courts of Appeal. “In reviewing the New York policy, the judge could not see how state programs to support renewable deployments were meaningfully different than the programs to preserve nuclear plants for their non-emitting attribute.”

As more states also explored goals to cut carbon emissions, the choice between boosting renewables over nuclear wasn’t efficient, Korsnick said. “A policy that advances renewables while closing nuclear plants won’t solve any problems. This approach is like running in place,” she said.

Still, for Korsnick, government intervention should only function as part of a longer-term strategy. Asked for the NEI’s stance on FirstEnergy Solution’s recent application for an emergency order under Section 202(c) of the Federal Power Act, which urged the DOE to “find that an emergency condition exists” in PJM’s footprint, and to order the grid operator to enter into contracts with generators to maintain grid stability, Korsnick said the NEI considers the measure a “bridging strategy.”

“Ultimately the fix that’s needed is that recognition in the marketplace and that recognition has been a bit slow in coming, which is why you’re seeing the level of activity that you’re seeing at the state level,” she said. “FERC has been working on price formation. …So ultimately the long-term answer is going to be one that’s market driven,” she said.

Industry Boosting Efficiency

The industry has been making every effort to stay competitive, Korsnick said. Over the last 12 months, the nation’s nuclear fleet had a 92% capacity factor and produced more than 800 million MWh. “That means we’re producing more electricity with the 99 reactors than ever before. In fact, … it would’ve taken 140 reactors in the 1980s to produce as much electricity as our reactors do today,” she said. Total generating costs—which include fuel operations and capital costs but not “accounts or risk management”—have fallen consistently over the last five years and in 2017 stood at $33.60/MWh. “Industry costs are down nearly 19% since their peak in 2012.” That effort stems from the NEI’s efforts to spread 68 best practices to potentially cut costs by $1.3 billion across the industry, she noted.

Further cost-cutting will entail an efficient regulatory framework, she said. “Part of our expense structure is the Nuclear Regulatory Commission (NRC). Our industry pays about 90% of the NRC’s budget, and as the industry faces changes, so in fact does the NRC, and we remain interested in an efficient regulatory framework that governs the current plants as well as future reactors.” The NEI has suggested that the NRC needs to more-strictly adhere to “risk-informed regulation—which focuses on what matters and what is most important to safety,” she said.

The future for nuclear isn’t entirely bleak. By the end of the year, six nuclear plant owners will have applied for permission to extend plant lives to more than 80 years. Meanwhile, “We see a very substantial bipartisan coalition that supports follow-through on the Nuclear Waste Policy Act,” Korsnick said. “That means two things, relatively small appropriations that will allow the NRC to resume its hearings on whether to grant a license for the Yucca Mountain repository and support for an interim storage site.” The Trump administration has asked for $150 million to support the NRC and Department of Energy, and 80 members of the House signed a letter requesting nuclear waste become a top priority in the 2019 budget, she added.

New technology that could make nuclear power more efficient is also making advances. These include accident tolerant fuels, small modular reactors, and other new reactor designs. “We hear encouraging things from the NRC. At its annual conference in March, the commission chair, Kristine Svinicki, said her agency would develop new processes to review and approve reactors other than the familiar light water models,” Korsnick said.

The industry is also seeing construction of an advanced nuclear reactor technology at the twin AP1000 Vogtle expansion units. “I’m very confident that [they] will be completed, though don’t ask me when,” she said during a question and answer period.

 

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)