By Kennedy Maize
Washington, D.C., 29 August 2013 – The surprise decision by Entergy Corp. to shut down its 620-MW Vermont Yankee single-unit nuclear plant at the end of its current operating cycle (late next year) is further evidence of how difficult it has become to make money with merchant nuclear plants. The decision, which new CEO Leo Denault announced Tuesday, suggests that Entergy might also be ready to walk away from the much larger, two-unit, 2,000-MW Indian Point plant in New York and a long-running, expensive battle with the New York state government, including powerful Gov. Andrew Cuomo and the state
Denault cited economic reasons for the decision about the Yankee plant, and those are undoubtedly real. They include the continued march of low-cost natural gas across the generating landscape, which, he said, is “resulting in sustained lower natural gas prices and wholesale energy prices.” Add to the mix the inherent economics of a single, elderly nuclear unit with a “high cost structure.” Entergy says it has put $400 million into the plant since it acquired it in 2002. In that regard, Entergy’s decision looks a lot like Dominion’s May decision to close the 556-MW Kewaunee plant in Wisconsin.
Denault did not mention that his New Orleans-based nuclear merchant division has also been in a long-running, nasty political battle with the state of Vermont, which must have also contributed to the decision to walk away from the Yankee plant.
But most telling of all may be this reason that Denault listed for closing the Vermont unit: “Wholesale market design flaws that continue to result in artificially low energy and capacity prices in the region, and do not provide adequate compensation to merchant nuclear plants for the fuel diversity benefits they provide.” Parsing that statement, Denault is admitting that in a straight-up competitive environment – ISO-New England in Yankee’s case – nuclear can no longer compete, even with its very low fuel costs.
The same conditions largely exist in New York, where Indian Point has to bid into the New York ISO, and Denault appears to be hinting at a similar outcome. The federal licenses for the two units run out this year and 2015. Reuters reports that Denault told the wire service that “the company’s current Indian Point strategy is to continue the safe, reliable operation of the plant located 40 miles north of New York City, but he remains open to talks to determine the plant’s future,” adding, in Denault’s words, that Entergy is “open to a resolution with the state that makes sense for us and for the objectives of the state.”
Handwriting on the wall? That’s what it looks like from here.