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Nuclear Costs

Estimates for new reactor construction costs continue to sky-rocket. Conservative estimates range between $6 and $12 billion per reactor but Standard & Poor's predicts a continued rise. The nuclear power industry is lobbying for heavy federal subsidization including unlimited loan guarantees but the Congressional Budget Office predicts the risk of default will be well over 50 percent, leaving taxpayers to foot the bill. Beyond Nuclear opposes taxpayer and ratepayer subsidies for the nuclear energy industry.

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Wednesday
Jun292016

A radical plan to bailout struggling nukes -- federal government takeover!

As reported by Bloomberg Government's Mark Drajem, Edward Kee, the founder of the Nuclear Economics Consulting Group, has a not so modest proposal to "save the nukes": a federal government bailout, or outright takeover, akin to the $700 billion rescue package for Wall Street banks and the Big Three automakers in the aftermath of the 2008 U.S. economic crisis.

Of course, Kee's outrageous scheme seems to forget, the U.S. government -- that is, federal taxpayers -- as well as electric ratepayers, have been subsidizing nuclear power for decades, to the tune of tens or even hundreds of billions of dollars, as Doug Koplow documented in a comprehensive 2011 report commissioned by the Union of Concerned Scientists.

But then again, Amory Lovins of the Rocky Mountain Institute made the astute observation, many years ago, that the only places where nuclear power is enjoying a significant growth spurt, are in countries with highly centralized economies, such as China and India.

That is, the public pays, while the nuclear robber barons profit.

The small number of reactors under construction in the U.S. operate along the same lines. The two new reactors under construction in Georgia -- Vogtle Units 3 and 4 -- enjoy not only ratepayer subsidies dubbed "Construction Work in Progress," or "advanced recovery" surcharges on electric bills, but also $8.3 billion in federal taxpayer nuclear loan guarantees, compliments of the Obama administration.

The two new reactors under construction in South Carolina -- Summer 3 and 4 -- have foregone federal loan guarantees, instead doubling down on gouging ratepayers. Remarkably, one-fifth of South Carolina ratepayer electric bills now go towards building the two reactors, after the ninth "pay-in-advance" rate hike, in just the past several years, as reported by the Charleston, South Carolina Post & Courier.

And the latest nuclear establishment fad -- so-called Small Modular Reactors (SMRs) -- have also enjoyed many hundreds of millions of dollars of federal taxpayer subsidization, a trend that will continue, if the national nuclear labs, reactor vendors, and nuclear utilities of the U.S. continue to get their way.

Kee's immodest proposal also seems to forget that nuclear industry lobbyists, as from Exelon and Entergy, demanded competitive electricity markets back in the 1990s and early 2000s. They hoped to make even more profits than they were already making under regulated monopolies that they then enjoyed. Now that atomic reactors can't compete with cheaper sources of electricity, in the markets their own lobbyists demanded be created, nuclear utilities are crying foul, and demanding the clocks be turned back, and their profits again guaranteed, at ratepayer expense.

The proposal for government takeover of failing atomic reactors extends from the federal level to the state level. As reported by Syracuse.com, in New York State, for example, local elected officials, nuclear power plant unions, and a former Republican Public Service Commission chairman have called for the State of New York Power Authority to take back over at Entergy's FitzPatrick, scheduled to close in January 2017. Democratic Governor Andrew Cuomo has rejected that idea, although he does support ratepayer subsidies in the form of "zero emissions credits" under the Public Service Commission's Clean Energy Fund program, in development. Groups like NIRS and AGREE have led the resistance to that particular form of bailout, which would burden New York ratepayers to the tune of billions of dollars over time.

Wednesday
Jun292016

UBS: Atomic reactors under long-term contracts also at risk for closure

"Burning Money" graphic by Gene Case, Avening Angels, as featured on the cover of The Nation magazine in 2003, accompanying Christian Parenti's report on the nuclear power relapse.As reported by Matthew Bandyk at SNL Financial and Robert Walton at UtilityDIVE, it's not just single unit, small sized atomic reactors in competitive marketplaces for electricity that are succumbing to a record-breaking, and accelerating, trend of closure announcements.

UBS Securities has noted (in its June 23rd report entitled U.S. Electric Utilities & IPPs: Reacting to Retirements) that even atomic reactors with lucrative, long-term Power Purchase Agreements, such as Entergy's Palisades atomic reactor in Michigan, are non-competitive, and facing imminent shutdown. So too are multi-unit nuclear power plants, such as Xcel Energy's Prairie Island Units 1 and 2 in Minnesota.

As Bandyk at SNL reported it:

Since 2012, when Dominion Resources Inc. revealed its Kewaunee nuclear facility in Wisconsin was unable to make money in wholesale electricity markets and would be retired, small nuclear reactors operating in deregulated merchant environments have been facing the most pressure. Plants that did not sell purely on a merchant basis, but had the extra security of a long-term power purchase agreement, were seen as in better shape.

Long-term contracts, however, may not be a savior in some cases going forward. "We see long-term contracted plants as also at particular risk of shutdown" because of the lack of rate-base incentive for utilities and high operating costs, the [UBS] report said.

Bandyk continues:

The Palisades facility could become the leading example of this potential trend. The nuclear plant sells its output to CMS Energy Corp. subsidiary Consumers Energy Co. under a long-term contract through 2022, according to S&P Global Market Intelligence data. But due to the high price of this contract, both Consumers and Entergy may find it mutually beneficial to give up Palisades and replace it with a lower-cost solution like power from merchant power plants in the Midwest, according to the report. (emphasis added)

This corresponds strongly with the analysis provided by Amory Lovins of the Rocky Mountain Institute, in a Forbes column entitled "Closing Diablo Canyon Nuclear Plant Will Save Carbon and Money." Lovins points out that "Renewables and efficiency cost less than operating many nuclear plants."

UBS recommends that Palisades should close by spring 2017, as a favor to Entergy's and Consumer Energy's/CMS's shareholders, and as a huge favor to regional ratepayers, who have been gouged for the past decade on their electric bills.

(This is the second time since April that UBS has recommended Palisades' closure -- but the latest report has added the suggested date: spring 2017.)

With the approval of the Michigan Public Service Commission in 2007, Consumers Energy/CMS contracted to purchase every single megawatt-hour of electricity Entergy would produce at Palisades till 2022. NIRS executive director Tim Judson has stated it is by far the highest Power Purchase Agreement he has seen. Combined with Entergy's refusal to make very costly but vitally needed major safety repairs (embrittled reactor pressure vessel annealing; steam generator replacement; reactor lid replacement), Judson points out that something must be seriously out of whack at Palisades, for Entergy to still be unable to keep its head above water, given such financial advantages, at ratepayer expense and downwind/downstream safety risk (Palisades is located on the Lake Michigan shoreline, drinking water supply for many millions downstream).

Bandyk also reported:

Closing Palisades "could not only save money for [Entergy] in operating the plant and accelerating its strategic positioning away from nuclear but also reduce delivered costs to CMS consumers avoiding the cost of such a high-priced PPA," the report said. A likely scenario would be Entergy announcing the retirement this fall so Palisades could be shut down around its spring 2017 refueling outage, the UBS analysts said. (emphasis added)

In fact, Entergy's CEO recently advised potential investors that the company is looking to get out of the failing merchant atomic reactor business.

UBS has also reported that closure of Xcel Energy's twin unit Prairie Island, MN nuclear power plant by the mid-2020s is a distinct possibility.

Thursday
Jun232016

UBS: Possible retirements and license expirations of nuclear plants (2016-2025)

A figure in the UBS report entitled U.S. Electric Utilities & IPPs: Reacting to Retirements shows announced permanent closure dates at nine atomic reactors in the U.S., as well as approaching license expirations at eight additional nuclear power plants (some are multi-reactor sites) in the U.S. and Canada (see Figure 1 at the top of Page 3).

Thursday
Jun232016

UBS: Palisades shutdown by spring 2017, replacement with "cheap renewables," would benefit Entergy, CMS, & ratepayers

UBS AG is a Swiss global financial services company, incorporated in the Canton of Zurich, and co-headquartered in Zurich and Basel.In a report entitled U.S. Electric Utilities & IPPs: Reacting to Retirements, UBS has advised investors that Entergy and CMS (Consumers Energy), as well as area electric ratepayers, would benefit significantly from the near-term (spring 2017) permanent shutdown of the problem-plagued Palisades atomic reactor. (IPP stands for Independent Power Producer.)

A relevant section reports:

Contracted nuclear fleet at risk as well too

Further, we see long-term contracted plants as also at particular risk of shutdown as utilities have little incentive (ratebase) and high costs attached to these typically smaller facilities. An update from ETR around its Fall EEI update on its nuclear portfolio could potentially include an arrangement with CMS on premature retirement of Palisades. We think such arrangements across the Midwest could materialize over time (depending on progress in achieving carbon goals with wind, etc). [Page 1]

The Debate at Palisades: Illuminating the Dilemma

Focus has shifted towards Michigan where the conversation revolves around ETR’s remaining single-unit plant, Palisades, which continues to run with an above-market contract with CMS. We reiterate our view that shutting down this unit early could not only save money for ETR in operating the plant and accelerating its strategic positioning away from nuclear but also reduce delivered costs to CMS consumers avoiding the cost of such a high-priced PPA. While merchant IPPs have been on the front end of the latest retirement wave, we see a trend towards regulated entities should the industry prove unable to rein in costs. We emphasize with power prices across much of the country now trending below $30/MWh – and capacity contributing an additional $5-10/MWh, the implicit value of carbon remains the key 'discrepancy' in justifying the economics of these plants.

Both sides would likely save costs

We believe a scenario in which Entergy opts to shut down Palisades nuclear plant during the spring 2017 refueling timeframe would likely be mutually beneficial for CMS/ETR later this year (~3Q timeframe for ETR decision) and envisage scope for CMS and ETR to arrive at a mutually agreeable arrangement to close the plant early and effectively replace the arrangement with a lower all-in cost solution, such as ratebasing further available merchant capacity in the MISO market for instance. This would likely result in both CMS and ETR respectively transitioning to a more regulated profile. Further, we see an early retirement scenario as likely addressing ongoing concerns around nuclear sustenance capital. An update could be provided in tandem with ETR's EEI capex update on its future nuclear strategy. Given its spring 2017 outage, we see this Fall timeframe as still providing latitude for a possible expedited retirement as soon as next year. [Page 3-4]

UBS asks, and answers, this key question:

What's changing in the equation? Cheap Renewables.

...We see the improving cost profile of renewables as adding to nuclear pressures. [Page 4]

UBS later states:

Bottom line, we would expect continued retirement in restructured markets as [nuclear] plants continue to be undermined by zero-cost renewables. (emphasis added) [Page 5] 

It should be noted that Dr. Mark Cooper, Senior Fellow for Economic Analysis at the Vermont Law School Institute for Energy and the Environment, accurately predicted, three years ago, many of the recently announced reactor closures in the U.S. One of the reactors he considered at high-risk of near-term shutdown was Palisades.

His report was entitled "Renaissance in Reverse: Competition Pushes Aging U.S. Nuclear Reactors to the Brink of Economic Abandonment." His analysis was based in part on UBS investment analyses at that time.

Included among the factors that Dr. Cooper listed as to why Palisades was at risk of near-term shutdown were: economic factors (cost, old, merchant, less than 25 years with license extension [stand alone should have been included -- Palisades is a single reactor plant]; operational factors (long term outage); and multiple safety issues. [See Exhibit ES-1, Retirement Risk Factors of the Nuclear Fleet, page iv.]

Thursday
Jun162016

PowerDC call to join them Fri., June 17 to show D.C. PSC opposition continues against Exelon Nuclear takeover of Pepco

This just in from the PowerDC coalition, opposed to Exelon Nuclear's takeover of the Mid-Atlantic utility Pepco:

Make your voice heard. Join us at the Public Service Commission building tomorrow at 3 p.m.

Tomorrow the D.C. Public Service Commission (PSC) will announce whether it will uphold its shocking approval of Exelon’s bid to takeover Pepco.

PowerDC coalition members, along with the, D.C. Office of the People's Counsel, and the D.C. Attorney General have asked the PSC to reconsider its decision. This request comes as a result of the PSC's decision to approve the merger based on flawed procedural grounds.

Let us know if you can attend the PSC's hearing (1325 G Street, NW #800) tomorrow at 3 p.m.

Thank you,
PowerDC

The commission and the media think the public has accepted defeat and moved on. We have an opportunity to show them that we are still engaged, outraged, and prepared to continue this fight. Join us!