Economic viability study: a wake-up call for US factories: NEI: Corporate

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April 30, 2021

Most nuclear power plants in the PJM Interconnection wholesale electricity market – spanning 13 U.S. states and the District of Columbia – will not generate enough revenue to remain economically viable for years to come, an independent economic assessment has found.

The independent study by Potomac Economics was commissioned by NEI (Image: NEI)

Potomac Economics, which has 20 years of experience as an Independent Market Monitor (IMM) for four of the regional electricity markets in the United States, was commissioned to conduct the assessment by the Nuclear Energy Institute (NEI) the United States. His analysis, A review of nuclear costs and revenues in PJM, accurately assesses the “avoidable” costs of PJM’s fleet and compares them to “realistic” revenues from PJM’s power, ancillary services and capacity markets, NEI said, as well as acknowledging the risks operational and market conditions that must be taken into account in order to accurately assess the costs of the continued operation of nuclear power plants.

According to the analysis, the decline in energy prices and associated revenues in recent years has significantly reduced the net revenues from all of PJM’s nuclear resources. “With energy prices falling to their lowest level for decades in 2020, it seems unlikely to us that any of PJM’s nuclear resources will cover its costs. Although all forward prices for energy are significantly higher than the prices in effect in 2020, we find that market revenues are unlikely to be sufficient to allow any of the resources to be viable to remain operational, with the possible exception of least expensive resources, ”the report says.

If PJM markets evolve to better reflect the value of carbon emissions, the economic outlook for nuclear resources would improve since they do not emit carbon dioxide, he adds.

“These results paint a grim picture of the financial viability of most of the nuclear resources in the PJM region,” the NEI said, describing the independent analysis as a “wake-up call.”

“Often two key aspects of nuclear economic analyzes are overlooked,” said Matt Crozat, senior director of strategy and policy development at NEI. The first of these, he said, concerns the financial costs and risks associated with operating large factories borne by the owners, and the second is the use of unrealistic or optimistic revenue forecasts.

“However, the Potomac Economics report sets the record straight by basing their analysis on realistic market-based prices,” he said. “Using true avoidable costs and a reasonable estimate of revenue, the report demonstrates that nuclear power plants are unsustainable.

“Through the analysis of Potomac Economics, it is clear that the economic obstacles facing PJM nuclear power plants are significant. Energy policies can be adopted to overcome these obstacles, but federal and state policy reforms are needed quickly. . “

Over the past decade, 10 states in the PJM region and the District of Columbia have instituted policies such as revolving portfolio standards or zero-emission credits to reduce emissions, Crozat said. “Yet federally regulated energy markets do not properly value carbon-free energy and therefore push nuclear power plants out, while policy experts come to the exact opposite conclusion. Policymakers must adopt policies that properly value our greatest source of carbon-free energy in order to have the hope of achieving a clean electricity sector and protecting the climate ”.

PJM is a regional transportation organization that coordinates the movement of wholesale electricity throughout all or part of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, Carolina from North, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. The region covered by PJM is home to 31 of the 94 nuclear power plants in the United States.

In the past two years, two nuclear units in the PJM region – Unit 1 at Three Mile Island and Oyster Creek – have retired, the report notes. Planned unit closures at the Davis-Besse and Perry factories were rolled back in 2019 after the state of Ohio passed a bill providing zero-emission clean energy credits, but Exelon announced last year its intention to close a total of four units at Byron. and the Dresden factories in 2021 due to market conditions. “Based on the results presented in this study, other PJM nuclear units are at risk of early retirement due to deteriorating economic conditions and the fact that carbon emissions are not effectively priced in the PJM region.” , indicates the report.

Research and writing by World Nuclear News





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