Page B1 of yesterday’s Wall Street Journal (online version here) and page 28 of the December 26 issue of Bloomberg Businessweek (online version here) contained articles discussing the difficulties US nuclear generators are having in today’s low cost natural gas environment. The WSJ article shows a map with fifteen different nuclear power plants that have either closed, will soon be closing, or were recently saved by the creation of new laws. I have created an interactive map that gives a little more detail on all the US nuclear plants that are still operating. (I hope to have the interactive map embedded with this blog post soon, but I’m having some technical issues right now. You can find my map here: https://public.tableau.com/shared/G88TY8WYK?:display_count=no)
Screenshot of interactive map. Click on link above to access features.
One of the big things to notice in my map is that while the companies claim the plants are struggling, the plants are running at very high capacity factors. A key thing to remember is that these plants still have very low marginal costs, so all of they are among the first to start generating to meet demand. The problem is that nuclear plants tend to have VERY high fixed costs. Today’s low power price environment means that the margin made on energy sales is no longer enough to cover these fix costs.
If keeping a plant open was based on the simple economics above, the decision to close would not be that difficult. However, there are many other issues that come into play when deciding if a plant should close. Nuclear plants are also very large employers and can have a significant impact on communities. Nuclear plants have no air emissions, so closing a plant could have a substantial impact on pollution levels. There are also issues from a fuel diversification perspective. The WSJ article mentions an analysis by the EIA that shows that when a nuclear plant is closed states increase their use of coal and natural gas to generate power. Information on this issue can be found in an article written by the EIA after the Fort Calhoun plant was shut down in October. (see article here)
Here is a chart from that article showing the in-state generation changed in these four states after nuclear closures.
So with all of these different factors there are reasons states could be willing to spend a little extra to keep their nuclear power plants open.
The Businessweek article discusses similar issues to the WSJ, and it adds an interesting graphic based on an analysis by Bloomberg New Energy Finance. This maps shows which plants are expected to have a positive operating margin during the 2016-19 period. It is interesting to see that most of the plants in this analysis that have a positive margin are in the northeast. The northeast has competitive electricity markets, but it also a more densely populated area and there have been issues increasing natural gas pipeline capacity into this region. These factors could be holding up power prices enough to keep these plants profitable.