There has been much talk of a “renaissance” of nuclear power in the United States. While I personally am a big fan of nuclear power, in my posts I attempt to cull the reality from the hype. One key concept is that even if a few plants get built, they are not likely to significantly dent the capacity loss from plants being pulled from service out of our current fleet of 104 units.
Recently the state of Vermont decided not to allow the renewal of the license for the Vermont Yankee nuclear plant. This decision was made by the Vermont Senate not the NRC itself (the NRC has allowed all licenses to be extended that have been requested so far, I believe). The NRC originally licensed reactors for 40 years and can provide a 20 year extension; Vermont Yankee went live in 1972 and thus it will not be in use past 2012 unless the license is extended. Per this article, Entergy intends to fight the state decision:
Late Wednesday, the Vermont Senate blocked the company’s application for a 20-year operating license extension for its Vermont Yankee nuclear plant. Entergy said in a statement that the effort to win the renewal, “is far from over.” The power company said it’ll work to prove its case to the Vermont legislature, state officials and the Vermont public. Entergy may be forced to shut down the plant in 2012.
Of course this begs the question as to how Vermont will now get its power; this plant provided 35% of all power (according to the Wikipedia link above) for Vermont in 2006 and certainly losing a fully paid for, base load nuclear station is going to require a lot of expensive replacement power from other sources. Since Vermont is on the east coast and there is a heavy transmission grid there other power sources should be available, but this likely will have a rate impact on the citizens of Vermont when they begin paying a higher price for out of state power.
Entergy and Spinning off Nuclear Assets
The plant is owned by Entergy. Entergy is run by Wayne Leonard, one of the smartest guys in the electrical utility industry, who purchased this plant back in 2002 (here is a link to the original purchase announcement, before it officially closed, back in 2001). It isn’t a “done deal” yet that the plant won’t get re-licensed, but if so, it would be expected that this would be a financial negative for Entergy because they likely assumed that the plant would have been re-licensed (because they are routinely approved by the NRC) when they purchased this asset back in 2002. Entergy is also thinking of spinning off their nuclear plants to shareholders; this is smart because the value of the nuclear assets are impaired by the fact that they are owned by distribution companies; as a stand-alone asset, they can charge whatever the market will bear and the distribution company will have to pay up or go without; when they are part of an integrated utility you can only raise rates so much without causing yourself problems since you own both sides of the value chain.
The state of New York woke up and realized the problems that independent nuclear plants would cause. Per this article:
New York’s utility regulator said on Thursday its staff found Entergy Corp’s (ETR.N) plan to spin off six nuclear power units, including three reactors in New York, to a new company, Enexus Energy Corp, was not in the public interest. The New York State Public Service Commission said in a release it was considering other options, including changes to the transaction to improve the financial stability of the three New York reactors and provide benefits to ratepayers. The staff concluded that the level of debt needed to finance the Enexus spinoff “is excessive when the business risks of this new merchant nuclear plant enterprise are considered,” the agency said.
The re-licensing of Vermont Yankee isn’t a done deal yet. It is likely that Entergy will continue to negotiate with the state of Vermont and they want some sort of additional clean up or concessions to allow the sale to go forward, or a guarantee of some sort of rate reductions below what could be charged as “market” rates. Like the state of New York, the states have to move while they still have some leverage (when the plant owners are changing the license or getting re-licensed by the NRC, which may or may not require state approval) because the Federal Government is pretty much approving everything right now without significant conditions.
Given that the states don’t actually believe that significant new capacity will be coming on line anytime soon, and that renewables haven’t made any sort of significant supply contributions to date, letting these nuclear plants charge whatever the market will bear will have ruinous impacts on utility customers because there is no viable competition on the horizon in terms of significant new plants. There has never been a better time to own a paid-off nuclear plant than right now.
Cross posted at LITGM