Market reforms needed to prevent US closures

09 January 2015

This story has been updated to include comments made by Exelon in a statement released on 12 January.

As Fitch warns that market reforms are needed to prevent a premature reduction in US nuclear power capacity, a report from Illinois proposes market solutions to head off the threatened closure of five Exelon reactors.

Quad Cities' two units have been earmarked as potential candidates for early closure
(Image: Exelon)

Illinois is home to 11 nuclear reactors at six sites, accounting for around a quarter of the state's generating capacity. All are operated by Exelon, which last year said it would consider closing non-profitable nuclear plants there. Byron, Clinton and Quad Cities - a total of 5 units - were identified as at risk of possible closure.

In response, the Illinois House of Representatives in May 2014 tasked the Illinois Commerce Commission, the Illinois Power Agency, the Illinois Environmental Protection Agency and the Illinois Department of Commerce and Economic Opportunity with preparing a report addressing issues related to the premature closure of nuclear power plants in the state. Each agency looked in detail at the potential impacts of the closures, ranging from security and reliability of supply to electricity prices, economic effects and greenhouse gas emissions.

The agencies were also instructed to include market-based solutions to prevent premature closures. Five were identified: relying on existing market forces and competition; establishing a cap-and-trade policy; implementing a carbon tax; creating a low-carbon portfolio standard; and creating a sustainable power planning standard. No final recommendations were made, but the report did note that any solutions would need to be applied within a timeline to fit with the Clean Power Plan proposed by the US Environmental Protection Agency last year.

Publishing the report, the Illinois Environmental Protection Agency notes that its findings are intended to be "starting points for further discussion" rather than forming specific policy recommendations.

Exelon thanked the state for its "attention and work" in highlighting the economic and environmental benefits brought by nuclear and the negative impacts of the premature closure of one or more nuclear facility.

In a statement issued yesterday, Exelon said: "We continue to believe that the best, most cost-effective approach for preserving the benefits these plants provide is a market-based solution that properly values the emissions-free, always-on energy they generate." The report is a "good starting point for discussions with lawmakers and other stakeholders about the right path forward for continuing to meet Illinois' energy needs."

US capacity in decline

The New York City division of international credit rating agency Fitch has meanwhile issued a report expressing its concern about the impact of the premature retirement of nuclear power plants, which are a significant part of carbon-free generating capacity for the USA.

Fitch notes that of five out of six recent or planned reactor closures in the USA – four that closed in 2013, one (Vermont Yankee) in 2014 and Oyster Creek, due to close in 2019 - will have been retired before the end of their operating licenses. Of these, only one closure – Oyster Creek – is being driven by factors outside the market, Fitch said.

Exelon announced in 2010 that it would close Oyster Creek in 2019, ten years ahead of uts licence expiry, after being faced with the prospect of having to build new cooling towers to comply with revisions to environmental legislation on cooling for large industrial facilities.

Without reforms to the current market structure, Fitch warns, at least eight additional units totalling around 8000 MWe of capacity are at risk of early retirement. "Reforms to the existing market structure are key to staving off further nuclear retirements," it said.

Accordingto Fitch, the most promising reform appears to be a proposal by the regional transmission organisation PJM Interconnection that would reward resources capable of sustained operations during peak load periods and extreme weather events. PJM coordinates the movement of wholesale electricity in all or parts of the states of Delaware, Illinois, Indiana, Kentucky, Maryland, Michigan, New Jersey, North Carolina, Ohio, Pennsylvania, Tennessee, Virginia, West Virginia and the District of Columbia. Reforms are also being considered in other jurisdictions.

Researched and written
by World Nuclear News