Study: Market puts Clinton nuke plant at risk for early retirement

Study: Market puts Clinton nuke plant at risk for early retirement

Exelon's Clinton nuclear plant is one of a dozen commercial reactors in the United States cited in a new study as facing pressures that make it particularly vulnerable to an early retirement.

The national study was done by the Institute for Energy and the Environment at the Vermont Law School.

The principal author, Mark Cooper, a senior fellow for economic analysis at the Vermont Law School, said in a telephone interview that a difficult Midwestern market puts the Clinton plant at risk for an early abandonment.

Cooper said he based his report on Wall Street analysts' review of the U.S. nuclear fleet and those reactors that met four or more of 11 risk factors.

UBS, the financial services company, reported that the Clinton plant had negative cash flow because of low power prices and an overcapacity of electric energy, he said. And Credit Suisse, another large financial services firm, ranked the Clinton plant similarly to the Kewaunee plant in Wisconsin, which was shut down last month.

"Clearly the economics of Clinton are dicey," Cooper said. "It's selling into a very tough market. And it's Exelon's smallest and only one-unit Midwest station. So it's standalone in terms of its geography and its site standalone. So it's got the characteristics where (analysts) think it has a negative cash-flow in this environment.

"With that standalone characteristic, its costs are higher. It's basic economics of electricity, particularly in the (Midwest) area. And that puts pressure on these plants, precisely because of the costs that have to be covered by the quark spread (the difference between the wholesale electricity price received by a nuclear plant owner and the cost of fuel needed to produce its electricity)."

The plant, which opened in 1987 and was built by the old Illinois Power Co., is now operated by Exelon Corp. It has about 700 employees.

Exelon officials had no comment on the substance of Cooper's report, said Bill Harris, communications manager at the plant.

But he said "Exelon is not considering closing any nuclear plant," except a New Jersey reactor long ago scheduled to be shut down in 2019.

"This is a low-cost nuclear fleet that Exelon operates," he said. "It's competitive. It's a long-term asset. We don't change our long-term investment decisions based on short-term market fluctuations. We continue to invest in what is a world-class nuclear fleet."

The Clinton plant is converting from a 24-month to a 12-month refueling cycle, which is more efficient and "will achieve substantial fuel cost savings," he said.

Cooper said in an earlier teleconference that 38 reactors in 23 states are at some risk of early retirement, that four plants had been closed in recent months, power "uprates" at five plants have been canceled and that the nuclear load factor last year was at its lowest level in a decade.

"The bottom line is that the tough times the nuclear power industry faces today are only going to get tougher," he said. "I'm not making predictions here, and I do really want to stress that. I'm just identifying the risk factors and looking objectively at the reactors that are saddled with a large number of risks. This is how Wall Street analysts have been examining the reactors."

He said plants like Clinton "are on the razor's edge of economic abandonment" and that any kind of precipitating factor, such as unexpected repair costs or stiff competition from low-cost alternatives, "could push them over the edge."

He said that policymakers need to prepare for a different energy future.

"There is no prospect of low-cost replacement nuclear power," he asserted. "We're much better off if we do this is an orderly fashion than being surprised when a reactor is retired."

The economics of building new reactors is "very, very dicey," he said.

"Nuclear power can't compete and failing to learn that lesson, and pursuing policies that attempt to lean against it and push against it are going to wind up being expensive, counterproductive and ultimately they will fail."

Alternative energy sources, such as natural gas, wind and solar energy will continue to put cost pressures on nuclear energy, Cooper said.

"Demand does not look like it's going to take off. You have new appliance standards that will put downward pressure on demand, and new building codes," he said. "The economics of the relevant time frame for making decisions on these reactors are very, very potent and they don't look like they are changing."

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