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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The Illinois economy could lose $3.6 billion in output, nearly 5,200 megawatts of emission-free electric generating capacity and up to 13,300 jobs if Exelon Corporation (NYSE:EXC) (Chicago, Illinois) closed the Byron, Clinton and Quad Cities nuclear power plants in 2016, which would be between eight and 16 years before their licenses expired, according to an analysis by the Nuclear Energy Institute (NEI) (Washington, D.C.).
The analysis, "The Impact of Exelon's Nuclear Fleet on Illinois," also included information on Exelon's other Illinois nuclear generators: Braidwood, Dresden and LaSalle. But it focused on Byron, Clinton and Quad Cities because those three plants face "a combination of economic and policy factors (that) has created potentially fatal economic headwinds," the report stated. Byron, Clinton and Quad Cities "are at significant risk of premature retirement because of a perfect storm of economic challenges: sluggish economy, historically low natural gas prices, and the unintended consequences of current energy policies."
One of the unintended consequences the report refers to obliquely is the structure of wholesale markets, which typically do not pay generators a capacity fee--in essence, a fee for being available to generate electricity. Rather, most wholesale markets only pay generators for the energy they produce. Low-priced natural gas has allowed gas-fired electricity to be dispatched ahead of other resources, like coal and nuclear.
Another unintended consequence has to do with state renewable portfolio standards. With many wind generators receiving a federal production tax credit (PTC) of about $23 per megawatt-hour of electricity produced, those generators have an incentive to produce electricity when the market clearing price is below their operating cost, or even negative.
Byron, Clinton and Quad Cities have combined generating capacity of 5,184 megawatts (MW), the report notes. If the three plants close prematurely in 2016, the NEI study calculated the state's economy would lose $3.6 billion in economic output that year. The state's lost output would increase annually, reaching $4.8 billion by 2030. The number of direct and indirect jobs lost peaks in the fifth year after the plants close: 13,300 jobs in 2020.
"Losses would reverberate for decades after the premature plant closures, and host communities may never fully recover," the report warned. "One way to appreciate the value of a nuclear power plant is to examine what happens when it is gone. When the Kewaunee facility in Wisconsin closed prematurely in 2013, Kewaunee County lost 15 percent of its employment and 30 percent of its revenue--not to mention 556 megawatts of reliable, affordable electricity."
The closure in 2012 of the two-unit San Onofre Nuclear Generating Station (SONGS) in California cost the state 1,500 jobs, the NEI analysis noted. Replacement power tended to be gas-fired, which played a role in driving up the state's carbon dioxide (CO2) emissions by 35%. Finally, the loss of SONGS increased electricity prices in Southern California by $7 per megawatt-hour to $10 per megawatt-hour, compared to electricity prices in Northern California. Prior to the closure of SONGS, there was virtually no difference in wholesale electric prices between Northern and Southern California.
"Byron, Clinton and Quad Cities are integral to the local and state economies," the NEI report asserted. "Since nuclear plants often are the largest, or one of the largest, employers in the regions in which they operate, the loss of a nuclear power plant has lasting, negative economic ramifications."
Beyond the economic benefits that Exelon Nuclear contributes to Illinois in the form of jobs, income and taxes, Exelon and its employees contribute to local communities in many other beneficial ways, the report noted.
"Exelon Nuclear has a strong tradition of community involvement that helps to strengthen and enrich the communities where it operates. Each of Exelon's nuclear plants has a community outreach program designed to build trust, support, and general goodwill with plant neighbors, community leaders, and elected officials." All of that would also be lost if the Byron, Clinton and Quad Cities nuclear units are closed prematurely in 2016, the report concluded.
"Somehow, someone must get U.S. economic, energy and environmental policies in alignment," said Brock Ramey, Industrial Info's manager of research for North American Power. "If we're concerned about power plant emissions, we ought to be encouraging all types of generation that emit no emissions. Wind power benefits significantly from the PTC. Solar power benefits significantly from the federal Investment Tax Credit (ITC). Nuclear has nothing comparable. Renewables are great, but what about when the sun doesn't shine and the wind doesn't blow? Fuel diversity is a time-honored practice to manage the risks of over-investing in any one type of fuel. Fuel diversity is not a free lunch--there are costs. But as this NEI report shows, there also are long-term costs when short-term factors lead to the closure of operating nuclear units."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
The analysis, "The Impact of Exelon's Nuclear Fleet on Illinois," also included information on Exelon's other Illinois nuclear generators: Braidwood, Dresden and LaSalle. But it focused on Byron, Clinton and Quad Cities because those three plants face "a combination of economic and policy factors (that) has created potentially fatal economic headwinds," the report stated. Byron, Clinton and Quad Cities "are at significant risk of premature retirement because of a perfect storm of economic challenges: sluggish economy, historically low natural gas prices, and the unintended consequences of current energy policies."
One of the unintended consequences the report refers to obliquely is the structure of wholesale markets, which typically do not pay generators a capacity fee--in essence, a fee for being available to generate electricity. Rather, most wholesale markets only pay generators for the energy they produce. Low-priced natural gas has allowed gas-fired electricity to be dispatched ahead of other resources, like coal and nuclear.
Another unintended consequence has to do with state renewable portfolio standards. With many wind generators receiving a federal production tax credit (PTC) of about $23 per megawatt-hour of electricity produced, those generators have an incentive to produce electricity when the market clearing price is below their operating cost, or even negative.
Byron, Clinton and Quad Cities have combined generating capacity of 5,184 megawatts (MW), the report notes. If the three plants close prematurely in 2016, the NEI study calculated the state's economy would lose $3.6 billion in economic output that year. The state's lost output would increase annually, reaching $4.8 billion by 2030. The number of direct and indirect jobs lost peaks in the fifth year after the plants close: 13,300 jobs in 2020.
"Losses would reverberate for decades after the premature plant closures, and host communities may never fully recover," the report warned. "One way to appreciate the value of a nuclear power plant is to examine what happens when it is gone. When the Kewaunee facility in Wisconsin closed prematurely in 2013, Kewaunee County lost 15 percent of its employment and 30 percent of its revenue--not to mention 556 megawatts of reliable, affordable electricity."
The closure in 2012 of the two-unit San Onofre Nuclear Generating Station (SONGS) in California cost the state 1,500 jobs, the NEI analysis noted. Replacement power tended to be gas-fired, which played a role in driving up the state's carbon dioxide (CO2) emissions by 35%. Finally, the loss of SONGS increased electricity prices in Southern California by $7 per megawatt-hour to $10 per megawatt-hour, compared to electricity prices in Northern California. Prior to the closure of SONGS, there was virtually no difference in wholesale electric prices between Northern and Southern California.
"Byron, Clinton and Quad Cities are integral to the local and state economies," the NEI report asserted. "Since nuclear plants often are the largest, or one of the largest, employers in the regions in which they operate, the loss of a nuclear power plant has lasting, negative economic ramifications."
Beyond the economic benefits that Exelon Nuclear contributes to Illinois in the form of jobs, income and taxes, Exelon and its employees contribute to local communities in many other beneficial ways, the report noted.
"Exelon Nuclear has a strong tradition of community involvement that helps to strengthen and enrich the communities where it operates. Each of Exelon's nuclear plants has a community outreach program designed to build trust, support, and general goodwill with plant neighbors, community leaders, and elected officials." All of that would also be lost if the Byron, Clinton and Quad Cities nuclear units are closed prematurely in 2016, the report concluded.
"Somehow, someone must get U.S. economic, energy and environmental policies in alignment," said Brock Ramey, Industrial Info's manager of research for North American Power. "If we're concerned about power plant emissions, we ought to be encouraging all types of generation that emit no emissions. Wind power benefits significantly from the PTC. Solar power benefits significantly from the federal Investment Tax Credit (ITC). Nuclear has nothing comparable. Renewables are great, but what about when the sun doesn't shine and the wind doesn't blow? Fuel diversity is a time-honored practice to manage the risks of over-investing in any one type of fuel. Fuel diversity is not a free lunch--there are costs. But as this NEI report shows, there also are long-term costs when short-term factors lead to the closure of operating nuclear units."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.
