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Released December 01, 2015 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The announcement last month that Entergy Corporation (NYSE:ETR) (New Orleans, Louisiana) will close its Pilgrim Nuclear Power Station by 2019 sparked a flurry of activity among politicians and developers about the best way to meet New England's future electric demand as well as the environmental impacts and costs of various alternatives.
Pilgrim, with 680 megawatts (MW) of generating capacity, came online in 1972. In 2012, the U.S. Nuclear Regulatory Commission (NRC) (Bethesda, Maryland) extended its operating license for another 20 years. However, the plant had unscheduled shutdowns in 2013 and 2015, triggering heavier oversight by the NRC. The nuclear regulatory agency said Pilgrim was one of the three least-safe nuclear plants in the country. The costs of the additional NRC oversight, coupled with the flood of inexpensive natural gas from the Marcellus Shale, convinced Entergy to close the plant.
In an October 13 statement announcing its decision, Entergy said "poor market conditions, reduced revenues and increased operational costs" combined to make Pilgrim uneconomic. "Low current and forecast wholesale energy prices--brought about by record low natural gas prices, driven by shale gas production," had driven regional energy prices down to the point that continuing to operate the plant would lead to annual net losses of between $10 million and $30 million per year for 2015, 2016 and 2017, the company said. In addition, Entergy said the "preliminary estimate of direct costs of the plant's response to a planned NRC enhanced inspection ranges from $45 million to $60 million pre-tax in operation and maintenance expense, not including any potential capital investment or other costs to address issues that may arise in the inspection."
Bill Mohl, president of Entergy Wholesale Commodities, which owns Pilgrim, told The Boston Herald: "When you have other folks making decisions on renewables, on preference power from Canada, on subsidization of gas pipelines ... you are basically picking winners and losers. The consequences are the shutdown of viable facilities."
Entergy could close Pilgrim as soon as 2017, when it is scheduled for a refueling. The company said it will determine Pilgrim's exact closure date next year, when it needs to decide whether to refuel the plant. However, it did say the plant's last day to operate would be June 1, 2019. Entergy also decided to close another nuclear plant, the James A. FitzPatrick Nuclear Power Station in New York. For more on the Pilgrim and FitzPatrick closures, see November 3, 2015, article - Entergy Announces Second Nuclear Plant Closure, Reports $723 Million Loss for Third Quarter. Last December, Entergy closed the 640-MW Vermont Yankee Nuclear Plant, located in Vernon, Vermont. For more on that plant's closure, see January 8, 2015, article --Entergy Permanently Shutters Yankee Nuclear Station in Vermont.
Every state in New England will be affected by Pilgrim's retirement, Martin Murray, a spokesperson for Eversource Energy (NYSE:ES) (Springfield, Massachusetts), told the Associated Press (AP). Eversource is the new name for what used to be called Northeast Utilities. Since homes and businesses in the region receive their electricity from a power pool, the loss of Pilgrim will remove a generating resource that kept the lights on in New Hampshire as well as Massachusetts, Connecticut and Vermont.
The AP also reported that ISO New England, which operates the region's bulk power system and wholesale electricity marketplace, said retiring Pilgrim "will place further stress on the region in terms of fuel security and will add to the operational challenge to maintaining reliability during New England's coldest months."
Although Pilgrim accounted for only about 5% of the region's electricity, about 80% of Massachusetts' carbon-free electricity comes from Pilgrim. This is important because in 2008, Massachusetts enacted the Global Warming Solutions Act, which mandated a 25% reduction in GHG emissions by 2020 compared to a 1990 baseline. By 2050, the state must reduce those emissions by 80% compared to the 1990 baseline. Removing a significant source of carbon-free emissions will likely make it harder for the state to comply with its own law.
A wide range of Gas Pipelines, Electric Generation and Electric Transmission projects, in additional to customer-facing programs like demand response, are being developed to keep the lights on in New England. Utility regulators and elected officials across the region, particularly in Massachusetts, are revisiting energy issues with a heightened sense of urgency, given the costs and lengthy permitting processes involved in some of the proposed projects. For more information on this issue, see August 10, 2015, article - New Gas-Fired Generator Under Construction in Massachusetts and June 16, 2015, article - Summer Power Demand May Strain New England.
Massachusetts Governor Charlie Baker has backed two bills in the state legislature that, if enacted, would be part of the solution. One bill allows the state's utilities to enter into long-term supply contracts with renewable energy producers. The other would increase the size of the state's net metering program, leading to installation of more rooftop solar power.
But the governor recognized that these are only part of the region's energy future. "Solar and wind are intermittent," he recently told the AP. "They don't solve or meet our capacity requirement. One of the things that makes hydro attractive to me is it's a baseload substitution and a baseload solution."
Local opposition and the inability to secure financing or permits have caused developers to cancel or delay some proposed projects that would bring energy into New England. For more on that, see April 8, 2015, article--Developers Delay, Cancel Gas Projects in U.S. Northeast.
Here are some of the larger active pipeline and transmission projects under development in the region.
Pipeline Projects
Jesus Davis, vice president of research for the Oil & Gas Production, Pipelines and Terminals industries, added this: "The fact that it took Eversource five years of stakeholder engagement before it could even file its permit with New Hampshire regulators is a clear warning sign to other projects: Expect the stakeholder engagement process to be long and contentious, and be prepared to make route changes. Whether Eversource's project will win a permit, and be operating before Pilgrim shuts its doors, is an open question."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at www.industrialinfo.com.
Pilgrim, with 680 megawatts (MW) of generating capacity, came online in 1972. In 2012, the U.S. Nuclear Regulatory Commission (NRC) (Bethesda, Maryland) extended its operating license for another 20 years. However, the plant had unscheduled shutdowns in 2013 and 2015, triggering heavier oversight by the NRC. The nuclear regulatory agency said Pilgrim was one of the three least-safe nuclear plants in the country. The costs of the additional NRC oversight, coupled with the flood of inexpensive natural gas from the Marcellus Shale, convinced Entergy to close the plant.
In an October 13 statement announcing its decision, Entergy said "poor market conditions, reduced revenues and increased operational costs" combined to make Pilgrim uneconomic. "Low current and forecast wholesale energy prices--brought about by record low natural gas prices, driven by shale gas production," had driven regional energy prices down to the point that continuing to operate the plant would lead to annual net losses of between $10 million and $30 million per year for 2015, 2016 and 2017, the company said. In addition, Entergy said the "preliminary estimate of direct costs of the plant's response to a planned NRC enhanced inspection ranges from $45 million to $60 million pre-tax in operation and maintenance expense, not including any potential capital investment or other costs to address issues that may arise in the inspection."
Bill Mohl, president of Entergy Wholesale Commodities, which owns Pilgrim, told The Boston Herald: "When you have other folks making decisions on renewables, on preference power from Canada, on subsidization of gas pipelines ... you are basically picking winners and losers. The consequences are the shutdown of viable facilities."
Entergy could close Pilgrim as soon as 2017, when it is scheduled for a refueling. The company said it will determine Pilgrim's exact closure date next year, when it needs to decide whether to refuel the plant. However, it did say the plant's last day to operate would be June 1, 2019. Entergy also decided to close another nuclear plant, the James A. FitzPatrick Nuclear Power Station in New York. For more on the Pilgrim and FitzPatrick closures, see November 3, 2015, article - Entergy Announces Second Nuclear Plant Closure, Reports $723 Million Loss for Third Quarter. Last December, Entergy closed the 640-MW Vermont Yankee Nuclear Plant, located in Vernon, Vermont. For more on that plant's closure, see January 8, 2015, article --Entergy Permanently Shutters Yankee Nuclear Station in Vermont.
Every state in New England will be affected by Pilgrim's retirement, Martin Murray, a spokesperson for Eversource Energy (NYSE:ES) (Springfield, Massachusetts), told the Associated Press (AP). Eversource is the new name for what used to be called Northeast Utilities. Since homes and businesses in the region receive their electricity from a power pool, the loss of Pilgrim will remove a generating resource that kept the lights on in New Hampshire as well as Massachusetts, Connecticut and Vermont.
The AP also reported that ISO New England, which operates the region's bulk power system and wholesale electricity marketplace, said retiring Pilgrim "will place further stress on the region in terms of fuel security and will add to the operational challenge to maintaining reliability during New England's coldest months."
Although Pilgrim accounted for only about 5% of the region's electricity, about 80% of Massachusetts' carbon-free electricity comes from Pilgrim. This is important because in 2008, Massachusetts enacted the Global Warming Solutions Act, which mandated a 25% reduction in GHG emissions by 2020 compared to a 1990 baseline. By 2050, the state must reduce those emissions by 80% compared to the 1990 baseline. Removing a significant source of carbon-free emissions will likely make it harder for the state to comply with its own law.
A wide range of Gas Pipelines, Electric Generation and Electric Transmission projects, in additional to customer-facing programs like demand response, are being developed to keep the lights on in New England. Utility regulators and elected officials across the region, particularly in Massachusetts, are revisiting energy issues with a heightened sense of urgency, given the costs and lengthy permitting processes involved in some of the proposed projects. For more information on this issue, see August 10, 2015, article - New Gas-Fired Generator Under Construction in Massachusetts and June 16, 2015, article - Summer Power Demand May Strain New England.
Massachusetts Governor Charlie Baker has backed two bills in the state legislature that, if enacted, would be part of the solution. One bill allows the state's utilities to enter into long-term supply contracts with renewable energy producers. The other would increase the size of the state's net metering program, leading to installation of more rooftop solar power.
But the governor recognized that these are only part of the region's energy future. "Solar and wind are intermittent," he recently told the AP. "They don't solve or meet our capacity requirement. One of the things that makes hydro attractive to me is it's a baseload substitution and a baseload solution."
Local opposition and the inability to secure financing or permits have caused developers to cancel or delay some proposed projects that would bring energy into New England. For more on that, see April 8, 2015, article--Developers Delay, Cancel Gas Projects in U.S. Northeast.
Here are some of the larger active pipeline and transmission projects under development in the region.
Pipeline Projects
- The Access Northeast Pipeline could bring up to 1 billion cubic feet of gas per day (Bcf/d) into New England, enough to power up to 5,000 MW of gas-fired generating stations, its developers said. This $3 billion pipeline project would be sited along existing pipeline rights of way in New York, Connecticut and Massachusetts. The project is being developed by subsidiaries of Spectra Energy Corporation (NYSE:SE) (Houston, Texas), National Grid Plc (NYSE:NGG) (London, United Kingdom) and Eversource. Assuming all its permits are secured, it could be operating by 2018.
- The Algonquin Incremental Market (AIM) Project is under construction and is scheduled to be operating by late 2016. The pipeline will be able to transport up to 342,000 dekatherms of gas per day to New York, Connecticut, Rhode Island and Massachusetts. The project developer is a unit of Spectra and it expands the capacity of the company's existing Algonquin Gas Transmission System.
- The Atlantic Bridge Project is a proposed expansion of the Algonquin Gas Transmission and Maritimes & Northeast Pipeline systems. It has not yet gained regulatory approval. If constructed, it would transport up to 132,700 dekatherms of gas per day from New York to New England and Atlantic Canada. If regulators approve the project, construction could begin in late 2016 and the pipeline could be operating by late 2017.
- The Northeast Energy Direct (NED) Pipeline is being developed by Tennessee Gas Pipeline Company (Houston), a subsidiary of Kinder Morgan Incorporated (NYSE:KMI) (Houston). The project has a total investment value (TIV) of about $5 billion. It could transport up to 1.3 Bcf/d of gas from Pennsylvania to New York, Massachusetts and New Hampshire. Local news reports said the proposed route for a portion of the Massachusetts route so angered local residents that Kinder Morgan proposed re-routing that portion through New Hampshire, which irritated residents of the Granite State. People living in the nine towns in New Hampshire that would be affected by the revised pipeline route voted to oppose it. The project is scheduled to kick off in early 2017 and be operating by late 2018.
- The New England Clean Power Link Project is a 154-mile underwater high-voltage direct current (HVDC) transmission line that would bring Canadian hydropower to New England by going under Lake Champlain. The project will cost an estimated $1.2 billion, and the line will be capable of transmitting up to 1,000 MW of electricity. This project has not yet received all its permits. If the project's developer, TDI-New England (Charlotte, Vermont), receives all its permits according to schedule, construction could start in mid-2016, and the project could be operating by mid-2019.
- The Northern Pass project is a $1.4 billion, 1,090-MW venture being developed by Eversource Energy. This 192-mile project would bring Canadian hydropower through New Hampshire and into the New England power pool. In response to local opposition, the developer agreed to bury some of the line that goes through the White Mountains, which increased the cost and reduced the capacity. Five years after it was first proposed, Eversource filed its permit application with New Hampshire regulators last month.
Jesus Davis, vice president of research for the Oil & Gas Production, Pipelines and Terminals industries, added this: "The fact that it took Eversource five years of stakeholder engagement before it could even file its permit with New Hampshire regulators is a clear warning sign to other projects: Expect the stakeholder engagement process to be long and contentious, and be prepared to make route changes. Whether Eversource's project will win a permit, and be operating before Pilgrim shuts its doors, is an open question."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at www.industrialinfo.com.
