Nuclear Energy Institute Briefing: Power Market Flaws Must Be Corrected

Recognition of the electricity market flaws that are putting even high-performing nuclear energy facilities at risk has grown quickly among those with the authority to fix the problem and initial market reforms are taking shape.

This was the message delivered to financial analysts Thursday at a briefing conducted by the Nuclear Energy Institute. The report of meaningful action by the Federal Energy Regulatory Commission and the PJM Interconnection, which operates the grid from the mid-Atlantic to the Midwest, comes in the wake of nuclear plant shutdowns in Wisconsin and Vermont over the past 20 months due to economic issues.

“We’ve seen significant movement in the past year on the part of FERC and the regional transmission organizations in recognizing the underlying problems in capacity market designs and prices in competitive energy markets,” said NEI President and Chief Executive Officer Marvin Fertel. “But it’s imperative that concrete actions be taken that recognize the inherent value of nuclear assets in time to ensure that we don’t lose additional nuclear plants that are excellent performers."

The progress includes ongoing FERC actions to explore changes to both capacity and energy markets, last November’s FERC order to regional transmission organizations for “fuel assurance” reports due in 90 days, and PJM’s request last December for FERC approval of a new “capacity performance” product to drive greater reliability.

A number of reactors operating in the Midwest and Northeast are at risk of premature shutdown despite their safe and efficient operating performance.

The closings of the Kewaunee and Vermont Yankee nuclear plants resulted in the immediate loss of bulk 24/7 electricity and more than 1,000 high-paying jobs in the communities where they operated.

The shutdowns have raised longer term concerns about energy diversity, electric grid stability and costs to customers, while making it far harder for states and regions to meet their clean air goals.

“It made no economic sense to allow these facilities to close because replacement electric generating capacity, when needed, would likely produce more costly electricity, more pollution and fewer jobs that would pay less,” Fertel said. “Each source of electricity has its own set of attributes that provide varying degrees of value to the grid, and those attributes must be reflected in the total compensation provided to each generator.”

Nuclear energy’s “unique value proposition” centers on these benefits, Fertel said: support for grid stability; stable, affordable electricity price; nuclear power plants produce electricity when needed, especially in extreme weather, because they have 18 to 24 months of uranium fuel in the reactor; contribute to fuel and technology diversity; prevent carbon emissions; and anchor the local community with jobs and tax revenue.

The value of America’s nuclear energy facilities was underscored by their record performance in 2014, Fertel noted. U.S. nuclear power plants operated at a record average capacity factor (a measure of efficiency) of 91.9 percent, according to preliminary NEI estimates.

Also, the industry undergirded the electric grid during the 2014 Polar Vortex and last month’s winter storm Juno, with weekly average capacity factors in the mid-to-high-90s—far above other electricity production sources.

Citing a recent IHS Energy study on the value of energy diversity, Fertel warned that the nation is at “serious risk” of losing this long-valued diversity if current trends continue.

The magnitude of the investment needed to meet future electricity demands presents a strong case for continued electricity production at well-run nuclear power plants and construction of new nuclear energy facilities, Fertel said. This is one of the reasons that a top NEI priority is to address the cumulative impact of requirements imposed both by the Nuclear Regulatory Commission and the industry itself.

“We cannot afford to let spending to meet regulatory requirements of low safety significance crowd out more important initiatives that would make measurable improvements to safety and reliability,” Fertel said. “The U.S. nuclear industry has an enviable safety record, and we will always invest to ensure safety and reliability.

“In the most recent 15 years of reporting to Congress on operations at NRC-licensed facilities, the agency has identified only four incidents deemed significant enough to mention as ‘abnormal occurrences.’ This safety record is not consistent with a doubling of regulatory capital expenditures over the past 10 years” in response to new NRC requirements.

Fertel highlighted advances in other areas, including:

-- Continued implementation of federal regulatory requirements to add even more layers of safety in response to the 2011 Fukushima Daiichi accident, including the opening of two national response centers to provide supplemental emergency equipment to any plant site within 24 hours.

-- Movement on a viable used nuclear fuel management program as courts suspended the Nuclear Waste Fund fee and ordered the NRC to continue the licensing process for the proposed Yucca Mountain, Nev., repository. NRC evaluations of Yucca Mountain have affirmed the safety of the site and Congress has expressed interest in introducing legislation to move the repository program forward.

Click Here to watch a video of the full NEI briefing.

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