10. NUCLEAR

projects, and in particular the NuScale project, has been at the forefront of DOE’s efforts. These include research, supporting the preparation of the licence application through the SMR Licensing Technical Support Program and the site selection process. As the regulator, the NRC is in charge of evaluating and certifying the designs.

More details on the measures taken by the DOE are described below.

Operational fleet

The US nuclear fleet has reached extremely high capacity factors (over 92% in recent years). Average nuclear generation costs have come down from USD 40 per megawatthour (MWh) in 2012 to USD 34/MWh in 2017 through gains in power plant utilisation, as well as refuelling and more efficient maintenance procedures (IAEA, 2019). Capital expenditures on the existing fleet peaked in 2012 when post-Fukushima safety measures were implemented, and have since fallen to about USD 6 billion per year.

Utilities have been taking action to reduce operational costs, in particular through the Electric Power Research Institute, to optimise maintenance, reduce the use of critical components, develop standardised performance indicators and implement various digital innovations. According to Electric Utility Cost Group data, the average generation costs of the US nuclear fleet, which were around USD 29 per kilowatt-hour (kWh) (2017 dollars) in 2002, rose to USD 41.35/kWh in 2012 and through cost-reduction measures, came down to USD 33.50/kWh in 2017.

Of the 99 gigawatts (GW) of net installed capacity, 54 GW are in vertically integrated markets and 45 GW in liberalised markets, where electricity is sold competitively on a short-term basis and priced according to short-run marginal costs.

In unregulated markets, the US nuclear fleet faces two main challenges: competition from cheap shale gas and subsidised wind power (which in 2016 received a federal production tax credit of USD 23/MWh). Coupled with priority dispatch of wind power on the grid, these conditions have made it particularly difficult for merchant fleet operators to be sufficiently profitable. With falling costs, renewables are also able to compete without subsidies in certain regions. The existence of capacity mechanisms and payments (in some markets) is, to a certain extent, able to offset some of these effects. The ability for nuclear operators to clear capacity auctions and guarantee capacity payments is, therefore, of high importance.

In recent years, several plants have shut down before the end of their operating licences (premature shutdown). Some plants shut down due to excessive costs for repair or refurbishment, or for meeting new environmental policy requirements (for example, related to cooling technologies). For most plants, however, the decisive factor was the economics of the plants in their respective electricity markets (Table 10.2).

In the absence of any carbon pricing policy at the federal level, some states have put in place specific measures to value and recognise the low-carbon electricity generation from NPPs.

221

ENERGY SECURITY

IEA. All rights reserved.

10. NUCLEAR

Valuing low-carbon generation

States such as New York, Illinois and New Jersey have put in place zero-emissions credit (ZEC) programmes in an effort to secure the long-term operation of NPPs.

The New York Department of Public Services developed a ZEC programme that is providing subsidies of USD 17.54/MWh, a little lower than the 2016 federal production tax credits for wind (USD 23/MWh). The ZEC programme benefits the Fitzpatrick, Ginna and Nine Mile Point NPPs (total 3.4 GW). It was claimed that this programme would lead to economic and environmental benefits of USD 5 billion, which far outweighs the total subsidies (USD 1 billion).

Illinois’ ZEC to support the Quad Cities and Clinton NPPs (2.8 GW) provides subsidies of USD 16.5/MWh to the two plants. A legal challenge to the Illinois and New York ZECs was not successful; in April 2019, the Supreme Court refused to hear an appeal by power companies.

New Jersey in early 2019 passed legislation to create a ZEC programme, which could

provide relief to the Hope Creek and Salem NPPs (with a subsidy of around USD 10/MWh).

Ohio is looking at introducing a bill establishing a similar ZEC programme to support the NPPs in its state (Davis-Besse and Perry). The proposal would create a “clean air fund” of USD 300 million annually, USD 180 million of which would subsidise the two NPPs. Pennsylvania is also looking to set up a ZEC-like subsidy system; failure to do so is expected to lead to the early closure of several NPPs in the state, in particular Three Mile Island unit 1, which is reported to have operated at a loss for several years. Connecticut passed legislation to support the state’s Millstone NPP, which is the largest in New England and provides half of the state’s electricity and nearly all of its low-carbon electricity. In Connecticut, the utility Dominion – operator of Millstone – won a bid for zero-carbon energy in December 2018 from the state’s Department of Energy and Environmental Protection. The governor announced in April that this deal, which is still awaiting approval by the state’s Public Utilities Regulatory Authority, should keep Millstone generating for at least another decade. Table 10.3 lists nuclear power plants that were saved by state policy measures.

Valuing resilience

To help maintain the existing nuclear fleet, the US administration has focused its attention on finding ways to value the contribution that nuclear energy makes to security of supply and resilience. Several extreme weather events (in particular polar vortex situations) have demonstrated the resilience of NPPs in maintaining power generation, compared with fossil fuel generation. Natural gas-fired power generation depends on continuous gas supply through pipelines, which is also needed to meet heating demand. Discussions are ongoing at several levels of government, within the DOE as well as with the Federal Energy Regulatory Commission (FERC), to improve electricity market designs and capacity markets to value this contribution. The DOE in 2017 proposed rule making on grid resilience and reliability, which would have recognised the attributes of generation technologies that can have on-site fuel storage (such as nuclear and coal). FERC instead directed the regional transmission organisations and the independent system operators to assess the resilience of the electricity grid and to make recommendations on how to improve it. Another proposal that was circulated in 2018

222

IEA. All rights reserved.

10. NUCLEAR

would see the DOE use authority under existing laws (the Federal Power Act and the Defense Production Act) to delay early retirements of power plants by directing system operators to purchase electricity or generation capacities from a list of strategic plants. In August 2018, FERC worked with the Department of Defense (DOD), the DOE and the National Security Council to identify a list of power plants that are critical to the nation’s power system, in particular to ensure security of supply to military bases, hospitals and other critical infrastructure.

PJM, the country’s largest grid operator, indicated that potential market intervention that would require customers to buy electricity from designated plants would be damaging to competitive power markets and costly. It further stated that early closures of NPPs in Ohio and Pennsylvania would not threaten the reliability of the grid.

Table 10.2 Premature shutdowns and planned shutdowns

Additional net capacity that could be retired: 11 133 MW

Source: NEI (2019a), Nuclear by the Numbers.

223

ENERGY SECURITY

IEA. All rights reserved.