Support For Coal And Nuclear Power Could Harm Natural Gas

The U.S. Administration is seeking ways to save coal and nuclear power facilities from early retirement, citing concerns over a depletion of nuclear power in the energy mix and impacts on the resilience of the power grid.

Last month, the Nuclear Energy Institute (NEI) published a report saying that a significant gas infrastructure event—coupled with retirement of a lot of nuclear power—could put the resilience of the PJM Mid-Atlantic area grid at risk.

As a representative of the nuclear power generation industry, NEI is supporting the Administration’s attempts to essentially bail out nuclear power plants by possibly intervening on the free market and compensating nuclear power for the stability it provides.

Competition from low-cost natural gas-fired electricity and lower wholesale electricity prices forced nuclear power plant operators to announce in recent years the early retirement of several nuclear plants, due to the fact that they are no longer profitable.

“Unfortunately, impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our nation’s energy mix and impacting the resilience of our power grid. President Trump has directed Secretary of Energy Rick Perry to prepare immediate steps to stop the loss of these resources, and looks forward to receiving his recommendations,” the White House said in early June.

The Trump Administration is implementing an “all of the above” energy strategy, meaning “we do not discriminate against any of our fuels…we are committed to using every one of them,” Secretary Perry said last week.

With the attempts to revive the nuclear industry, the current U.S. Administration is pitting natural gas against nuclear, and what was President Obama’s war on coal is now turning into a war on natural gas, energy expert Dan Eberhart writes in Forbes.

To be sure, natural gas and record gas production is also at the top of the Administration’s energy-independence agenda. The potential support of uncompetitive nuclear and coal power, however, could distort the free-market-based electricity generation and work against the energy independence ambitions, Eberhart argues.

According to the NEI report, “While the interstate natural gas supply system has an admirable safety and reliability record, the increased reliance on a single fuel source can raise questions regarding the resilience of the power grid in response to a significant natural gas infrastructure event.”

Further down, the report reads:

“A significant gas infrastructure event could prevent the PJM Mid-Atlantic area from serving electric load on a number of days if existing nuclear capacity was retired. Such an event could result in the loss of nearly 27 GW of gas-fired generation, with 18 GW serving the PJM Mid-Atlantic area, depending on the severity and location of such event. When combined with the retirement of a similar amount of nuclear capacity, the analysis implies such an event would put as much as 22 percent of the area’s load at risk of being shed in the highest load hours.”

Many of the assumptions in the NEI report are based on unlikely scenarios such as the Extended Case assuming that “economic circumstances cause the retirement of 19.4 GW of nuclear capacity across PJM prior to 2023.”

EIA’s Annual Energy Outlook 2018 Reference case forecasts that U.S. nuclear power generating capacity will decline from 99.3 GW in 2017 to 79.1 GW in 2050. The rate of the decline in the other scenarios depends on different assumptions for oil and natural gas availability, nuclear power unit costs, and carbon policies, the EIA said.

According to PJM itself, during this winter’s cold snap—the coldest since the 2014 Polar Vortex—“the system performed well in the cold snap, evidence that the grid in the PJM region remains strong, diverse and reliable.”

Last year, the PJM energy mix consisted of 35.9 percent nuclear, 32.2 percent coal, 26.7 percent gas, 5 percent renewables, and 0.2 percent oil. The electric grid “is more reliable than ever, encouraging significant private investment in new technology and resulting in decreasing emissions and historically low wholesale electricity prices,” PJM said.

Referring to the potential DOE market intervention, PJM said last month that “Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers.”

Tsvetana Paraskova for OilPrice.com