13 Oct (NucNet): Entergy Corporation will close its single-unit Pilgrim nuclear power station in Massachusetts no later than 1 June 2019 because of poor market conditions, reduced revenues and increased operational costs, the company said in a statement today.
The company said it had notified the grid operator, ISO New England Inc, that as of that date, Pilgrim would not take part as a capacity resource in the market.
The exact timing of the shutdown depends on several factors, including further discussion with ISO-NE, and will be decided in the first half of 2016.
Entergy said the decision to close Pilgrim-1, a 677-megawatt boiling water reactor unit that began commercial operation in December 1972, was based on a number of financial factors.
Low current and forecast wholesale energy prices – brought about by record low natural gas prices, driven by shale gas production – had a significant impact on Pilgrim’s revenues.
The current and projected market price for delivered natural gas in New England has dropped substantially because of the influx of shale gas and policy-related issues, which in turn has driven down power prices. As a result, power prices have fallen about $10 (€8.7) per megawatt hour, an annual loss of more than $40m in revenues for Pilgrim.
The company said wholesale energy market “design flaws” continue to suppress energy and capacity prices in the region, and do not provide adequate compensation to nuclear plants for the benefits they provide.
“These benefits include reliable carbon-free, large-scale 24/7 energy generation and onsite fuel storage. Efforts over the past few years to correct these market design flaws have not been sufficiently successful,” the statement said.
Pilgrim’s economic performance is also being undermined by unfavourable state energy proposals that subsidise renewable energy resources at the expense of Pilgrim and other plants.
Entergy said it has invested hundreds of millions of dollars to improve Pilgrim’s safety, reliability and security, but faces increased operational costs and increased Nuclear Regulatory Commission oversight.
The station has come under increased oversight from the NRC after Entergy did not adequately evaluate the causes of unplanned shutdowns in 2013. The NRC also said some corrective actions had not been completed as intended or were closed out prematurely.
Entergy said it remains “committed overall” to nuclear power. The company operates 11 commercial reactors with about 10,000 MW of capacity.
The effect of the shutdown on cash flow is expected to be “neutral to positive” until 2020, compared to Pilgrim’s continued operation, depending on uncertainty about the shutdown date, the plant’s capacity supply obligation and costs related to the NRC’s increased oversight.
The preliminary estimate of direct costs of the plant’s response to a planned NRC inspection ranges from $45m to $60m pre-tax in operation and maintenance expenses, not including any potential capital investment or other costs to address issues that may arise from the inspection.
After shutdown, decommissioning of Pilgrim will begin, Entergy said. The Pilgrim nuclear decommissioning trust had a balance of approximately $870m as of 30 September 2015, representing excess financial assurance of approximately $240m above levels required by the NRC.
