|Cheap Gas a Threat to Nuclear Power
Bill Ergen is a licensed nuclear reactor operator who has never really worried about losing his job.
Ergen has been a member of Minneapolis, Minn., Local 160 since the '80s when he started working at the Monticello nuclear power plant. Monticello opened 10 years before he started his career and its operating license extends until 2030, long after he expects to retire.
"When I started I was told we were making energy that was basically free," Ergen said. "Getting a plant built is the hard part, but once they are up and running, they make megawatts like nothing else."
About six months ago, Ergen started to worry.
Last October, Dominion Energy said it was closing the Kewaunee nuclear plant just across the border in Wisconsin. To Ergen, Kewaunee looks a lot like Monticello. They are both highly efficient with excellent maintenance and safety records. They were also older than average, have a single reactor and lack long-term contracts with electricity purchasers.
Dominion said Kewaunee was losing millions of dollars in an energy market driven to historic lows by the recession and a flood of natural gas produced by hydraulic fracturing or "fracking."
It was an unprecedented announcement. Fewer than 15 percent of commercial reactors have been shut down, and never because they were losing money. Some were closed because regulation changes required expensive modifications. The rest were closed because repairs or upgrades were prohibitively expensive. (Duke Energy announced in February that the Crystal River nuclear plant in Florida, which has been mothballed since a 2009 repair was botched, would not reopen.)
Neither was the case with Kewaunee.
"It was a decent power plant for decades and the price of natural gas wipes them out in a few years?" Ergen said. "I have seven years until I retire. I don't know now. Will we be next?"
Ergen is not alone. After the announcement, the IBEW identified 11 nuclear generation stations — including Monticello — that are at risk of being closed (see sidebar). Some of them, like Kewaunee, are not represented by the IBEW, but most of them are. More than 15,000 members work in the nuclear industry including approximately 2,400 at the at-risk plants.
"The closure announcement was stunning," said Jim Hunter, Director of the Utility Department. "If you had said three years ago that Kewaunee would close, people would've said you are out of your mind. But now that it is happening, we have to take this very seriously."
The Nuclear Boom and then the Bust
As recently as three years ago, new nuclear plants were under construction. That hadn't happened in more than a generation. With natural gas prices at record highs and pollution regulation threatening to close hundreds of coal-fired power plants, power companies submitted 28 proposals for new construction to the U.S. Nuclear Regulatory Commission.
"When our operating license was extended in 2010, we all felt secure," Ergen said.
This was great news for the IBEW as well, Hunter said, because nuclear employs many more people than other kinds of generation. For the same power production, nuclear employs double the number of people in coal plants and nearly five times more people than in natural gas plants.
In the last five years, however, the industry has suffered a succession of shocks. Most dramatically perhaps was the tidal wave that struck the Fukushima Daiichi nuclear plant in March 2011, causing a meltdown and radiation leaks. Although a recent report from the World Health Organization found only slightly increased health risks for the closest neighbors and no impact for the rest of Japan, public opinion turned and nuclear facilities are closing across the globe.
In the U.S., smaller nuclear generators have been hit at least as hard by a dramatic change in the energy market. Production of natural gas from shale oil deposits has jumped 800 percent since 2008, driving down the wholesale price 66 percent. Nationwide, wholesale electricity prices are near record lows. In 2012, prices in California fell 15 percent and in Texas they were down 47 percent.
As a result, nearly all of the new nuclear construction has been postponed or canceled.
Yet there are signs that the market for natural gas is changing. Wholesale gas prices have risen slightly since the summer of 2012. The U.S. Energy Information Administration reported that fewer new gas wells are being drilled. Dozens of new electric gas turbines are coming online, increasing demand; new pipelines are bringing gas to international markets, reducing supply. Fracking regulations under consideration across the country are also expected to increase production costs.
"Is it good business to shut down Kewaunee today? It's not for me to say," Hunter said. "What I want to know is what happens to the electrical grid if they do."
No Viable Alternatives
When Kewaunee ceases production, 600 megawatts will disappear from the grid. Dominion officials said they plan to make up for it by buying it on the open market. If all 11 plants the IBEW is concerned about do close, nearly 1 percent of national energy production would be lost.
Utility Department International Representative Dave Mullen said it might not seem like much, but all energy is not created equal.
"Nuclear energy is the foundation of our electrical system because it is predictable," Mullen said. "It can't just be replaced by the same amount of solar and wind because they aren't as consistent."
Solar and wind respond to the weather, not demand for electricity. To avoid blackouts, electrical grids today need sufficient "base-load" generation from nuclear, hydropower, natural gas and biggest of all, coal. Yet because of old age and new regulation, coal-fueled energy production is expected to fall by nearly 20 percent in the next seven years.
"If you only look at base-load generating facilities that don't emit any greenhouse gases, these few smaller nuclear plants are 7.5 percent of everything we have," Mullen said.
"Energy demand is expected to go up 12 percent by 2020," Hunter said. "The reality is, if the smaller nuclear plants disappear, no one knows how they would be replaced."
The Future of Smaller Nuclear
Mullen said regional bodies called regional transmission organizations have the power to keep plants open if they determine a closure would lead to power disruptions. Mullen says it is impossible to know if regulators might intervene.
Whether the market or regulators do, these aren't just company decisions. They are also political ones.
Hunter pointed to the Duane Arnold nuclear plant in Palo, Iowa, as an example. It had been high on the at-risk list, but at the end of January, with the help of local politicians, the single-reactor plant secured a 12-year contract to sell nearly three-quarters of its output to a local utility company.
"The deal was great news for the members of Local 204 in Cedar Rapids and for consumers, but it could also be a model that other plants can follow," Hunter said. "Informed citizens can help legislators understand the importance of these plants to our communities and the reliability of the grid."
Hunter said state and local governments could help find potential long-term partners or even sign long-term deals themselves. Regulators could follow Maryland's lead and authorize long-term agreements like the 30-year deal recently signed by the Calvert Cliffs nuclear station. States with at-risk nuclear plants could even purchase them outright or help publicly-owned utilities make the purchase.
Finally, there might even be some good news for Kewaunee. A state legislator has proposed amending the renewable energy mandate to include nuclear power generation. The Republican lawmaker said he hoped the revision would change Dominion's economic calculation or attract potential purchasers.
"This is a free market, but we are not powerless," Hunter said.