Nukes Are Challenged by Efficient Natural Gas Plants, Penn State Prof Says
- Jun 21, 2018 3:30 pm GMT
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Low natural gas prices, unused generating capacity, and unit efficiency are likely to continue to hamper nuclear power units in Pennsylvania that are slated to close.
Those nuclear generating units could see their fortunes change, but only if natural gas prices rise 300 percent above their current level.
That's unlikely to happen, according to Seth Blumsack, associate professor of energy policy and economics at Penn State University, in a research paper prepared for the Electricity Journal.
Owners of both Three Mile Island, near Harrisburg, Pennsylvania, and Beaver Valley Nuclear Power Station, near Pittsburgh, have cited financial troubles caused at least in part by historically low electricity prices. Blumsack says that low power prices are expected to continue for years to come because energy use has leveled off and efficient natural gas-fired power plants - which are nowhere near peak production - have recently come online. The situation comes at a time of low natural gas prices that are unlikely to budge significantly.
"Even if you were to lose these big power plants there's so much other generation capacity that can produce electricity at costs competitive with the nuclear plants that the market outcomes aren't going to change and the reliability of the grid won't be compromised," Blumsack says.
A report by research from IHS Markit says that natural gas production in the U.S. could rise by almost eight billion cubic feet per day (Bcf/d), or more than 10 percent in 2018 alone. Altogether, U.S. production is expected to grow by another 60 percent over the next 20 years.
The report estimates that approximately 1,250 trillion cubic feet (Tcf) of U.S. supply is economic below $4 per MMBtu Henry Hub price, up from a previous estimate of 900 Tcf in 2010.
The largest effect has been on the U.S. electric power industry, the IHS report says. Where coal and nuclear had previously dominated the growth in share of U.S. electric power generation, natural gas has become a “backbone of electric generation” and regularly competes with coal for the largest share of total electric generation. By 2040, IHS expects natural gas’ share to grow from almost one-third to nearly half of all electricity generated in the United States.
In his research, Penn State’s Blumsack studied the impact of the two nuclear power plants coming offline and found wholesale energy prices would rise between 4-10 percent each year over a three-year period if those plants were not replaced. When the lost nuclear capacity was replaced by natural gas, wholesale energy prices decline each year by between 9 percent and 24 percent. The more new generation capacity that enters the market, the larger the reduction in wholesale energy costs, as long as market prices for natural gas remain low.
Blumsack says they would have to increase by 300 percent at Appalachian trading hubs for nuclear power to again be competitive. Natural gas prices are now one-fourth the level that they were a decade ago, which helps the economics of natural gas power plants. The growth in renewable generating resources has also made nuclear power less competitive.
"There's so much production potential that it's tough to think about a scenario that's going to increase gas prices by more than 50 percent in the next decade," he says.
Blumsack cautioned that this research focuses solely on energy prices. It doesn't factor in environmental or fuel-security implications that could result from a shift in the energy portfolio. Natural gas is a carbon-based fuel, while nuclear power is carbon-free. Additionally, the two plants employ about 1,700 people.
A price to reward nuclear generating resources for their environmental benefits, fuel security, and economic impact could keep those power plants online even in the face of low natural gas prices.