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PSU study: Closing Three Mile Island wouldn’t cause electricity price jump

By Dan Miller

danmiller@pressandjournal.com

717-944-4628
Posted 7/11/18

The premature retirements of Three Mile Island and Beaver Valley nuclear power plants will not lead to spikes in electricity prices, as the gap should be more than offset by increased energy …

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PSU study: Closing Three Mile Island wouldn’t cause electricity price jump

staff photo by jason maddux
Posted

The premature retirements of Three Mile Island and Beaver Valley nuclear power plants will not lead to spikes in electricity prices, as the gap should be more than offset by increased energy production from natural gas power plants, according to a recent study out of Penn State University.

Seth Blumsack, associate professor of energy policy and economics at University Park, studied the impact of the two nuclear power plants coming offline and found wholesale energy prices would rise between 4 to 10 percent each year over a three-year period, if the plants are not replaced.

But when that lost nuclear capacity is replaced by natural gas, wholesale energy prices decline each year by between 9 percent and 24 percent, Penn State said in a news release about Blumsack’s study, to be published in an upcoming issue of The Electricity Journal.

Low electricity prices due to increased natural gas production has been cited as the key factor behind TMI owner Exelon Corp.’s May 2017 announcement that TMI is to be shut down in September 2019.

While TMI in Londonderry Township is still selling electricity through existing contracts, the plant has not turned a profit in six years, according to Exelon.

TMI has also failed to clear the past four annual energy capacity auctions held by PJM, to ensure that enough power generation resources are available to meet future electricity demand throughout a region including Pennsylvania, 12 other states, and the District of Columbia.

That means TMI is unable to produce electricity at a price the market is willing to pay.

The growth in renewable energy like solar and wind has also contributed to making nuclear power less competitive economically, according to Blumsack.

At the same time, overall demand for electricity in the United States has not grown in the past decade.

“You have this combination of no growth in demand and excess power generation capacity,” Blumsack said. “That prompts the market to crash, which causes some players to lose, and in this case that appears to be the nuclear power plants.”

Blumsack cautioned that his research focuses solely on energy prices. It does not consider the environmental or fuel-security implications that could result from a shift in the energy portfolio away from nuclear.

Exelon is pushing Pennsylvania lawmakers to act to make TMI and other nuclear plants economically competitive with other energy producers in the state, which could enable Exelon to keep the plant open beyond September 2019.

This could take the form of a subsidy or credit to compensate TMI and other nuclear plants for carbon-free production of energy.

Critics oppose such action, saying Pennsylvania consumers would be saddled with higher energy costs to “bail out” plants that should be allowed to close if they cannot compete on their own.

Nuclear power advocates would prefer a federal solution covering all 50 states, but that is considered unlikely in time to save TMI and other plants now scheduled for early retirement nationwide.

In the alternative, advocates are placing their hopes on actions by individual states, including Pennsylvania.

In Harrisburg, legislation would most likely emerge from the nuclear energy caucus, which has about 80 members from the state Senate and House including Rep. Tom Mehaffie, R-Lower Swatara Township, whose district includes TMI.

Mehaffie has said he is optimistic that legislation that could avert the closure of TMI will come out of the caucus in early 2019.

The caucus during its most recent meeting on June 19 heard representatives from several organizations talk about the potential environmental impact of the premature retirement of TMI and other nuclear plants.

Nuclear plants provided just more than 41 percent of all electric generation in Pennsylvania as of 2017, said Doug Vine, senior fellow of the Center for Climate and Energy Solutions. Nuclear plants currently account for 90 percent of all zero emission energy generation in Pennsylvania today, according to Vine.

He said that the premature retirement of nuclear power plants in recent years has led to increased carbon dioxide emissions in California, Wisconsin and Florida, as the energy that was being produced by these plants has been replaced by energy produced by coal and natural gas plants.

“We need to reduce carbon emissions by mid-century to avoid the worst impacts of climate change,” Vine told the caucus. “Most studies say that a diverse mix of renewables, nuclear power and fossil fuel with carbon capture and storage is the least costly and least technologically challenging pathway to achieve that mid-century goal.”

His and other groups spoke in favor of Pennsylvania enacting a credit system that would reward nuclear plants for producing carbon-free energy. But Vine added that there needs to be more to the legislation than just that.

“We would encourage Pennsylvania to broaden the coalition tent further when it considers supporting nuclear power,” Vine said. “It should also consider measures to improve energy efficiency, increase energy storage and increase renewables procurement. This can help increase support for whatever final bill emerges, as well as ensuring a cleaner energy future for Pennsylvania.”