What FitzPatrick nuclear closing says about NY power grid

Nov 19, 2015

 

Energy giant Entergy’s decision to close its nuclear plant near Oswego shocked the central New York community. 615 people will lose their jobs. State officials tried to get Entergy to change its mind, but the company announced Wednesday that talks have ended. The news also sent shock waves through New York’s electricity markets.

Plants like FitzPatrick, right on the shore of Lake Ontario, are the workhorses of the grid. Nuclear plants are powerful. In New York, four plants produce almost a third of the state’s electricity. They’re reliable in the frigid polar vortex when natural gas and coal can go cold, and in the heat of summer when wind dies down.

But in deregulated electricity markets nuclear doesn’t get paid a bonus for that reliability, says Chris Gadomski of Bloomberg New Energy Finance.

"To have a technology that’s dispatchable any time of the day is a premium type of electricity, and the nuclear power industry is not being compensated adequately for that," said Gadomski.

Hydropower is in a similar situation. Both face another pricing problem. Wind power can bid very low because it gets federal subsidies. Sometimes wind offers its electricity for negative prices to be the lowest bidder.

These pricing problems are factors in FitzPatrick going offline. But the biggest reason is cheap natural gas from the nearby Marcellus shale driving down prices. Fitzpatrick nuclear is projected to lose $60 million bidding against electricity plants powered by natural gas.

"Natural gas is making it very rough for the nuclear plants, not just in our towns and in our county, but throughout the United States," said Ken Burdick, supervisor of the town of Scriba, home to FitzPatrick and near the two Nine Mile nuclear reactors.

"We're a nuclear community," said Burdick. People around here pay close attention to energy markets. So when Entergy announced the closure, it wasn’t a surprise, but it hurt all the same.

"It’s almost a nightmare," Burdick said. "It’s like a punch in the guts when something like this happens."

The James A. FitzPatrick Nuclear Power Plant will close at the end of its current fuel cycle, at the end of 2016 or early 2017.
Credit Entergy/FitzPatrick Nuclear Power Plant

The ripple effects of the loss of $75 million in payroll and approximately $18 million in taxes to the county, towns, and their schools will be felt by businesses large and small.

At Scriba Meats, just down the road from FitzPatrick, owner Rebecca Swenszkowski said the nuclear workers make good money. They buy lunch and dinner regularly at her store, making hundreds of orders when contractors are in town to refuel the reactors. They also spring for luxuries, like exotic game meats, from elk and ostrich to turtle, alligator, and even rattlesnake. (One thin rattlesnake filet, by the way, will set you back $14.)

Swenszkowski said everyone’s going to feel the economic pain. "The trickle down effect, between our business, other businesses," she said.

Workers and their families will feel it most. "They’re probably going to have to sell their houses, move away," said Swenszkowski.

Fitzpatrick is one of four nuclear plants in the Northeast closing over five years. Vermont Yankee closed last year. Nuclear is having better luck in other parts of the country. Five new reactors are set to go online by 2020, all in the southeast, resulting in a 3500 megawatt net increase in nuclear power nationwide.

According to Allison MacFarlane, a professor at George Washington University and a former chairman of the Nuclear Regulatory Commission, that’s important because nuclear doesn’t contribute to climate change.

"Nuclear in the United States provides over 20 percent of our electricity supply, and that’s carbon-free," MacFarlane said.

Environmentalists are divided over whether to embrace nuclear as a solution to climate change. Many say closing nuclear plants is good, because they’re too dangerous and divert money from renewables like wind and solar. And Congress still hasn’t dealt with how to store nuclear waste long-term.

Gov. Andrew Cuomo is still trying to save FitzPatrick to save the central New York economy, and local leaders are behind him all the way. Sean Bruno, superintendent of the nearby Mexico school district, said the plant’s taxes pay almost a quarter of his budget.

"I’m not ready to give up on goal number one. And our original goal is to do whatever we can to make sure that that plant continues to operate," Bruno said.

The elephant in the room is Entergy's other nuclear plant, Indian Point in the lower Hudson Valley. It’s more profitable because it’s a double reactor and it gets higher prices because it’s closer to the New York City market. But Cuomo says it’s too dangerously close to New York City in the case of a meltdown, like what happened in Japan. He wants to shut Indian Point down. But neither company nor state officials say Indian Point is a bargaining chip in the FitzPatrick negotiations.

So far, Entergy shows no sign of change its mind. Its CEO told Wall Street analysts last week Fitzpatrick can’t compete with cheap natural gas. He said saving up to $275 million by closing FitzPatrick is being factored into future earnings projections.