By William Opalka
Entergy announced Tuesday it will close its Pilgrim Nuclear Power Station in Plymouth, Mass., no later than June 1, 2019, marking the company’s exit from the New England market.
The company blamed “poor market conditions, reduced revenues and increased operational costs” for the planned closure. The plant has come under increased scrutiny from the Nuclear Regulatory Commission, having earned the second-worst ranking for operational performance. (See Federal Briefs.)
The company said it would cost $45 million to $60 million in direct costs, plus any additional capital expenses, to comply with NRC requirements.
“The decision to close Pilgrim was incredibly difficult because of the effect on our employees and the communities in which they work and live,” Entergy CEO Leo Denault said in a statement. “But market conditions and increased costs led us to reluctantly conclude that we had no option other than to shut down the plant.”
The 680-MW plant began operations in 1972.
The company blamed low current and forecast energy prices caused by shale gas. The Energy Information Administration reported last week that January 2016 forward contracts for on-peak power in New England are trading at about $90/MWh, versus $190/MWh a year ago.
Entergy says the falling prices would lower annual revenue from Pilgrim by more than $40 million.
It also blamed what it called “wholesale energy market design flaws” that suppress energy and capacity prices, state subsidies for renewable energy and a recent proposal to import Canadian hydropower. (See Baker: Hydropower Contracts Best Way to Lower Costs.)
The merchant plant was relicensed three years ago by NRC and can operate through 2032. But the commission’s decision to place Pilgrim in column 4 of the reactor oversight process action matrix put it in the unwelcome position of being one of three of the country’s 99 nuclear plants so designated.
“We have invested hundreds of millions of dollars to improve — first and foremost — Pilgrim’s safety, as well as its reliability and security, but face increased operational costs and enhanced Nuclear Regulatory Commission oversight,” the company said. “We also take into account the effect on our stakeholders of operating over the long-term if it is not economically viable to do so.” Entergy said the exact date for closing the plant would be decided in the first half of 2016. It already notified ISO-NE that the plant will not be available as a capacity resource starting in mid-2019.
ISO-NE’s 10th capacity commitment period begins in June 2019, with its Forward Capacity Auction slated for February 2016.
Generators are required to notify the RTO by Monday if they will participate in the 2016 auction.
Nuclear power generated 34% of New England’s power in 2014. Pilgrim represents almost 17% of the region’s nuclear capacity.
ISO-NE could ask Entergy to keep the plant online if a study indicates it is needed for grid reliability. If Entergy agrees, it would receive out-of-market payments. But the RTO does not have the authority to prevent a resource from retiring.
The closure of Pilgrim will mark Entergy’s exit from New England. The company closed the 615-MW Vermont Yankee nuclear power plant at the end of 2014 and last week announced the sale of a 583-MW natural gas plant in Rhode Island. (See Entergy Sees Big Gain on Sale of RI Gas Plant to Carlyle.)
The Pilgrim nuclear decommissioning trust had a balance of approximately $870 million as of Sept. 30, which is approximately $240 million above what NRC requires for license termination activities, Entergy said.
Entergy bought the plant in 1998 for $80 million from Boston Edison. Entergy Nuclear was the first company in the nation to purchase a nuclear plant through the competitive bid process, it said.