LANSING, Mich. — The U.S. Department of Energy’s lifeline to struggling nuclear generators appears unlikely to save the next three units scheduled to retire.

Entergy (NYSE:ETR) officials said Wednesday they are unlikely to seek federal aid to prevent the Palisades Nuclear Plant from closing as scheduled on May 31, despite entreaties from Michigan Gov. Gretchen Whitmer (D). And Pacific Gas and Electric (NYSE:PCG) said Diablo Canyon 1 and 2 are still scheduled for retirement in 2024 and 2025.

Whitmer sent a letter Wednesday to Energy Secretary Jennifer Granholm — her predecessor as governor — urging the department to use $363 million from the Civil Nuclear Credit (CNC) Program created by the Infrastructure Investment and Jobs Act (IIJA) to keep Palisades open. (See DOE Launches $6B Nuke Credit Program.) DOE opened applications for the $6 billion CNC program Tuesday.

Whitmer said saving the 800-MW nuclear plant, which employs 600 and is one of the state’s largest sources of carbon-free electricity, “is a top priority.”

Merchant Power Exit

But Entergy spokesman Nick Culp told RTO Insider the company would only reconsider its plans to close Palisades — part of the company’s broader exit from the merchant power business — if it received a purchase offer from a “credible formal buyer.”

In December, the Nuclear Regulatory Commission approved Entergy’s request to transfer Palisades, its nuclear trust fund and its spent fuel to Holtec Decommissioning International.

“Our focus at Palisades power plant remains on the safe and orderly shutdown of the facility in May,” the company said in a statement. “We acknowledge having recently been contacted by government officials about the facility potentially operating beyond May 2022. In addition to these conversations, we have and will continue to entertain discussions with qualified nuclear merchant plant owner/operators who may want to purchase and continue operating Palisades. However, it is important to note that no formal proposal to acquire Palisades has been made that provides an opportunity for continued operations and that eliminates the substantial financial and operational risks associated with unwinding the existing contract with Holtec.”

Entergy has been preparing to shutter Palisades since 2017 and has not refueled the plant since 2020.

“There are challenges that make continued operation of the facility beyond May 2022 difficult, including the pending transfer of more than 130 employees to other parts of Entergy’s business and planned employee retirements post-shutdown,” the company added. “Additionally, the plant is unable to operate beyond the target closure date due to the diminished power of its nuclear fuel as it reaches the end of its two-year operating cycle.”

Holtec issued a statement saying it was aware of Whitmer’s effort to keep Palisades operating. “We remain ready, should these efforts to keep the plant operational not be successful, to transition ownership to Holtec after the plant ceases operations for a safe, efficient decommissioning process,” it said.

Keeping Palisades open until at least the end of its current operating license, which expires in 2031, has split the state’s environmental community. While a number of environmentalists have called for keeping the plant open to aid decarbonization efforts, others oppose nuclear generation.

During public testimony on developing the MI Healthy Climate Plan — the final version of which is due to Whitmer by Friday, Earth Day — keeping Palisades open drew comments from supporters across the nation. The first version of the plan to make Michigan carbon neutral by 2050 did not discuss the plant.

Expiring PPA

CMS Energy’s (NYSE:CMS) Consumers Energy, which put Palisades into service in 1971, sold the plant to Entergy in 2015 while purchasing most of its output under a power purchase agreement scheduled to expire this year.

Entergy and Consumers agreed to end the PPA early and close Palisades in 2018, but they canceled those plans under pressure from the Michigan Public Service Commission. Prices under the PPA ranged from $43.50/MWh in 2007 to $61.50/MWh in 2022, with an average of $51/MWh.

A CMS spokesperson said the utility would not oppose continued operation of the plant, located in Covert Township on Lake Michigan. “If the power from the plant could provide competitively priced and reliable energy for our customers, we would consider working with our partners to keep the plant open,” CMS’ Katie Carey said.

Whitmer’s letter said that “Michigan has already had numerous conversations with the plant owner and leading nuclear operators who may be interested in purchasing the plant and keeping it operational through its 2031 [NRC] licensure date.”

“If another buyer does not materialize and Entergy maintains its stance, Gov. Whitmer might look to other sources of leverage to keep the plant in service, and Secretary Granholm could prove a valuable ally in this respect,” ClearView Energy Partners said Wednesday, citing two options: invoking the Defense Production Act to prevent plant closures, or seeking relief from the NRC.

The commission’s December 2021 press release announcing its license transfer approval said it was “subject to [the NRC’s] authority to rescind, modify or condition the transfer based on the outcome of any subsequent hearing on the application.”

In February 2021, Michigan Attorney General Dana Nessel requested a hearing on whether Holtec has sufficient financial strength to decommission Palisades. “If the NRC were to grant that request, it could delay the transfer (and perhaps even ‘rescind, modify or condition’ it),” ClearView said.

No Takers for First Round of CNC Program?

DOE says 12 commercial reactors have closed early since 2013 because of economic pressures. Illinois, New Jersey, Connecticut, Ohio and New York have approved subsidies to keep plants operating within their borders.

DOE’s CNC program will allow owners of commercial nuclear reactors at risk of closure to competitively bid on credits to keep them in operation. The IIJA requires applicants to prove their reactor will close for economic reasons and that the closure will result in increased air pollution. Credits would be allocated over a four-year period.

The department will accept applications for its first round of CNC funding through May 19. While the first cycle will be open to reactors that have already announced their intention to cease operations, future cycles — beginning with the second cycle in the first quarter in FY2023 — will “not be limited to nuclear reactors that have publicly announced their intentions to retire,” DOE said.

According to the Nuclear Energy Institute, Palisades and PG&E’s Diablo Canyon 1 and 2 are the only operating nuclear units that have announced retirement plans.

“PG&E is committed to California’s clean energy future, and as a regulated utility, we are required to follow the energy policies of the state,” PG&E spokesperson Suzanne Hosn told RTO Insider. “At this time, the state has not changed its position regarding the future of nuclear energy in California. The plan to retire Diablo Canyon Power Plant was introduced in 2016 and approved by the California Public Utilities Commission, the State Legislature and Gov. [Jerry] Brown in 2018.”

Matt Crozat, executive director of policy development at NEI, said his group “will work with our members to ensure this program [CNC] is as effective as possible and continue to advocate for a production tax credit, which will offer greater certainty for owners to make long-term investments in their carbon-free nuclear plants.”