By William Opalka

The embattled Indian Point nuclear plant will close by 2021, owner Entergy and New York Gov. Andrew Cuomo said Monday morning.

An agreement between the governor’s office and Entergy calls for the company to shorten its pending license renewal applications to six years, with both sides ending litigation they have filed against each other as part of the deal. The state reserved the right to begin new litigation if necessary.

Unit 2 would shut down in April 2020, followed a year later by the closure of Unit 3.

“For 15 years, I have been deeply concerned by the continuing safety violations at Indian Point, especially given its location in the largest and most densely populated metropolitan region in the country,” Cuomo said in a statement. “I am proud to have secured this agreement with Entergy to responsibly close the facility 14 years ahead of schedule to protect the safety of all New Yorkers.”

Cuomo said that his administration has been “aggressively pursuing and incentivizing the development of clean, reliable energy” and that the state is “fully prepared” to replace Indian Point’s output at a “negligible cost” to ratepayers.

An agreement to close the two units — which combined have more than 2,000 MW in generating capacity — was first reported by The New York Times on Friday.

Entergy said energy economics driven by low natural gas prices forced the closure, which will mark the company’s exit from the merchant power generation business.

“Key considerations in our decision to shut down Indian Point ahead of schedule include sustained low current and projected wholesale energy prices that have reduced revenues, as well as increased operating costs,” Bill Mohl, president of Entergy Wholesale Commodities, said in a statement. “In addition, we foresee continuing costs for license renewal beyond the more than $200 million and 10 years we have already invested.”

Mohl noted that regional power prices have fallen by about 45% over the past 10 years to an average of $28/MWh, largely the product of record low gas prices stemming from increased supply out of the Marcellus Shale formation.

“A $10/MWh drop in power prices reduces annual revenues by approximately $160 million for nuclear power plants such as Indian Point,” Mohl said.

The agreement would allow the plants to operate for two additional two-year increments — with final closure slated for 2025 — if an emergency affected reliability in the New York City area.

Both units, whose permits expired in 2013 and 2015, have applied for 20-year license extensions from the Nuclear Regulatory Commission, which has granted the extensions pending review. Under the agreement, Entergy will instead apply for a six-year license renewal.

The plant has had a series of mishaps in recent years, intensifying pressure from state officials.

“Shutting down the Indian Point power plant is a major victory for the health and safety of millions of New Yorkers and will help kick-start the state’s clean energy future,” Attorney General Eric T. Schneiderman said.

Among the many challenges he has filed against the facility, Schneiderman has sought to deny Indian Point state water quality permits. (See Loss on Water Permit a Setback for Indian Point Extension.) New York will issue a coastal zone certificate and water quality permit for the plant as part of the settlement.

Schneiderman and environmental group Riverkeeper were also parties to the settlement.

“This agreement is a win for the safety of our communities and the health of the Hudson River, and it will pay big dividends in new sustainable energy sources and the well-paying jobs that come with them,” Riverkeeper President Paul Gallay said in a statement.

Other aspects of the agreement include:

• Annual safety inspections by the state, along with the transfer of used fuel to protective storage in dry casks, the preferred method of safely storing spent fuel;
• A commitment by Entergy to offer plant employees new jobs at other facilities, while the state will offer employment assistance and worker retraining, including for new skills needed for employment in the renewable energy sector; and
• A requirement that Entergy establish a new emergency operations center in nearby Dutchess County, as well as create a $15 million fund for environmental projects.

Entergy’s previous agreements to make payments in lieu of taxes to local government entities and school districts will continue through 2021. Those agreements will persist before being gradually stepped down at a negotiated level following shutdown. The state will also work with local communities to address potential revenue shortfalls, enacting programs similar to those implemented for other communities affected by plant closures through the existing fossil fuel plant retirement fund.

New York has committed to a 50% renewable energy power mandate by 2030, with nuclear power seen as a bridge until clean power sources can be built at sufficient scale.

“With the news that the Indian Point nuclear power plant will close by 2021, New York should look to wind power, solar power and offshore wind to meet electricity needs, rather than relying more on natural gas,” said Anne Reynolds, executive director of the Alliance for Clean Energy New York. “New York essentially has five years to get new renewable energy online to meet this demand, and the renewable energy industry is more than ready.”

The state Public Service Commission has said the closure will have minimal impact on customer bills, with adequate resources expected to be online by 2021. Transmission upgrades and energy efficiency measures totaling 700 MW are already in place, officials said. (See FERC OKs Settlement for NY TOTS Projects.)

“The NYISO is required to perform an electric system reliability impact analysis after receiving an official retirement notice for any bulk system generation asset,” NYISO spokesman David Flanagan told RTO Insider. “Additionally, the NYISO’s Comprehensive Reliability Plan, to be issued in July 2017, will consider future grid reliability needs and generation capacity margins over a 10-year time horizon under expected system conditions.”

Indian Point’s closure will mark Entergy’s exit from the merchant power business. In little more than two years, the company has shuttered the Vermont Yankee nuclear plant in Vermont and announced the closures of two other nukes, including Pilgrim in Massachusetts and Palisades in Michigan. The sale of New York’s James A. FitzPatrick nuclear plant to Exelon is pending. The company has also sold a natural gas-fired power plant in Rhode Island.

Entergy said it will record a non-cash impairment charge of approximately $2.4 billion pre-tax and $1.5 billion after-tax in the fourth quarter of 2016. It also expects additional charges totaling about $180 million for severance and employee retention costs by the end of 2021.

The company said it has invested $1.3 billion in Indian Point in the 15 years it has owned the plant.