Skip to main content

Why The Economics Don't Work for Kewaunee Anymore

By Eric McErlain
NEI VP Richard Myers
Over the past 24 hours, we've seen a number of folks online ask the question of why it's no longer economically feasible for Dominion to continue to operate the Kewaunee Power Station in Wisconsin. Earlier today, I put the question to Richard Myers, NEI's Vice President, Policy Development, Planning and Supplier Programs. Here's what he wrote back:
In 2005, when Dominion bought the plant: (1) power prices in the Midwest were in the $40-50/MWhr range; wellhead gas prices were in the $6-10 per million Btu range; and U.S. electricity demand was growing.

Today: (1) power prices in the Midwest are in the $30/MWhr range: gas prices are in the $2-3 per million Btu range; and (3) the U.S. has had 5 years of no growth in electricity demand, thanks to the worst recession in 80 years.
Thanks to Richard for laying out the numbers for us. For a statement from NEI's Marv Fertel on the decision to close Kewaunee, click here. For a a quote from an RBS research note that defended the decision, click here.
Labels:

Comments

SteveK9 said…
None of those 'today' numbers are likely to apply 'tomorrow'.
October 23, 2012 at 2:53 PM
Engineer-Poet said…
There is a shakeout coming in the natural gas industry.  The bubble in shale gas is popping already, and demand is set to surge as heavy trucks start to switch from diesel to LNG.  The breakeven cost of shale gas is around $8/mmBTU, which is where the price will be within a couple of years.  If LNG export terminals open, North American NG prices will likely rise again to within a couple dollars of the world price (currently around $15/mmBTU).

Given this, closing Kewaunee because of the short-term price situation is extremely short-sighted.  I hope some patient capital is willing to buy the plant and keep it open, because it will be well-rewarded in just a few years.
October 23, 2012 at 3:26 PM
Anonymous said…
Still seems short-sighted, apparently ignoring the historical volatility of gas in the context of economic recovery in the US and beyond.
October 23, 2012 at 3:35 PM
Anonymous said…
It seems short-sighted both economically in terms of the historical volatility of NG prices, and also strategically for a robust and diverse mixture of generating assets. There may come a day when NG is in short supply (and therefore expensive) and we will wish we had a zero-emissions source of capacity like Kawuanee. But there is no going back from decommissioning. Once you trash and rip down that asset, it is gone forever.
October 23, 2012 at 5:32 PM
Alex said…
When Dominion bought Kewaunee, I wondered what they were going to do with it. It was part of, I seem to remember, a three plant deal.
Dominion is an East Coast company and they have this plant on the other side of Lake Mchigan.
It would make more sense for another company to take over this plant.
October 24, 2012 at 10:37 AM
Post a Comment

Popular posts from this blog

Activists' Claims Distort Facts about Advanced Reactor Design

By
Below is from our rapid response team . Yesterday, regional anti-nuclear organizations asked federal nuclear energy regulators to launch an investigation into what it claims are “newly identified flaws” in Westinghouse’s advanced reactor design, the AP1000. During a teleconference releasing a report on the subject, participants urged the Nuclear Regulatory Commission to suspend license reviews of proposed AP1000 reactors. In its news release, even the groups making these allegations provide conflicting information on its findings. In one instance, the groups cite “dozens of corrosion holes” at reactor vessels and in another says that eight holes have been documented. In all cases, there is another containment mechanism that would provide a barrier to radiation release. Below, we examine why these claims are unwarranted and why the AP1000 design certification process should continue as designated by the NRC. Myth: In the AP1000 reactor design, the gap between the shield bu...
23 comments
Read more

What Happens During a Refueling Outage?

By
You may have noticed over the past few weeks that a number of nuclear plants are shut down for refueling outages or are resuming operations after just returning from one. This type of routine outage usually occurs in the spring or fall when electricity demand is low so that nuclear reactors can replace about one-third of the spent fuel rods with new fuel and conduct other routine maintenance and repairs at the plant. To get a better sense of how refueling works at a nuclear energy facility, I spoke with Marcus Nichol, NEI’s senior project manager for used fuel storage and transportation, and asked him to explain the basics. Why does a nuclear plant need to replace one-third of its fuel? Nichol: The main purpose of a refueling outage is to replace older fuel that is depleted—meaning it can no longer efficiently produce energy from nuclear fission reactions—with new fuel. This “used fuel” has typically been used in the reactor for four-and-a-half to six years before it is pe...
6 comments
Read more

Nuclear Utility Moves Up in Credit Ratings, Bank is "Comfortable with Nuclear Strategy"

By
Some positive signs that nuclear utilities can continue to receive positive ratings even while they finance new nuclear plants for the first time in decades: Wells Fargo upgrades SCANA to Outperform from Market Perform Wells analyst says, "YTD, SCG shares have underperformed the Regulated Electrics (total return +2% vs. +9%). Shares trade at 11.3X our 10E EPS, a modest discount to the peer group median of 11.8X. We view the valuation as attractive given a comparatively constructive regulatory environment and potential for above-average long-term EPS growth prospects ... Comfortable with Nuclear Strategy. SCG plans to participate in the development of two regulated nuclear units at a cost of $6.3B, raising legitimate concerns regarding financing and construction. We have carefully considered the risks and are comfortable with SCG’s strategy based on a highly constructive political & regulatory environment, manageable financing needs stretched out over 10 years, strong partners...
Post a Comment
Read more