Skip to main content

Energy Markets Are Blind to Critical Factors in the Electric Grid

Using the short-term energy markets to make long-term decisions about the electric grid will irreversibly damage the system’s diversity and resiliency, the nuclear industry told the Federal Energy Regulatory Commission on Monday, as the Commission prepared to take up a request by the Secretary of Energy to reform the rules for regional electricity pricing.

The markets are well set up to minimize short-term electricity costs, but they are blind to “critical non-price factors, such as resiliency, fuel diversity and environmental performance,” the Nuclear Energy Institute (NEI), the industry’s trade association, said in comments filed Monday with the Commission, known as FERC.

Using the short-term energy markets to make long-term decisions about the electric grid will irreversibly damage the system’s diversity and resiliency, the nuclear industry told the Federal Energy Regulatory Commission on Monday.

FERC sets the ground rules for the competitive energy markets that are now in place over more than half the country. But those rules have turned crucial decisions over to a very narrow set of considerations, as if the system operated in a “price-only vacuum,” NEI said in its comments.

The markets set prices that reflect the value of the electricity generated, and most of them also pay for being available to generate when needed, called “capacity.” They do not take account of diversity or how the system hedges its bets by relying on more than one or two technologies, and they do not consider the nuclear plants’ contribution to the resilience of the grid, the NEI comments stressed.

Driven largely by an abundance of natural gas, wholesale electricity prices have declined precipitously in the last several years, but energy sales are the source of most of the revenue for 43 reactors in market areas. It is lower revenues, not higher costs, that threaten the continued operation of the nuclear reactors.

The price of fossil fuels varies over time, and the supply is vulnerable to physical disruptions, market conditions and man-made problems. Natural gas is subject to sudden price increases and scarcity, NEI said in its comments.

In contrast to that just-in-time fuel delivery system, nuclear plants typically refuel once every 18 to 24 months and need only a few truckloads of fuel to run for that period. The price of fuel is a relatively small segment of their production cost, about 20 percent, so consumers are insulated from fuel price variations. Reactors take years to build, and keeping them ready to run costs money; hence when an owner decides to retire a plant, the company takes irrevocable steps quickly. The Nuclear Regulatory Commission doesn’t even have a rule for how to re-activate an operating license.

More than 11,000 megawatts of nuclear generating capacity has been retired in recent years or is scheduled to be shut prematurely. Since those plants run more hours of the year than any other – 92 percent last year – this represents an enormous amount of energy. The same capacity in wind or solar generation would produce one-third to one-sixth as much actual electricity.

On September 28, Energy Secretary Rick Perry proposed that electricity generators with 90 days of fuel stored on site should be compensated for their costs. He asked FERC to rule within 60 days, which reflects the urgency of the problem but is unusually prompt for the commission. Secretary Perry’s proposal opens the door for consideration of a variety of reforms. NEI favors the cost-based system proposed by Mr. Perry, until some broader solution can be worked out.

Allowing short-term energy price considerations to dictate long-term policy runs counter to the federal government efforts that have made resiliency a key component of its national security strategy for more than 20 years.

Comments

Popular posts from this blog

A Design Team Pictures the Future of Nuclear Energy

For more than 100 years, the shape and location of human settlements has been defined in large part by energy and water. Cities grew up near natural resources like hydropower, and near water for agricultural, industrial and household use.

So what would the world look like with a new generation of small nuclear reactors that could provide abundant, clean energy for electricity, water pumping and desalination and industrial processes?

Hard to say with precision, but Third Way, the non-partisan think tank, asked the design team at the Washington, D.C. office of Gensler & Associates, an architecture and interior design firm that specializes in sustainable projects like a complex that houses the NFL’s Dallas Cowboys. The talented designers saw a blooming desert and a cozy arctic village, an old urban mill re-purposed as an energy producer, a data center that integrates solar panels on its sprawling flat roofs, a naval base and a humming transit hub.

In the converted mill, high temperat…

Hurricane Harvey Couldn't Stop the South Texas Project

As Hurricane Harvey battered southeast Texas over the past week, the devastation and loss of life in its wake have kept our attention and been a cause of grief.

Through the tragedy, many stories of heroics and sacrifice have emerged. Among those who have sacrificed are nearly 250 workers who have been hunkered down at the South Texas Project (STP) nuclear plant in Matagorda County, Texas.

STP’s priorities were always the safety of their employees and the communities they serve. We are proud that STP continued to operate at full power throughout the storm. It is a true testament to the reliability and resiliency of not only the operators but of our industry.

The world is starting to notice what a feat it is to have maintained operations through the catastrophic event. Forbes’ Rod Adams did an excellent job describing the contribution of these men and women:

“STP storm crew members deserve to be proud of the work that they are doing. Their families should take comfort in the fact that…

New Home for Our Blog: Join Us on NEI.org

On February 27, NEI launched the new NEI.org. We overhauled the public site, framing all of our content around the National Nuclear Energy Strategy.

So, what's changed?

Our top priority was to put you, the user, first. Now you can quickly get the information you need. You'll enjoy visiting the site with its intuitive navigation, social media integration and compelling and shareable visuals. We've added a feature called Nuclear Now, which showcases the latest industry news and resources like fact sheets and reports. It's one of the first sections you'll see on our home page and it can be accessed anywhere throughout the site by clicking on the atom symbol in the top right corner of the page.
Most importantly for you, our loyal NEI Nuclear Notes readers, is that we've migrated the blog to the new site. Moving forward, all blog posts will be published in the News section, along with our press releases, Nuclear Energy Overview stories and more. Just look for the &qu…