PSEG Threatens to Close Salem Hope Creek without Subsidies

PSEG CEO, Ralph Izzo, has told members of the New Jersey legislature that the Salem and Hope Creek nuclear plants will be shut down unless they receive financial support. Speaking to the state Senate Environment and Energy Committee and the Assembly Telecommunications and Utilities Committee, citing data from a study PSEG commissioned from the Brattle Group, Izzo said that as current hedging contracts expire, current market pricing will erode plant profits and force the closure of the plants. The announcement sparked immediate outcry from the PJM Independent Market Monitor (IMM), the New Jersey chapter of the American Petroleum Institute, and opponents of nuclear subsidies.

Key Details

  • Neither Salem nor Hope creek covered their avoidable costs (annual out of pocket expenses plants would incur if they did not run) in 2016
  • According to the Joseph Bowring, President of Monitoring Analytics for PJM IMM, the plants are not uneconomic as they have $31/MWh of operating expenses vs. energy and capacity costs in PJM of $37/MWh
  • Per the Brattle Group study, closing the nuclear plants would:
    • Cause electricity prices to rise, costing New Jersey rate payers on average $400 million/yr. for 10 years
    • Increase carbon dioxide emissions by almost 14 million
    • Add $733M/yr. in environmental and human health costs
    • Reduce New Jersey’s GDP by $809M/yr.
    • Eliminate 5,800 jobs
    • Reduce tax receipts by $37M
  • PSEG has not asked for a specific number of subsidies, but $350M over 10 yrs. has been mentioned by critics

Implications

PSEG is the latest nuclear generator to request subsidies from state legislatures, following Exelon in IL and PA, Dominion in CT, and nuclear generators in NY. If these two plants were to close, there would no longer be any nuclear energy generation or state nuclear regulator in New Jersey, as the states only other plant, Oyster Creek, is scheduled to be closed in 2019. As cheap natural gas and increased supply of renewables continues to put downward pressure on power prices, nuclear generators feel that subsidies are the only way to produce safe, clean, and reliable energy in the future. PJM’s IMM has described power subsidies as being “contagious,” but PJM is already looking at changing how it sets prices to provide incentives for “inflexible” generating units such as coal, nuclear, and large gas units. If New Jersey’s legislature agrees to grant subsidies to nuclear generators, look for this trend to continue in other states

More Information

Utility Dive: PSEG CEO: Salem, Hope Creek Nukes will Close Absent Subsidies

Utility Dive: PJM Market Monitor: State Plant Subsidies ‘Threated the Foundations’ of Power Markets

Utility Dive: PJM Price Formation Proposal Would Dramatically Change How Prices Are Set in the RTO

NJTV News: PSEG to Close Nuclear Plants without Subsidies from Trenton

This report is part of ScottMadden’s Nuclear Minute series. To view all featured Nuclear Minutes, please click here.

Additional Contributing Author: Frank Nelms

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