Cheap natural gas might not be the biggest nail in the coffin of the Vermont Yankee Nuclear Power Station in Vernon, VT, but it's in there, Entergy Corp. said in announcing the shuttering of the plant, mainly due to low power prices in a poorly designed wholesale power market.
"This was an agonizing decision and an extremely tough call for us," said Entergy CEO Leo Denault. The company said the decision to close Vermont Yankee in 2014 was based on a number of financial factors, including:
A natural gas market that has undergone a transformational shift in supply due to the impacts of shale gas, resulting in sustained low natural gas prices and wholesale energy prices.
- A high cost structure for this single unit plant. Since 2002, the company has invested more than $400 million in the safe and reliable operation of the facility. In addition, the financial impact of cumulative regulation is especially challenging to a small plant in these market conditions.
- Wholesale market design flaws that continue to result in artificially low energy and capacity prices in the region, and do not provide adequate compensation to merchant nuclear plants for the fuel diversity benefits they provide.
The station is expected to cease power production after its current fuel cycle and move to shutdown in the fourth quarter of 2014. The station will remain under the oversight of the Nuclear Regulatory Commission (NRC) throughout the decommissioning process.
Commenting on the future of nuclear power, Denault said, "Entergy remains committed to nuclear as an important long-term component of its generating portfolio. Nuclear energy is safe, reliable, carbon-free and contributes to supply diversity and energy security as part of a balanced energy portfolio."
Vermont Yankee, a single unit boiling water reactor, began commercial operation in 1972. Entergy acquired the plant from Vermont Yankee Nuclear Power Corp. in 2002. In March 2011, the NRC renewed the station's operating license for an additional 20 years, until 2032.
Back in 2004, before the license renewal, the potential retirement of the plant was on the table. At the time the nuclear plant and Hydro-Quebec supplied about two-thirds of the state of Vermont's power (see Daily GPI, Jan. 7, 2004).
According to Energy Information Administration data last updated in July 2012, Vermont had the second-lowest per capital natural gas consumption of all states in 2010. Nuclear power accounted for about three-fourths of power generated in Vermont in 2011, a greater share for nuclear than in any other state. Twenty-one percent of Vermont's net electricity generation in 2011 was from conventional hydroelectric power. In 2010, Vermont had the nation's lowest carbon dioxide emissions from power generation, and the state has a "voluntary goal" of generating 25% of its power from renewable sources by 2025.
Entergy plans to recognize an after-tax impairment charge of about $181 million in the third quarter related to the shutdown. In addition to this initial charge, Entergy expects to recognize charges totaling approximately $55 to $60 million associated with future severance and employee retention costs through the end of next year.