Flat demand and natural gas competition threaten nuclear industry’s profitability
For the first time in Three Mile Island’s 41 years of commercial operation, the nuclear power plant failed to secure a contract in August to sell a year’s worth of electricity on the regional power grid, meaning that it will lose a major revenue source.
In addition, it will be harder for TMI to find buyers for the electricity it generates during that period. Without the contract, there’s no guarantee that the company’s main customer, PJM Interconnection, will buy any of the plant’s electricity, according to PJM Spokesman Ray Dotter.
The failed bid, along with other factors, raises questions about TMI’s future. Nationwide, two nuclear plants closed in 2013 and 2014. TMI’s owner, Exelon, recently said it might close two plants in Illinois that failed to get contracts. Nuclear power plants industry-wide face stagnant demand for power and unprecedented competition from natural gas.
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Industry-wide risk
TMI is hardly alone. For the same period, June 2018 to May 2019, Exelon’s Quad Cities plant in Illinois and Oyster Creek plant in New Jersey failed to get capacity contracts. During the auction for the period from June 2017 to May 2018, Exelon’s Byron nuclear power plant in Illinois, as well as Quad Cities and Oyster Creek, failed to get contracts.
That doesn’t even take into account nuclear power plants run by other companies, such as Vermont Yankee and Kewaunee, both of which have closed within the past two years after struggling to remain profitable.
Exelon has been considering Quad Cities and Byron for closure, the company has said. However, Exelon recently pushed back the deadline to decide whether to close the plants until 2016.
Fein said the company will look at each power plant from the context of the whole company. He pointed to retail chains for comparison.
“If they have stores that aren’t performing, they’re going to close those stores and look at the profitability of the overall company,” Fein said. “We’ll make those decisions in due course.”
One thing was certain, Fein said. TMI would not lay off any of its more than 532 employees during the 2018-2019 contract season.
“There will be no change whatsoever in the operation of the plant,” he said.
Energy production by the numbers
In 2005, nuclear plants made 781,986 gigawatt-hours of electricity, while natural gas made 760,960 gigawatt-hours. By 2006, natural gas surpassed nuclear power in output, and by 2014 gas-powered plants spiked up to more than 1 million gigawatt-hours, while nuclear plants remained near 2005 levels.
2014 Energy production:
• Coal — 39 percent
• Natural gas — 27 percent
• Nuclear — 19 percent
• Hydropower — 6 percent
• Other renewables* — 7 percent
• Wind — 4.4 percent
• Petroleum — 1 percent
• Other gases — 1 percent
*Consists of biomass, geothermal and solar.
Source: U.S. Energy Information Administration
