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Low Power Prices Threaten US Nuclear Units Retirement

Low Power Prices Threaten US Nuclear Units RetirementLow Power Prices Threaten US Nuclear Units Retirement

When Exelon's Oyster Creek nuclear unit disconnects from the grid at the end of September and permanently shuts, it will mark the start of a busy period of US nuclear power plant closures driven by low power prices that are placing dozens of more units at risk.

According to S&P Global Platts, as utilities threaten to shut nuclear units, a patchwork of state subsidies has emerged, and the US Department of Energy and the US Federal Energy Regulatory Commission are mulling separate actions to prevent reactors from closing.

The result is a confusing amalgam of measures that could benefit nuclear units in some locations but not others.

"We are seeing these plants close and the next question seems to be 'Is anyone going to step in and stop it'," said Tim Fox, a vice president at ClearView Energy Partners, in an interview on Saturday.

In 2012, the US had 104 nuclear units with a total gross capacity of 107.6 gigawatts. A series of retirements for technical and economic reasons shuttered 6 units with 4.7 GW of capacity by 2016.

But in recent years, continued low power prices and competition from subsidized renewable energy and lower-cost natural gas-fired generation has accelerated the pace of nuclear plant retirement announcements.

Thirteen additional units with a combined capacity of 12.1 GW will shut permanently between September and 2025. The bulk of the announced retirements will be coming in 2019 (2 units), 2020 (3 units) and 2021 (4 units).

"An estimated 12.4 GW in nuclear capacity is at high risk of retiring before its operating authorization ends," said Manan Ahuja, senior director of North American power analytics for S&P Global Platts Analytics.

As many as half of all US nuclear units are at some risk of premature retirement, Platts Analytics said in an annual report on the topic in January.

"The biggest issue is plant economics," Ahuja said in an interview on Saturday.

Factors such as the existence of power purchase agreements, which can provide higher revenue for plant operators, plant-specific costs and prices in capacity markets are important in determining the risks, he added.

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