What Pilgrim decision says about energy market

NO MATTER WHERE YOU STAND on nuclear power, the thought process behind Entergy Corp.’s decision to shut down its reactor in Plymouth reveals a lot about the energy market in New England.

At a press conference with reporters in Plymouth on Tuesday, Entergy officials said the primary reason they decided to shut down the plant was not the price of required safety upgrades, but the price of natural gas. Officials said the influx of cheap natural gas into the region has driven down the price of electricity by an estimated $10 per megawatt hour, which translates into a $40 million-a-year loss for the company.  Bill Mohl, the president of Entergy Wholesale Commodities, said the Pilgrim Nuclear Power Station was expecting negative cash flow for the foreseeable future.

The Entergy officials said they also saw little chance of price relief on the horizon. They noted the Baker administration appears to be moving ahead with a plan to have electric ratepayers subsidize the expansion of the region’s natural gas pipeline infrastructure, which the company said would further lower the price of natural gas and increase the region’s reliance on it.

Mohl said Massachusetts officials are fond of picking energy winners and losers, and nuclear is in the losing column. In addition to subsidies for natural gas pipeline infrastructure, he said the Baker administration is pushing for a plan that would offer “above-market prices to utilities in Canada for hydropower.” He said state policies also subsidize emerging renewal energy resources but ignore the benefits of carbon-free nuclear energy.

Renewable energy advocates, who over the years have fought back attempts to extend renewable energy subsidies to well-established technologies such as hydropower and nuclear, issued statements on Tuesday saying the loss of Pilgrim underscores the need to aggressively develop carbon-free  sources of power. The advocates specifically mentioned energy efficiency programs, solar power, and onshore and offshore wind. Solar advocates, for example, urged quick passage of legislation that would lift the so-called net metering cap, which is limiting the availability of a key financial incentive for solar projects.

The Pilgrim shutdown is a big headache for the Baker administration. The governor says he wants to both reduce carbon emissions to reach state-mandated targets and lower electricity prices, but his emphasis in public statements has been more on lowering electricity prices. The closing of Pilgrim, at the latest by June 2019, makes his bid to cut electricity prices much harder by removing 680 megawatts of clean energy from the state’s mix.

Baker’s only options for replacing Pilgrim’s carbon-free power output are likely to be far more expensive. The cost of Canadian hydropower won’t be known until bids are collected, but Entergy officials claimed it would be priced “above-market.” Most renewables cost well above market prices. Solar, according to some estimates, costs more than 50 cents a kilowatt hour. Even natural gas, if the cost of expanding pipeline infrastructure is included, could end up costing much more.

According to the regional power grid operator, ISO-New England, the shutdown of Pilgrim will mean the loss of nearly 4,200 megawatts of generating capacity in the region by June 2019.The grid operator said there are currently 11,000 megawatts of new generation being proposed, with two-thirds of that power coming from natural gas and the rest from wind. ISO-New England is expecting the region’s reliance on natural gas to grow to about 58 percent of its power needs, with most of the new plants capable of burning gas or oil.