Lower gas prices
Lower natural gas prices have hit US utilities (XLU) hard. Weak wholesale power prices, influenced by lower gas prices, took coal’s place away as generators’ traditional favorite, and now nuclear power’s share seems to be under serious threat.
US utilities have been shutting down nuclear plants in the last few years at a striking pace, as lower gas prices have spun power generation economics significantly. Exelon (EXC), the largest nuclear power generator in the US, has warned it could close its Three Mile Island nuclear plant in Pennsylvania if it doesn’t receive state aid.
Closures so far
Recent nuclear plant closures and planned closures include PG&E’s (PCG) Diablo Canyon facility, Entergy’s (ETR) Palisades facility in Michigan, and Dominion Energy’s (D) Kewaunee in Wisconsin. Dominion’s Millstone nuclear power plant could also follow Kewaunee after the Connecticut state house rejected a bill that would have allowed the state to buy power from the plant. The utility said that the Millstone plant would be highly uneconomical without state support.
The United States is the worldwide spearhead in nuclear power generation, and planned closures would reduce the total number of nuclear plants in the country to 60.
Building a nuclear power plant takes years, and the operation and maintenance costs are huge. Lower natural gas prices have made gas-fired power plants more economical relative to nuclear ones. Nuclear power producers are seeking state help.
Illinois approved state help to Exelon’s two loss-making nuclear power plants last year. However, the agreement is still uncertain after it received heavy criticism from independent power producers.