Energy markets in the U.S. are facing what seems to be major structural changes. While the Obama Administration attempts to pass the carbon-reducing Clean Power Plan (CPP) through the U.S. Supreme Court, nuclear generation – which is mostly carbon free – faces plant closures due to competing gas prices and rising unprofitability.
In an article for Energy World, S&P Global Rating’s Michael Ferguson explains that nuclear generation’s high fixed and maintenance costs contribute to its decline in profitability, especially when competing with low gas prices – which have been low since the shale gas boom of the early 2000s. States’ various energy policies also affect nuclear in various ways, some more positively than others. For instance, Ferguson notes that in order to help achieve its own low-carbon goals, the state of New York grants nuclear subsidies to prevent nuclear closures in the state, whereas Illinois does not, prompting several nuclear plant closures in the state within the last year.
Ferguson explains that, should the CPP pass through the legal challenge, nuclear generation will be needed to help achieve low-carbon standards. Therefore, states’ nuclear-sustaining policies now will help determine their success achieving low-carbon goals later.
The article can be read here (subscription required).