Power Plant Retirements

The Economics of Retirement

Several factors are challenging coal-fired, oil-fired, and nuclear power generators’ ability to recover the cost of capital investments to maintain their older plants.

• Fuel and environmental-mitigation costs make them too expensive to effectively compete against:
• Newer, faster natural-gas-fired generators that typically have low fuel costs and use less fuel
• Growing levels of renewable-energy resources that have no fuel costs, low operational costs, and incentives designed to lower their initial capital investments
• These older oil and coal plants can require up to 24 hours to reach full power production, making it difficult for ISO operators to rely on them when system conditions are tight. Their age and lack of regular operation can also sometimes lead to mechanical problems.
• Oil-fired power plants tend to keep limited fuel supplies on site to avoid the expense of purchasing oil that they may not use. So, even when called to run, they often can’t run for very long.
• Low wholesale electricity prices over recent years, largely a result of typically low natural gas prices, have also reduced revenues for these resources when they run.

For many, the only option is to retire. These resources are likely to be replaced mainly by wind resources and more natural-gas-fired resources.

Retirement of Resources with On-Site Fuel that Can Sustain Operation During Cold Weather

On days when natural-gas-fired generators have unconstrained access to low-cost pipeline gas, they usually produce the majority of New England’s electricity. However, natural gas delivery constraints in winter caused by high demand for this fuel from both the heating and electric power sectors can prevent these resources from filling this need during cold weather. Wind output is also especially variable during winter. During the 2017–2018 cold spell, ISO system operators observed variable generation from wind turbines, as wind speeds fluctuated throughout the 16-day period. At times, transmission congestion also required curtailments of some wind farms

Very few coal plants remain and oil-fired plants, which typically don’t run often, become critical on cold winter days when the fuel for natural-gas-fired generators is limited and expensive.

Nuclear power currently supplies a quarter of the grid electricity New Englanders use each year, and our analyses show that the region would be more vulnerable to blackouts, higher prices, and increased emissions should we lose these two resources. Regional emissions rose when Vermont Yankee closed, for example. New England’s remaining two nuclear facilities (Millstone and Seabrook, which produce a combined 3,300 MW) will be critical components of the hybrid grid because they are carbon free and have a dependable, on-site fuel supply, but how they can remain financially viable is still unclear.

The retirements issue accelerated in March 2018 when Exelon Corporation announced its intention to retire the Mystic Generating Station in 2022, which is located in the region’s largest load center. Most of the Mystic station’s generators are fueled solely by the nearby Distrigas LNG import facility, and these generators are the LNG facility’s largest customers, creating concern that the LNG facility may retire as well. Though most of the Mystic station is fueled by natural gas, its use of stored LNG instead of pipeline-delivered gas makes it more akin to a coal, oil, or nuclear resource in terms of sustained operations during cold winter weather.

Without these resources, it becomes even more critical for the ISO to be able to effectively preserve energy supplies for forecasted cold weather conditions.