I'm a bit hazy on exactly why Browns Ferry (no apostrophe) reactor 1 shut down, but I'm pretty sure it wasn't a result of the 1975 fire, in any engineering sense at least. The plant was fixed up and did restart and run after that. It wasn't mothballed until about 10 years later.
However the length of layoff is instructive; BF1 was out of action for 20 years. Zion should be relatively easy at a mere 10-year shutdown.
Joffan:
Oops. You are correct. Browns Ferry 1 did restart after the fire. I need a better research assistant!
This is an excellent suggestion Rod. Restoring old Nuclear plants is far less expensive than building new ones. American nuclear plants have prove very durable, and these reactors are probably capable of giving many more years of safe service.
I recently noticed, during my surfing for "all things atomic", that the Zion units had been shut down in 1998. This surprised me because of the size of the units. Most other units that have been shut down after only 25 years of operation were quite small, in some cases prototypes. I had assumed, without further digging, that low fossil prices combined with a repair bill had caused the economics to look unfavourable. Thanks for filling some of the blanks.
Brad,
Zion was also shut-down because the work environment was absolutely toxic with a complete lack of trust between the management and the technical crew, with an abundance of procedure violations, a climate of intimidation and NRC notices raining days in, days out. The situation was not much better in many of the other ComEd NPPs.
Those were the very, very bad years of Com. Edison before Exelon was formed and things started to shape up.
I doubt that the toxic work conditions were a decisive factor but it probably explains why the operator was so willing to throw the towel when they found out about the SGs: With such a bad work climate and all the NRC's attention it helped create, the possibility of a license extension to 2033 was seriously questionable.
So who owns the Zion plant now? Could say Exelon buy it for a suitably low price and start the refurb?
Now it's me that needs better research... I see that Exelon owns the Zion plant already.
http://www.exeloncorp.com/
ourcom...ing_station.htm
So, Exelon... get to it!
Joffan,
Exelon still owns the plant. However, they're handing the plant operating/possession license, and the decommissioning fund, over to EnergySolutions for decommissioning. After the plant site is returned to greenfield (under a fixed-price contract, i.e., the decommissioning fund), EnergySolutions will then transfer title back to Exelon. Only the spent fuel storage installation will remain.
Based on all this, it really doesn't look like the plant is going to be reopened. This is a shame, since I think it would be the rational thing to do, given the relatively low startup cost vs. any new plant (given the good condition of plant), and the very low operation cost after that. The two main reasons people are not considering restarting the plant are as follows.
Politics:
This plant is near a large city, like Indian Point. Thus, starting it back up will be a major political and regulatory battle, much more so than merely keeping an operating plant open (which they're having enough trouble with at Indian Point).
Economics:
Perhaps an even more important reason why Exelon is not interested in restarting the plant is one which is not talked about in public. The fact is that, whereas Illinois ratepayers may benefit from a plant restart, it would have a negative impact on Exelon's profits. And this has nothing to do with the capital costs of restarting the plant.
Exelon operates in a deregulated ("free") power market. Under this system, the market price for power at any given time is set by the supplier with the most expensive variable cost, which meets the last increment of supply.
If gas plants are the last incremental supplier at all times, the market price stays high at all times, due to gas plants' very high variable (fuel) cost. Conversely, if power demand drops to a level where no gas plants are needed, and all the supply is met by coal and nuclear plants, the market power price drops precipitously, to the variable cost for a coal or nuclear plant. This is how it works in theory, at least. For nukes, the variable cost (fuel plus non-fixed O&M) is only ~1 cent/kW-hr. For coal it is maybe 1.5 cents.
The problem for Exelon, and their service area, is that they have a large number of nuclear and coal plants, and they get very little power from gas. These power plant decisions were made in the rate-base days, and were based upon what actually made the most sense (lowest cost), and not what would maximize profits under a market system. Times have changed.
For these reasons, Exelon has no interest in building new coal or nuclear stations in their service area, as it would actually reduce their profits. Instead, they want to just sit back, slowly build gas plants to meet increased demand, and let the fraction of the day over which gas is the incremental supplier increase, until this applies most of the time.
Interestingly, Exelon is persuing a nuclear project in Texas, where gas supplies ~50% of al
continued...,
Interestingly, Exelon is persuing a nuclear project in Texas, where gas supplies ~50% of all power (vs. 10% or less in Illinois). This makes sense. In Texas, they can expand nuclear significantly and still have gas be the incremental supplier over most or all of the day. There, it is just a matter of how they can supply the baseload at the lowest cost, because they don't have to worry about the baseload plant's impact on the market price. For baseload, nuclear is cheaper than gas, and is the lowest cost baseload supplier if CO2 constraints are assumed.
To summarize, if gas would remain the incremental supplier, building a new nuclear plant will increase profits (by lowering overall generation cost). If gas would not remain the incremental supplier after building the new plant, a new nuke would reduce profits, since it would lower the market price for power.
For these reasons, Exelon has no interest in starting up a large nuclear plant in Illinois. Thus, it appears that there is almost no likelihood that Zion will ever reopen. Recent actions (by Exelon and EnergySolutions) further confirm this.
Jim:
Excellent analysis and something that nukes should keep in mind when they listen to comments by Exelon leaders about their reluctance to build new nuclear power plants.
Many of the nuclear technical types that I know have been amazed as I attempted to explain they should not worry about their future opportunities just because someone with a vested interest in delaying the Nuclear Renaissance - like John Rowe, CEO of Exelon - makes disparaging remarks. Here is a quote from a 2002 BusinessWeek interview with him:
"Q: Looking at the rest of the value chain, if you will, one of the strong points of Exelon is its big nuclear fleet. What do you see in the future for nuclear?
A: It's my opinion that someday, there'll be a new generation of nuclear plants, but I don't believe that day is close at hand because natural gas is very cheap again. And I think that every analysis of the commodity markets suggests that over the next 10 years, natural gas will be cheap many more years than it is expensive. As long as that's the case, economics drives new plants to be gas-driven."
It is now 2008, just 6 years later and the price for natural gas in early summer is about $13 per million BTU, at least 3 times what it was in 2002.
Exelon is, of course, hugely profitable, so as an energy prognosticator, John Rowe is an excellent company CEO.
Jim H.
Many thanks for that extremely valuable insight.
I will fess up right now to being an Exelon shareholder and wishiong they restarted the plant. Perhaps the reason that Exelon will not restart is the absolutely toxic political environment in Illinois where it was forced to pay hundreds of millions just for being successful. Let's face it. Would you spend billions in a state where three branches of government are run by the same political party, all hate each other, and all are anti-business. Exelon is going to Texas for the same reason that other industries have gone south for decades, because Texas welcomes business. Who would build or restart a powerplant and pay 2008 prices for labor and materials, and then sell into a market where politicians spend months trying to freeze rates at 1997 levels? Face it folks, if you owned Exelon would you invest in Illinois where they hate you, or invest in Texas where they welcome you with open arms?
JD:
I am certainly no expert on Illinois politics. What I am beginning to understand, however, about most political systems is that there are many backstories to all decision making.
Exelon's profits partially come as a result of market control, not excellence in service or producing a superior product. They are thriving partially by artificially keeping out competition that would drive down the price of their product and their profit margins.
In that situation, is there any wonder that they have customers - which happen to include every single voter and other business - that dislike them? Can you really blame those customers - represented by their government - for trying to tax back some of what they have given to the company in excess profits?
For some people on the right, the term "excess profits" is said to have no meaning, but I believe that excessive profits can come when a commodity supplier is able to control market entry through manipulation of the rules of the game. Exelon, which has monopolistic philosophies at the very core of its being, is very good at that game and at playing the victim while banking hundreds of millions in profits.
You obviously are not an expert in energy either. I don't mean that in a nasty way, but how can you just assert, without facts, that Exelon controls the market. The FERC, the Department of Justice and the SEC all regulate the energy markets and ensure that no party has market power to manipulate energy prices. They review Exelon every year. Exelon must meet stringent market power tests and a market monitor reviews every transaction. The fundamnetal fact is that Illinois is part of a 13 state system where over 1,000 power plants compete on an hourly, best price basis. Exelon owns about 20-30 of those plants. How on earth can it control the market.
So, next time a politician says that Exelon controls the market, perhaps we should inform him or her to file a complaint in court and prove it. I think there is something called antitrust law that applies.
The bottom line is that Exelon's profits come from the hard work of thousands of its employees in Illinois and elsewhere that have turned around nuclear power plant performance. We should be proud to have a company that is a successful world leader in our state.
Think about this for a moment. When you say "excess", who would you like to measure that? A politician? And, by the way, if Exelon loses money because it does not run its plants well, will there be a law to prevent "excess" losses. Yes, my friend, come to Illinois, where if you make too much money we will take it away, but if you lose money then tough luck.
We have to stop punishing companies that are successful.
JD:
What do you think would happen to the "hourly, best price basis" in that 13 state system if there were an additional 2200 MWe of baseload electricity available from a supplier that had a production cost of 2-3 cents?
In Exelon's 2007 fact book, there is an interesting bullet under the heading of
Protect today's value
"Protect the value of our generation".
It is quite possible that I am not an expert in energy - as you assert.
I do know enough about energy markets to understand that the balance between supply and demand is a very important part of the value of each generating asset. In a tight market, prices are high enough to allow almost every participant to make money with the low production cost participants making enormous profits.
Here is a hypothetical example to explain what I mean.
Suppose you own 20,000 MW of electric generation with an average operating cost of 2 cents per kilowatt hour. That generation cost ensures those plants nearly always run.
If the plants are running in a tight market, the last in generators needed to meet demand could be gas fired turbines with a fuel cost of 7.9 cents per kilowatt hour (using today's gas prices of about $8.5 per million BTU and a heat rate of about 9,500 BTU per kilowatt hour.) The best price the owner of that generation can bid is about 8 cents per kilowatt hour. Your 20,000 MW nets 6 cents per kilowatt hour - $1.2 million per hour.
If you put an extra 2200 MW of low operating cost generation into that same market, the last in generator might be a coal fired power plant with a production cost of 3.2 cents and a bid of 4 cents per kilowatt hour. If you were the owner of that 2200 MW that would increase your sales volume to 22,200 MW, but your profits would drop by 63% to only $440,000 per hour.
I know that is a simplistic example - but heck, this is just a quick blog comment.
There are many components to "protecting value - I will roger that the hard working plant employees that keep the plants running are very important, but so is the total generation available to bid in those hourly auctions.
Your seemingly simple suggestion to "file a complaint in court and prove it" gives a clue as to the amount of power that a company like Exelon has in the market. The overhead cost of making a case that could be understood keeps out riff raff like me.
BTW - there seem to be plenty of protections against excess losses for corporations that are "too big to fail".
Rod,
There is no doubt that restarting Zion would reduce prices in a supply and demand market. The effect of Zion is not as powerful as you suggest because it is a 140,000 MW system -- not 20,000 MWs.
But, sure a new plant would increase supply and , all things being equal, reduce prices. Electricity is no different from any other market. A new dairy farm increases the supply of milk in that market. It does not mean that dairy farmers don't want to increase the size of their facilities. They know that if they don't get bigger someone else will come in. The same is true for energy markets. If the prices are attractive others would build here. In fact, PJM has added over 7,000 MWs of new generation over the last 5-7 years. Exelon is not the only company that can build a plant.
Your point about your personal resources to file a complaint misses the mark. You don't have to file a complaint. What I am saying is that there is already a host of regulators that monitor the market. Your suggestion that the company has market power is unfounded. I guess on some level you think that these regulators are doing a bad job or that you can do better?
Rod, what troubles me is that you jump to the conclusion that Exelon is trying to manipulate the markets and you want to punish the company. In so doing, you answer the question of why Exelon's investors would not want to restart Zion. Its people like you, frankly. And, the host of environmentalists and others that would try to block restart in Illinois.
Can you be won over?
JD,
You are correct about the oversight but I don't think that the political scene is as bad as you say. It scares me when people talk about excess profits and market power, but I think that people would be excited about restarting the plant. I think that Zion is a special opportunity. The company should restart. If it does Rod would have to change his mind.
JD:
I can certainly be won over - all it would take would be for Exelon to show some interest in finding out what it would take to restart Zion.
The reactors were shut down for specific reasons at a particular time in history when it did not look like it would make sense to invest hundreds of millions with little chance of getting a license extension. Gas and electricity prices were low and the opportunity for capital recovery was limited.
Those conditions have changed.
I do not want to "punish" the company, but I am tired of people quoting the company leaders about how they have no interest in new plant construction or even restarting a fully built and licensed plant that might need a fairly major, but still doable investment.
The implication is that if the owner of the largest fleet of nuclear plants does not want more, there must be a reason why no company should want to build.
The reality is that the companies with the least incentive to build new plants are those that have lots of existing capacity!
Rod,
I don't think that is true about incentive but I agree that restart should be considered.
JD - would you agree if I rephrase to the following:
The companies with the least incentive to build new plants are those that have lots of existing capacity in a market that is adequately supplied when all of the capacity - including the high marginal cost capacity - is used.
In normal competitive markets, there is an incentive for new players to enter when the existing players have a high cost operation that could be beaten by better technology, a more streamlined supply chain, or a better managed enterprise.
In electricity production, the difference in marginal cost between nuclear and natural gas is rather striking, but it is profitable for existing players to allow a condition that makes gas the price setter.
I do in theory but it doesn't work in reality. Reliability standards require new plants to be built in order to maintain a safe operation. If Exelon did not want new MWs so as to keep gas on the margin, then it would not have worked so hard to increase capacity factors to world class levels (94% last year as oppossed to 50-60% when ComEd ran the plants) and Exelon would not have invested hundreds of millions in new nuclear uprates. Take a look at the SEC filings detailing nuclear uprates. You will see that Exelon has well over 1,000 mWs through uprates. If your theory holds true, then it would not have done that.
Look, if you were the owner of a hamburger chain or a wheat farm, you would stop adding new burger joints and new wheat fields if the market did not need them. You would be dilluting the hamburger and wheat markets. The same holds true for electricity. You can't expect merchant generators to build plants just to supress prices. That is the kind of thing that utilities used to do, they would over-build and goldplate. But the surplus didn't help consumers because they paid for plants that were not needed. The fact is that coal is on the marging 70% of the time in the Midwest according to PJM's annual report. I doubt that Zion would move the needle all that much.
JD:
Exelon's actions to increase the production from assets that they are already operating is perfectly rational and leads to good improvements in returns on investment. That is especially true if the capacity increases are timed to come on line as the market size increases.
(BTW - I happen to have similar feelings about the poor little oil companies who blame "environmentalists" for the fact that there have been no new refineries built in the US in 25 years. Of course, existing refineries are running at about 94% capacity factor and are part of a very profitable enterprise.)
It is true that the owners of hamburger chains or wheat farms will stop adding new capacity when the market demand looks like it is slowing.
There are, however, few barriers to entry into those markets so if the existing suppliers wait too long to add capacity someone else will recognize the market signals and do it for them when they have a way to produce the same product at a lower cost or a better product at the same cost.
I think we can all agree that there are rather substantial barriers to entry into the electricity production market, especially if you want to use a low marginal cost fuel like uranium or thorium dioxide. Established suppliers in "competitive" electricity markets have no worries about letting investors add gas capacity - those generators only run in high priced situations because the fuel cost is such a large portion of the total cost.
My only real point in this discussion is to shed some openness and light into the market decisions being made by one of the most powerful suppliers in a certain market. Exelon likes to market their decision making as being in the best interest of the consumer or they like to push the blame for actions like shutting down Zion onto others. They play the victim or the white knight very well.
The fact of the matter is that they are - like most American corporations - seeking to put the supply demand curve at the point that is most in their own favor.
That is good for the returns on their stock, but not necessarily good for some of their diversified stockholders who happen to own shares in energy dependent industries. It is also not in the best interests of people - like me - who truly believe that we need to reduce our consumption of fossil fuels and their pollution of our common environment.
The good thing about modern technology is that I have a way to share my thoughts with a relatively wide audience, even though I do not have anywhere near the marketing budget of an Exelon.
Rod,
The barriers to entry argument is nonsense. Most of the new plants are built by new entrants.
Energy is not unique, there are substantial barriers to new entry in many businesses. Take a look at the steel industry. Their prices have gone up 100% in a year. Their profits have sky rocketed. It is hard to build a new plant.
The bottom line is that you personally don't like free markets. Many decades ago Adam Smith wrote that the common good is best achieved when every man and entity legally acts in its own best interest. In other words, by trying to be most efficient and by trying to make profits, all corporations act in the community interest because they drive robust market forces of innovation.
You don't like big corporations, that obvious. You probably believe that government can do it better. That is the nonsense and is stopping Constellation in your home state from building.
Stop being a populist. You probably think that we should bail out the people that over-mortgaged their homes because "big bad predatory lenders" made them take the loans.
My view is simple. Screw the people that took the loans and screw the big banks that made the loans. That is how the market should work.
JD:
The barriers to entry for low capital cost natural gas fired power plants may be fairly low.
I can personally testify to the enormous barriers that have been erected to make it difficult for new suppliers who want to build low marginal cost, high technology nuclear plants.
With a good technical background, lots of contacts in the financial world, and a proven design with most of the elements operated in test programs for decades, there is about a $150-200 million entry fee for a 10 MW plant.
There is a reason I have been working - and continue to work - for 15 years to figure out ways to move the barriers out of the way.
You have not correctly diagnosed my economic philosophy. I have nothing against big corporations, but I do have something against big corporations that have worked diligently to use government power to slow down their competition.
I love competition - I just know that there is a need for rules and unbiased umpires. Otherwise the golden rule applies - he who already has the gold gets to make the rules.
As a personal note - there is a very good reason that I have been renting my home for more than 5 years. The frothy market when I was looking for a place to live indicated a lot more room for downward movement than upward.
Rod,
Ha! I wish that I took your advice on my home!
I could not be more with you on the need for new nukes. I don't think that the incumbants are blockers though and that is probably where we disagree. Anyway, this has been a fun and interesting discussion.
I recently became aware of the Zion situation via an article referencing David Hollein in the Chicago Tribune (Give Nuclear a Chance). Like many of you I asked the obvious question "Why in the world would they close a two unit plant like Zion?". Here in the great state of Texas (no bias from me) there is talk of building five new units (2 @ STP, 2 @ Commnache Peak, and a new site in Victoria). I got a lucky invite for a function where the Governor, Rick Perry, proudly announced that 80% of the NEW jobs created in the US last year were from companies BASED here in Texas. After googling David Hollein's name and reading through your comments as a result, the politics of Illinois sheds some light on the subject of closing Zion, at least for me. But given that this post is a year old, one has to wonder if the economics may have changed. Excelon is trying to take over NRG Energy (who seems to have won one of the lucrative DOE new plant incentives) in a hostile takeover. The ACES bill, if passed, will artificially inflate fossil fuel power costs. I personally wish there was a few extra billion in my savings account to buy both Zion units. Anyone want to go havsies with me?
A little bit of shameless spam for a group that won't have me. The Young Nuclear Generation has established a pronuclear blog at www.cleanenergyinsight.org. That is how I learned of the Zion issue and eventually was directed here. For those of you in the nuclear advocate camp I hope that you will join me in supporting their enthusiasm and initiative by contributing to the dialoque there also.
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