Wisconsin is a long way from Muskrat Falls. But, given the interconnectedness of the North American electrical grid — a grid we expect to join with the building of Muskrat Falls and the Maritime Link — Kewaunee, Wis., might just be a little closer. Tuesday, the Kewanee nuclear power plant — a plant that had been selling into the U.S. spot electricity market — closed its doors, putting more than 600 people out of work. The plant was built in 1974, but the plug was pulled and the expensive decommissioning process started because of steadily-falling power prices.
Here’s how its owners described the closure of its plant: “This decision was based purely on economics,” said Dominion Nuclear president David Heacock. “This closing does not herald the end of our company’s commitment to nuclear power. It is a safe, reliable and carbon-free technology, but as with all forms of generation, it must compete on economics, including the necessity of being price competitive on a regional level.”
Those economics are daunting right now. Before Muskrat Falls was sanctioned, there had been discussions about Nalcor expecting power sales of five cents a kilowatt hour — far less than ratepayers in this province, who will shoulder the full cost of building Muskrat Falls, will pay, but at least some return. New numbers from Hydro-Québec are disturbing. Its annual report points out, “After reaching a historic peak in 2008, natural gas and electricity prices in northeastern North America dropped sharply in 2009, then rose slightly in 2010 only to fall again, such that prices in 2012 were at their lowest in 10 years.”
The accompanying graphic shows power sales from natural gas as low as two cents per kWh. It will cost 7.6 cents a kWh to produce power at Muskrat Falls, let alone the cost of transmission systems and the costs of wheeling it south to market. (Interestingly enough, a chart of electrical prices in that same annual report as of April 1 — well before Muskrat Falls and its inevitable hikes — listed St. John’s as having the third-highest power bills in the cities sampled, trailing Montreal, Winnipeg, Seattle, Vancouver, Miami, Houston, Portland and Nashville.)
But back to Wisconsin. The 556-megawatt Kewaunee plant shut down after its electrical utility customers switched to cheaper power generated by natural gas.
And it’s not alone, as the New York Times pointed out Wednesday: “Earlier this year … the owners of the Crystal River 3 plant in Florida decided to retire it rather than repair its containment structure, because of unfavorable economics. Industry experts say that several reactors are operating at a loss while their owners wait for the glut of natural gas to disappear. How long that will be, and how many will last, is not clear.”
It’s going to cost something like $900 million to decommission the Kewaunee plant. It’s cheaper to spend that money than to keep operating. The decommissioning will take time, and that delay may affect the total costs, according to the New York Times: “(A) commission expert said the actual budget was open to question. But ‘when you try to do any of these calculations beyond seven years, I’ll be frank with you,’ said Michael Dusaniwskyj, an economist with the commission. ‘It’s a shot in the dark.’”
The Dunderdale government must understand about shots in the dark. Last year, its single-year forecast for the price of oil was hopelessly optimistic (leading to a much-larger-than-expected deficit) and the forecast for this year is already trailing real oil prices.
Plenty can change over the 50-year roadmap for Muskrat Falls, and not all of it for good.