New York Nuclear Investments
Will Natural Gas Kill Nuclear, Too?
It all started in 2007.
That's when the owners of the Indian Point nuclear power plant applied to renew operating licenses for two separate nuclear reactors.
Last week the Nuclear Regulatory Commission finally began a hearing that will ultimately determine if the operating licenses in question get renewed...
Supporters argue that without license renewals, New York City will experience energy scarcity while putting a lot of folks out of work.
Opponents insist that this particular nuclear facility is unsafe and should be put out of commission when the original 40-year operating licenses expire.
Well, which is it?
And more importantly, if the licenses don't get renewed, are there any opportunities for investors?
Short about 2 Gigawatts!
So if the Indian Point nuclear power plant was unable to continue operations, what kind of “energy scarcity” would we really be talking about?
Today Indian Point provides more than 2 gigawatts worth of power. That's not a small number — and thus far has been enough to provide enough juice for about 25% of New York City and Westchester County.
Clearly, Indian Point is significant contributor to New York's energy economy, one that has been reliable for almost 40 years.
Shutting it down without anything comparable as far as capacity and cost would absolutely pose a threat to the state's ability to keep all those lights on in the city that's not supposed to sleep.
And therein lies the need for clarification: If the Nuclear Regulatory Commission were to deny the license renewals, New York would only have a few years to provide a suitable replacement for all that power.
Some opponents of Indian Point argue this is not a problem...
What's It Gonna Cost Me?
According to a study conducted by consulting firm Synapse Energy Economics, Indian Point's power generation could be completely replaced — and done so cost-effectively — with equal investments in energy efficiency and renewable energy.
Some key findings of the study include:
New York will maintain a surplus of energy capacity through 2020, even if Indian Point is retired.
A new transmission line under construction now and scheduled to come online next year, the 660 MW Hudson Transmission Project, will soon replace more than 25% of Indian Point's 2,060 megawatts.
The portfolio of clean energy outlined in the report is expected to have a very small impact on consumer costs, adding an estimated 1% to energy bills in 2022 — or one dollar a month for the average residential customer.
Of course, it's that last one that gets tricky. To put it bluntly, it's very difficult to trust cost estimates from either side of the argument, as these cost estimates are never accurate, and they almost always reflect the agendas of those paying for the respective data.
Synapse suggests the average residential customer will only have to pay an extra dollar per month in order to provide replacement power for Indian Point. But Jonathan Lesser of Continental Economics and Robert Bryce of the Manhattan Institute argue that in absence of Indian Point, residential customers would be forced to pay an extra $8.33 per month.
That's a pretty big disparity between those two estimates. To be honest, I'm suspicious of both.
But let's assume they do put Indian Point out of business, and folks in New York have to shell out a few extra bucks a month to keep the lights on... what then?
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The Synapse report made a series of recommendations that would allow the state to fully replace Indian Point with renewable energy and energy efficiency. Most seem reasonable, although most are already going to happen anyway, regardless of these recommendations.
In any event, let's take a look...
1. Update the state's energy efficiency goals to capture all cost-effective efficiency opportunities in order to achieve a minimum electricity savings of 1.5% a year.
This is absolutely doable, and for the most part, is being done right now.
2. Faster implementation and stronger enforcement of the state's energy efficiency build code for new and renovated buildings.
Also doable, although I don't know how much faith I have in getting an overburdened bureaucracy to implement anything faster.
3. Expanding the state's Renewable Portfolio Standard to ensure that renewable energy provides 30% of energy statewide by 2016, and increasing that goal by one percent each year thereafter.
The state of New York currently has in place a goal of 30% renewable energy by 2015. Today about 25% of the state's electricity comes from renewable energy resources; three years ago, it was 11%. So I'm not too concerned that New York will have a problem hitting 30% in the next 26 months.
4. Establishing a goal of achieving 5 gigawatts of offshore wind projects in waters off or near New York State, and backing it up with siting and long-term financing support for offshore wind.
Completely doable. Only problem is that such a goal will take at least 15 to 20 years.
Don't get me wrong; I do think offshore wind is in the cards for the Northeast. But we probably won't see the first commercially viable offshore wind farm in operation in the Northeast until the end of this decade (and even that's a bit optimistic).
Of course, while there are plenty of steps that can be taken to allow Indian Point to be replaced with renewables and energy efficiency, it would be naïve to assume natural gas also won't be involved in this potential transition.
Is This the End for Indian Point?
If Indian Point is forced into retirement, this could actually present an excellent opportunity for fracking advocates that continue to get a lot of push back in New York... because short 25% of its power generation, I don't think it's far-fetched to assume that some lawmakers that previously frowned upon fracking could have a change of heart.
Although it should be noted that because there's so much shallow bedrock in the region, pipeline costs could be quite high. We're talking as much as $40 million per mile.
Still, with record natural gas supplies, producers are quite eager to do whatever they can to move more of that supply.
If Indian Point's licenses aren't renewed, the stars will really start to align for gas producers in that region.
The truth is no one really knows how this is all going to play out.
Opponents of Indian Point believe the safety issues alone are enough to deny those license renewals. Having a nuclear power plant sitting on two fault lines, which is exactly where Indian Point is located, is a pretty solid safety concern argument — especially after Fukushima, and especially considering Indian Point's proximity to a city that is home to more than 8.2 million people (we're talking less than 40 miles away).
That being said, advocates of a license renewal can just as easily point to the fact that in nearly 40 years, Indian Point has operated without any major safety issues.
Again, there's no telling what the end result will be here...
But here's what I do know: Records at the New York State Comptroller's Office indicate that the New York Attorney General's Office has nearly $1.7 million in contracts with consultants. It's using these consultants to support its case against license renewals.
Couple that with a growing number of anti-nuclear New Yorkers who don't seem to be too bothered by higher electricity rates (according to a few random polls), and you could have a recipe for the end of Indian Point.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the managing editor of Energy and Capital and contributing analyst for the Energy Investor, an independent investment research service focusing primarily on stocks in the oil & gas, modern energy and infrastructure markets. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor''s page.