Can wind-rich Iowa go beyond nuclear without a carbon impact?

Source: Jeffrey Tomich and Kristi E. Swartz, E&E News reporters • Posted: Tuesday, July 31, 2018

If a nuclear plant closes prematurely in the heart of wind country, does it have a climate impact?

It’s a key question in the wake of Friday’s announcement of an agreement between NextEra Energy Resources and Alliant Energy Corp. to shutter Iowa’s Duane Arnold nuclear plant in two years — five years earlier than previously expected and almost a decade and a half before the plant’s federal license expires.

No state gets more of its energy from wind than Iowa — about 40 percent last year — and there’s much more on the way. But can the state add enough new wind energy to replace the 615 megawatts of emissions-free nuclear generation that will be lost with Duane Arnold?

In the short run, Iowa may see carbon emissions rise as Duane Arnold’s output is at least partially backfilled by the state’s second-largest energy source — coal, said Jessica Lovering, director of energy at the Breakthrough Institute, a think tank that views nuclear power as essential to addressing climate change.

Over the longer term, it’s not a simple trade-off of zero-emission energy sources. The loss of Duane Arnold may mean fossil generation, in Iowa or elsewhere on the regional power grid, runs more frequently.

“Even if they can replace all of Duane Arnold’s generation with renewables, it means they’re not replacing coal and gas generation with renewables,” she said. “You really want renewables to replace fossil fuels.”

Josh Mandelbaum, a staff attorney in Des Moines for the Environmental Law and Policy Center, said the state currently has excess generation, and it may be possible to add enough new renewable energy to avoid a short-term spike in carbon emissions in Iowa.

“There’s significant wind generation being added. We’re pushing 3,000 MW of new wind between MidAmerican and Alliant,” he said. “I think there’s room for renewables to come in and fill that gap.”

Utility-scale solar, energy efficiency and battery storage can also complement wind energy in future years, said Kerri Johannsen, energy program director for the Iowa Environmental Council.

But environmental advocates agree that tackling climate change in Iowa’s electricity sector depends on replacing coal with renewables and reducing demand.

“You’re going to get more carbon bang for the buck by retiring coal plants,” Johannsen said.

It’s the economics

Of course, it’s economics, not the emissions impact, that will decide whether Duane Arnold ceases operation in 2020.

The single-reactor nuclear plant, 10 miles north of Cedar Rapids, began operating in 1975. The plant is 70-percent owned by Florida-based NextEra, with two Iowa cooperatives owning the rest.

Alliant’s Iowa utility, Interstate Power & Light Co., takes NextEra’s share of the energy output under a power purchase agreement signed in 2005.

In a filing on Friday with the Iowa Utilities Board, Alliant said the decision to buy out the remainder of the PPA with NextEra was driven by financial pressures.

“In recent years, dramatic changes in the bulk power market have outpaced the competitiveness of the [PPA],” the filing said. “Specifically, the prevalence of inexpensive natural gas-fired generation and rapid technological advancements in renewable energy have resulted in market energy and capacity prices that are significantly lower than the terms of the [PPA].”

The utility said terminating the contract five years early will save its customers almost $300 million through 2040. The savings include a $110 million buyout payment to NextEra in September 2020 and the costs of replacing the energy and capacity.

The nuclear output would partially be replaced through the purchase of 340-MW wind energy from four NextEra-repowered Iowa wind farms.

Alliant said in a regulatory filing that “the new and amended PPAs will reduce customers’ bills by 2 to 3 percent while promoting reinvestment in Iowa wind farms and bringing additional cost-effective renewable energy to IPL’s customers.”

Overall, NextEra said it plans to invest $650 million in new and existing renewables generation across Iowa by the end of 2020, including $250 million to repower wind projects. The company said it’s also evaluating redevelopment opportunities at the Duane Arnold site, which could include a solar, battery storage or natural gas project.

The nuclear plant’s other owners were less enthusiastic about NextEra’s plan.

Central Iowa Power Cooperative, a 20 percent owner of Duane Arnold, is concerned about the effect of earlier-than-anticipated decommissioning costs and the financial impact of continuing debt payments for its share of the nuclear plant while replacing the lost capacity.

“We’re concerned how the upfront financial burden associated with closing the plant may impact our members,” Bill Cherrier, the co-op’s CEO, said in a statement. “We’re hoping to work with other owners for a positive outcome.”

Another closure

Friday’s news continues a wave of announcements of early reactor closures in recent years. While many of the plants being shut down before their licenses expire are in deregulated states, those in vertically integrated states aren’t immune to financial challenges.

“I think what it shows is the vulnerability to nuclear power in the current economics of the electric power sector,” said Paul Patterson, a utility analyst with Glenrock Associates LLC.

Dominion Energy Inc.’s Kewaunee nuclear plant in northeast Wisconsin was the first to shut down in 2013. The Fort Calhoun nuclear plant in Nebraska was shuttered in 2016.

And in an arrangement similar to what is being proposed in Iowa, Consumers Energy in Michigan last year sought approval to buy out the remaining years of a power purchase agreement with Entergy Corp., which planned to shut the Palisades nuclear plant in southwest Michigan (Energywire, Sept. 25, 2017).

Economic considerations — not environmental concerns — nixed those plans. Michigan regulators ultimately reduced the amount of money Consumers was allowed to recover from its customers to pay for the buyout, and Palisades is expected to continue running through the end of the PPA.

NextEra’s plans to shutter Duane Arnold in 2020 aren’t a sign that the company is seeking to exit the nuclear business. The company’s regulated utility in Florida recently secured federal approval to expand its nuclear plant there.

But cheap natural gas is affecting those plans, too. Florida Power & Light Co. said it will be at least a decade before it decides to begin work on the project, given the current economics of nuclear power.

Back in the Midwest, natural gas prices will remain a key driver in deciding the fate of nuclear plants, according to a recent analysis.

The Midcontinent Power Sector Collaborative, an ad hoc group of utilities and environmental groups led by the nonprofit Great Plains Institute, last week released its “road map” for decarbonization of the Midcontinent Independent System Operator region by 2050 (Energywire, July 24). Economic modeling done as part of the study found that if gas prices remain low, almost all of the region’s nuclear plants could be shuttered by 2030, absent some form of carbon limits.

The Great Plains Institute’s Franz Litz said in an interview before the release of the study that it may require policy action on the part of states to keep nuclear energy a part of the region’s energy mix.

“If you don’t care about carbon, maybe you let them go offline, or retire,” he said. “But if you do, you better think harder.”