How Alternative Energy Affects Electricity Pricing

As more nuclear plants are retiring, states are becoming more reliant on gas-fired energy generation, meaning more vulnerability to weather-related price swings.

According to powermag.com, roughly one-half of U.S. nuclear power plants in competitive markets are at risk of early retirement. With that threat looming, some states have opted to subsidize nuclear generators while others are choosing substitute fuel types.

For example, both Illinois and New York have lobbied for financial support for nuclear power through zero-emission credits (ZECs). However, such legislative solutions mean higher costs for ratepayers.

States that have chosen the substitute fuel route, such as Michigan, Massachusetts and New Jersey, have become more vulnerable to weather-related price swings, like those that occurred during the Polar Vortex in the winter of 2014.

According to the site:

Nuclear generators have noted a 25% jump in fuel costs during the past decade. Capital expenses have increased 109%, while operating costs jumped 13% during that timeframe. Even if nuclear retirements in Germany and Japan weaken demand for raw materials and depress fuel costs, significant measures will still need to be taken to keep nuclear power online.

Illinois in particular plans to generate 25% of its energy from renewable sources by 2025. The state recently passed a $235 million annual subsidy for nuclear generators, which allows the state to purchase ZECs from nuclear plants. Illinois utility companies pass those costs on to the ratepayers as ancillary services.

In March, the Electric Power Supply Association and several electricity generators filed with the U.S. District Court 9 (Case No. 17-cv-01164 ) for a preliminary injunction “to halt the multibillion-dollar illegal subsidy” for Exelon’s Illinois-based nuclear plants on the grounds that it is unconstitutional while raising electric bills for consumers.

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