Power Brokers Plan to Unplug Nuclear Plants

The noisy public debate over the fate of the Indian Point nuclear reactor came to City Hall on May 7,

The noisy public debate over the fate of the Indian Point nuclear reactor came to City Hall on May 7, when energy-company executives, state officials and anti-nuke environmentalists testified before the City Council. There were a couple of novel highlights during the hearings-for example, one executive got into a discussion with a council member about precisely what size airplane could crash into the nuclear facility without causing a meltdown. But for the most part, the day’s discussions hewed fairly closely to the lines of public debate, with environmentalists and energy executives spinning rival stories of chaos and mayhem if the other side wins.

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But while the political and public-relations brawl over the facility’s future has grown in volume and emotion, industry players have been arriving at a behind-the-scenes consensus that may be more relevant to the fate of Indian Point than anything being hashed out in public. A series of interviews by The Observer with energy-policy experts and industry executives indicate that New York’s power brokers are preparing for a landscape without Indian Point.

“If Indian Point were to be shut down, then there would be [a] need for replacement capacity of some kind,” said Paul Parshley of American National Power, which is considering building a plant half the size of Indian Point in Ramapo, N.J. “So that would be interesting to us.”

Privately, other power-company executives were less reserved. “There are power plants waiting to be built,” said one. “Because of Enron going under, energy companies can’t get the money they used to be able to get. But that money will appear if Indian Point closes. We’re all drooling, basically.”

Interestingly, the scenarios laid out to The Observer bore little resemblance to either the painless and speedy plant decommissioning envisioned by anti-nuclear environmentalists or the nightmarish emergency situation sketched out by the plant’s owners. Mostly, they go like this: The plant continues to operate for a few more years and then shuts down, to be replaced by a host of new, profitable facilities that would spring up to replace it.

“It all depends on the assumptions you put into the model,” said Liam Baker, a manager of asset development for Reliant Energy, which is currently seeking to revive a stalled project to upgrade a gas-powered plant it operates in Queens. “What you’d probably see in the short term [if Indian Point closes] is a small increase in cost for consumers. In the long term, it would probably level out.”

Before Sept. 11, the notion of closing Indian Point was largely a fantasy of the anti-nuclear movement. But the prospect of further terrorist attacks, and reports that Afghanistan-based terrorists may have planned to target nuclear facilities in the New York area, gave the issue a sudden urgency-and new advocates.

Still, the idea that Indian Point might be taken offline anytime before the end of its original licensing period in 2015 seems unattainable, for several reasons. Foremost is the fact that the two operating nuclear reactors at Indian Point produce 20 percent of the electricity consumed in New York City. If that energy-producing capacity were to disappear tomorrow, the potential consequences would be dire. In his testimony before the council, William Museler-who heads New York’s power oversight board, the New York Independent System Operator-said that he had “serious concerns” about what would happen to energy prices and reliability if Indian Point were shut down, predicting a possible repeat of the summer of 2001, when prices soared. A report commissioned by the Entergy Corporation, which operates the facility, envisions a scenario in which the facility vanishes overnight, and pegs the hypothetical cost to consumers at $3.4 billion over the next four years.

But here’s the catch: No one in any position of authority really expects the plant to close down tomorrow, or any time this year. As a result, say many experts and industry executives, the assumption upon which the report was based-namely, that Indian Point would suddenly cease to exist-produced conclusions that were entirely unrealistic.

Mr. Museler said his concerns about power shortages would not necessarily apply in the case of a longer-term shutdown. “If you actually replaced power that Indian Point would generate and also build enough plants to take care of [increasing demand], then from a reliability standpoint you can probably solve that problem,” said Mr. Museler. He also said that the effect on energy prices would be impossible to determine without knowing about what the replacement facilities would be.

Entergy spokesman Jim Steets said that although the report was based on current circumstances, it would be impossible to determine the long-term consequences of shutting down the plant. “It takes six, eight or 10 years to build some of the plants that get certified, so I don’t know if a couple of years makes a big difference,” he said. “We also know that some of these projects might not get built at all.”

But some analysts feel that the report ignores something else: the obvious financial incentive that closure of Indian Point would provide to other companies looking to build power plants to serve the New York area. “The numbers in the Entergy report are way overblown,” said an executive in a Wall Street firm who specializes in energy issues. “There’s no way it’s going to cost consumers billions of dollars to close that plant. There are too many other companies that can make money selling power here.”

Mirant Corporation, for example, was given permission to open a plant in Rockland County on March 25. At the moment, however, the project is stalled, mainly because the company is having trouble raising enough capital to complete construction-an increasingly common problem for energy companies after Enron’s collapse. But Lou Friscoe, a Mirant executive, said that financing would be much easier to come by if Indian Point closed. “The power demand would certainly increase [without Indian Point], which is good for us,” he said.

Another company, New Jersey–based PSEG, has been trying for two years to build connections that would allow New York to import electricity from plants the company is building across the Hudson. This would be done at PSEG’s own expense, and would go some way towards relieving the chronic and highly limiting congestion of the city’s power lines. The plan is tied up in bureaucracies on both sides of the river. Perhaps not surprisingly, PSEG executives also are watching what happens with Indian Point. “Anything that would remove a considerable source of supply would have an impact on both the market going forward as well as the reliability issue,” said PSEG spokesman Neil Brown, who insisted that the company did not wish to see Indian Point close. “Any loss of supply from any reason is a boon to us.”

If all the plants currently in various stages of the approval process went through, there would actually be a surplus of energy in the New York area, according to some estimates.

Mr. Steets acknowledged that other companies would act to make up the loss of energy, but suggested the only beneficiaries would be the companies themselves. “We know that by shutting down Indian Point, other utilities will of course make more money on electricity, but it would also drive up costs that are now reasonable for consumers,” he said. “Good for them that it creates an opportunity for them, but it’s not a good scenario for rate-payers.”

In reality, it is nearly impossible to make precise calculations of the long-term costs of shutting the plant down. On that score, Indian Point’s opponents haven’t been above a little bit of creative formulation, either.

When You Assume ….

A report commissioned by Riverkeeper, an environmental group advocating the immediate shutdown of the facility, concludes that, under the right circumstances, the loss of Indian Point–generated electricity could be offset by conservation and the importing of energy from sources outside New York. “The permanent retirement of [Indian Point] would not lead to any reliability problems …. ” the Riverkeeper report says. But this assumes both that consumers would voluntarily accept conservation measures and that prospective plant builders would continue to invest in new plants to replace Indian Point’s power-with no guarantee that Indian Point would close.

In other words, it wouldn’t be easy. “You can’t shut it down without a plan,” said Ashok Gupta, an energy specialist for the Natural Resources Defense Council. “You need to have new generators and an efficiency program in place. If they want to shut it down this summer, I’d say they’re running out of time.”

Marija Ilic´ a senior research engineer for the Massachusetts Institute of Technology, was slightly harsher in her assessment. “In order for these ideas to work, the technology has to be in place, and it’s not there yet,” she said. “They’re wrong.”

Kyle Rabin, a policy analyst for Riverkeeper, defended the report. “We’re not talking about closing the plant and doing nothing,” he said. “Of course we believe that there should be a plan.” Mr. Rabin said that even an immediate plant closure would leave enough energy for New York consumers to buy. “You would dip into reserve margins slightly, but you wouldn’t have blackouts and brownouts,” he said. Mr. Rabin also asserted that even this amount could be compensated for by state-encouraged conservation programs. “New York State has the potential for real progress in efficiency and conservation,” he said. “The state used to invest more in efficiency programs, and power companies used to have to promote it. We could definitely do more. Remember that California was a national leader in conservation, and they were still able to make a huge dent in their demand through conservation.”

The most realistic solution to the problem is somewhere in the middle of what’s currently being discussed by the warring sides. For logistical and other reasons, the plant would take several years to close under any circumstance. There would be no power shortage, though consumer prices might increase as cheaply generated nuclear energy is replaced by fossil fuels or small, eco-friendly turbines. In the meantime, New York would rid itself of a nuclear facility that produces more radioactive waste than it’s equipped to handle, and which many residents feel is unsafe.

So everyone would be a winner, right? Well, not exactly. For Entergy and its employees-who have been increasingly vocal in countering calls for the plant’s closure-it would be a disaster. Not only would Entergy be out the $1 billion it paid for the plant, but the closing would set a precedent for its other nuclear plants across the country, which represent almost its entire asset portfolio. “We’re talking about 1,500 employees making $130 million in salary at Indian Point, plus a couple of hundred others in White Plains,” said Mr. Steets. “We would be talking about a pretty devastating economic impact just locally.”

An increasing number of experts say that both the pro– and anti–Indian Point forces are getting farther from reality, not closer, and that market realities may leave them behind. The Nuclear Regulatory Commission, which has the ultimate authority on decisions to close plants, intends to keep the plant open for now, rendering academic all talk of what would happen in the case of an immediate shutdown. The real worry, say energy experts, is that no one seems to be taking a long view of the situation. “You can’t just close the plant tomorrow and hope that the environmentalists were right,” said Ms. Ilic´ “But you also can’t buy the other [Entergy] argument that closing it would be a disaster. You have to work in a very systematic way towards making the transition of the system into what customers need.”

Power Brokers Plan to Unplug Nuclear Plants