Lower U.S. power prices trim revenue for nuclear reactors

April 24 Wed Apr 24, 2013 11:02am EDT

April 24 (Reuters) - Lower wholesale power prices in the U.S. Midwest and Mid-Atlantic regions have reduced the amount of money available to nuclear power generators, the U.S. Energy Information Administration (EIA) said in a report Wednesday.

Since 2012, EIA said quark spreads, which measure the potential profitability of nuclear power plants, in the Midwest and Mid-Atlantic have ranged from about $10 to $35 per megawatt-hour (MWh).

Quark spreads in 2008 ranged from $20 to $90 per MWh.

A quark spread is the difference between the wholesale electricity price received by a nuclear plant and the cost of fuel needed to generate the electricity.

EIA said the quark spreads were down primarily due to weaker natural gas prices. In many parts of the United States, natural gas fired plants set the price of power paid to all generators.

Natural gas and power prices in 2012 reached decade lows in part due to record shale production.

EIA said the estimated average national fuel costs in 2011 for coal and natural gas plants were $25/MWh and $36/MWh, respectively. Nuclear fuel however costs averaged only $6/MWh.

So, EIA said, nuclear plants generally produce more revenue net of fuel cost on a dollar-per-megawatt basis than coal- or natural gas-fired plants.

EIA said The recent narrowing of quark spreads may affect investment decisions for plants that anticipate major capital expenditures or increasing operating and maintenance costs in the near future.

Nuclear plants owned by vertically integrated utilities under cost-based state regulation may be in a better position to recover increases in plant expenses by passing them through directly to ratepayers, EIA said.

But EIA warned that merchant nuclear plants are more directly reliant on the wholesale electricity market for the revenue necessary to recover these costs.

Already U.S. power company Dominion Resources Inc said it would shut its Kewaunee nuclear plant in Wisconsin later this spring, 20 years before its operating license expires, due in part to weak market conditions. Kewaunee is a merchant nuclear plant.

Other operators of merchant nuclear power plants include Exelon Corp, Entergy Corp, NextEra Energy Inc and Public Service Enterprise Group Inc.

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