Jul

22

Coal, from Carder Dimitroff

July 22, 2013 |

 It seems there has been a collective awakening concerning the viability of nation's nuclear power fleet. Bloomberg, Cooper and others argue that many nukes are unprofitable. They speculate which plants might retire early.

I may have been wrong on NextEra's Prairie Island (WI). I was sure these units would be high on the list. Yet NEE just finished a new capax project. It also appears NEE may have long-term power purchase agreements with other utilities. If, it appears NEE found a way to circumvent the markets by locking in a hedge position with unwitting consumers.

I was surprised to see Clinton high up the list. Unlike Prairie Island, Clinton is newer and larger plant. As such, it is relatively economic. Apparently, EXC has significant challenges in delivering Clinton's product to market.

This does not bode well for coal. Compared to most coal-fired power plants, nukes have lower production costs. With rising production costs and more competition from struggling nukes, coal is motivated to exit before nukes. In fact, it is in the nuke's best interests for coal to exit sooner than later.

The problem is the owners. Many nuke owners also own coal. NEE and D are exceptions.

The important point is that coal is not alone in their challenges. In addition, new federal regulations are not the prime driver behind utilities' decisions to exit their coal positions. The prime driver is the market.


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