Fitch: Indian Point Closure Shows US Nuclear Sector Challenges
Indian Point units 2 and 3 have been added to the growing list of US nuclear power plants retiring before the end of their useful lives. Following a settlement agreement with New York state, Entergy Corp. agreed to shut Indian Point units 2 and 3 in April 2020 and April 2021, respectively. The closures will likely increase energy and capacity prices in the New York region, although the impact will ultimately depend on the type, amount and timing of replacement power. Likely beneficiaries are independent power producers operating within the region including NRG and Dynegy. New York Transco could also be a beneficiary of additional transmission opportunities.
The two Indian Point units, aggregating approximately 2,000 MW, join a list of five other nuclear units that have announced plans to prematurely retire between 2018 and 2025 and five other nuclear units that shuttered prematurely in 2013 and 2014. The closure stands in stark contrast to the Zero Energy Credit (ZEC) program implemented in New York in late 2016 that was intended to preserve the environmental attributes of two upstate nuclear plants. Indian Point, which has long been discussed by Governor Cuomo, was specifically excluded from the ZEC program because of its location in a constrained area that generally provided an uplift to wholesale energy prices.
As part of the agreement, New York state will withdraw legal challenges to Entergy's license renewal application for the Indian Point units and issue the necessary permits and Entergy will request the Nuclear Regulatory Commission to shorten the term of the renewed license from 2033 and 2035 for units 2 and 3, respectively, to 2024 and 2025, providing some flexibility in the closures dates.
Entergy previously retired the Vermont Yankee nuclear plant in 2014 and announced plans for the early retirement of the Palisades and Pilgrim nuclear plants in 2018 and 2019, respectively (in each case before the expiration of their operating licenses), and completed the sale of the Fitzpatrick plant to Exelon Corp. The Indian Point closure will complete Entergy's exit from the merchant energy business.