New Hampshire’s energy picture got two surprising pieces of news Tuesday: The Pilgrim Nuclear Power Station on Boston’s South Shore plans to shut down in the next few years, and the state’s largest natural-gas plant changed ownership for $500 million.
Both reflect the changing nature of the once-staid world of making electricity, which has been upended by low prices for natural gas and the advent of new technologies.
As a result, it’s hard to say what effect they will have such big New Hampshire energy issues as the future of PSNH’s power plants, including Merrimack Station in Bow, or the prospects of the Northern Pass hydropower transmission and Kinder-Morgan pipeline proposals.
In the next couple of years, said Peter Shattuck, director of the Massachusetts office of the Acadia Center, which advocates for clean energy, a major effect of the Pilgrim plant shutdown could be to raise the price offered in New England’s Forward Capacity Market, which pays producers to guarantee production three years down the road.
That would seem to make it more financially viable to, for example, keep Merrimack Station operating even as other coal-fired power plants around the country shut down, and improve the mid-term financial prospects for hydropower from Quebec or natural gas from New York shale fields.
But this is far from certain.
“You have these interesting dynamics. There’s a broader shift in energy system from large central power stations towards distributed energy systems – not just solar or wind but energy efficiency, demand programs, smarter grids,” said Shattuck.
Shattuck noted that total electricity consumption in New England has stayed level even as the economy has recovered from the recession, due to changes in the patterns and amount of electricity consumption. That unusual pattern makes it hard for utilities, which have long depending on increasing power usage for their financial viability.
Tuesday’s announcement by New Orleans-based Entergy Corp. that it would shut the 680-megawatt Pilgrim plant by the year 2019, and possibly as early as 2017, came abruptly but isn’t entirely a shock because of safety problems at the 43-year-old plant in Plymouth, Mass.
Last month the federal Nuclear Regulatory Commission downgraded the plant’s safety rating to the lowest rank of any nuclear plant in the country. Entergy would have had to spend millions of dollars in upgrades to keep it operating at a time when the firm says it was losing $40 million a year because wholesale electricity prices are so low.
ISO-New England, the independent organization that oversees the electricity grid in the six-state New England region, said it would examine Entergy’s request to shut Pilgrim to ensure that the loss of one of the largest of 350 power plants in the region wouldn’t hurt the stability of the grid.
If ISO-New England thinks there is an issue it can ask Entergy to keep the plant online, dangling an “out-of-market payment” as incentive, but it noted that the agency “does not have the authority to prevent a resource from retiring.”
ISO New England has implemented a winter reliability program for the next three seasons, paying extra to keep fuel on hand at participating oil and natural-gas power plants. “The retirement of any large non-natural-gas-fired generator, such as Pilgrim, will place further stress on the region in terms of fuel security and will add to the operational challenge to maintaining reliability during New England’s coldest months,” ISO noted.
It also makes it harder for Massachusetts to meet its goals for cutting carbon emissions.
The unrelated sale of Granite Ridge Energy Center in Londonderry to Houston-based Calpine Corp. for $500 million, also announced Tuesday, is evidence of the continuing importance of natural gas in electricity production. Gas is the fuel for plants that produce about half of the New England’s electricity, and is the fuel source for about two-thirds of the power plants that have been proposed to be built in New England in coming years. Wind is the fuel source for the remaining one-third of future plants.
Granite Ridge is a 745-megawatt combined cycle power plant in a Londonderry industrial park that is owned by the privately held Granite Ridge Holdings. One megawatt can power roughly 1,000 homes.
The $500 million price translates to $671 per kilowatt, slightly more Calpine paid last year for Fore River Generating Station in southern Massachusetts.
The deal increases Houston-based Calpine’s array of gas-fired power plants in New England to about 2,000 megawatts.
Entergy shut Vermont Yankee nuclear power plant, which is roughly the size of Pilgrim nuclear plant, at the end of 2014 for similar reasons to the Pilgrim closure. Those two Entergy power plants combined have roughly the output of 1,295-megawatt Seabrook Station in New Hampshire, whose owners have applied for a 20-year extension on the plant’s operating permit.
The closure of Pilgrim plant will threaten 600 full-time and 300 part-time jobs, as well as $9.75 million in property taxes to the town of Plymouth.
ISO-New England noted that the retirement of Pilgrim plant means the New England grid will have lost nearly 4,200 megawatts of generation by June 1, 2019, or about 12 percent of the total production. These retiring plants are older generating plants that use oil, coal, and nuclear.
There are 11,000 megawatts of proposed new generation in what is known as the queue, although not all of them will get built depending on market forces,
ISO-New England noted that most new gas-fired generation are dual-fuel capable, meaning they will be able to switch to oil if natural gas is not available or if the cost of oil is lower than that of natural gas.
(David Brooks can be reached at 369-3313, email@example.com, or on Twitter @GraniteGeek.)