Palo Verde nuclear plant could close if renewable-energy measure passes, APS says

The nation's biggest producer of electricity, the Palo Verde Nuclear Generating Station, could be forced to close in the next decade if voters approve a renewable-energy ballot measure, the plant's owners said.

The plant is run by Arizona Public Service Co., which is fighting the clean-energy ballot measure on several fronts.

Although Palo Verde is important to APS, it would not be the only nuclear plant to shut down in recent years.

Six reactors have closed since 2013 and eight more reactors are planned for shutdown before 2025, mostly because of increased competition from cheap natural gas.

The Clean Energy for a Healthy Arizona measure would amend the state constitution to require utilities to get half their electricity from renewable sources such as solar and wind by 2030.

Supporters gathering signatures in hopes of putting the amendment on the November ballot said APS is exaggerating the economic fallout of the proposal and that there is no evidence the nuclear plant would be forced to close.

APS officials said the measure would prompt so much solar- and wind-power development that there would be too much energy on the grid during mild parts of the year when Arizonans aren't cranking up their air conditioners.

That oversupply would force the shutdown of its coal and nuclear plants, which are known as baseload facilities because their power output doesn't fluctuate, they said. If there is more power than demand on the electrical grid, it causes problems and can even damage home appliances.

"The way we see this, it will force the closure of all our baseload facilities," said Jeff Burke, APS' resource planning director. "This really closes the door on a lot of different resources."

Palo Verde provides power for millions

The nuclear plant is a crown jewel for the utility, generating about one-fourth of its energy supply. The three nuclear generators are co-owned by seven utilities in Arizona, California, New Mexico and Texas.

The plant generates enough power for about 4 million people.

Salt River Project, which serves the Phoenix area, is one of those co-owners. It would not be directly affected by the ballot initiative, but spokeswoman Patty Garcia-Likens the initiative likely would affect that company's baseload power resources if enacted.

"The environmental goal must be to reduce carbon emission intensity, rather than try to pick a winner among competing technologies," Garcia-Likens said.

She said SRP is taking the same approach as regulators at the Arizona Corporation Commission, which is mulling a new proposal to reduce carbon emissions but maintain the state's nuclear plant along with more solar, wind and other renewables.

"It is the availability of all these options that leads to the most diversified and cost effective path to reducing carbon intensity," Garcia-Likens said.

"If enacted, the proposed renewable energy mandate initiative puts all eggs in one basket ... . There is a better, more commonsense way — use whatever options work best."

It's unclear how the other utilities who own part of Palo Verde would respond if APS were to decide to shut it down. But if a shutdown threatened reliability for any of their power systems, the U.S. Department of Energy could order the plant to remain operating temporarily as needed under the Federal Power Act.

This act has been invoked as recently as last year in Virginia to keep coal generators operating until adequate power supplies are secured for the region.

Palo Verde also represents billions of dollars in investments that APS officials hope will pay dividends through the mid-2040s when the three generators' operating licenses expire. Early retirement would harm shareholders and utility customers financially.

And Palo Verde is the largest single taxpayer in the state, with a $55 million property-tax bill last year.

Without the nuclear plant, APS would have to build new plants to provide energy when customer demand spikes, and the company suspects that utility bills could double if the measure passes.

Closure could exacerbate problems for environment

Many experts concerned with climate change acknowledge that nuclear plants are necessary to reduce carbon emissions from fossil fuels.

Kevin Steinberger, a policy analyst with the Natural Resources Defense Council in New York, said he doubts APS would need to shut down the nuclear plant early because of the ballot measure, though his organization is seeking data to further study the initiative's impacts.

"I have not seen any evidence the plant would need to shut down," Steinberger said of Palo Verde. "There are plenty of fossil resources on the system APS could ramp down instead.

"Certainly, decreasing coal generation and reducing emissions from fossil resources is a main goal of the strengthened (energy standard)," said Steinberger, who has a bachelor's from Princeton University, a master's from Stanford University and has studied renewable-energy standards in the West.

APS officials said that if Palo Verde closes to make room for renewable energy, the state's carbon emissions will increase because at least some of the nuclear plant's power would be replaced with natural-gas plants that can be turned on when power demand spikes.

"Palo Verde is the biggest clean-energy producer in the U.S.," Burke said. "If Palo Verde goes away, emissions go up. We don't have anything that generates clean energy 24-7 to replace it today."

Steinberger said one possibility would be shutting down the nuclear plant only during seasons when it is least needed.

APS would invest big in renewables

The ballot measure would require APS and other regulated utilities to immediately increase the amount of energy they get from solar, wind and other renewable sources.

To meet the energy standard in the ballot measure, APS would have to build about 3,000 megawatts of solar capacity, roughly tripling the 1,600 megawatts it has today, Burke said. Rooftop solar owned by customers also is expected to continue to increase in that time.

This building boom would initially create construction jobs and provide an economic spark for the state, an analysis of the ballot proposal recently conducted by Arizona State University shows.

But APS officials said that because of how the grid must be managed to meet customers' instantaneous power demands, the clean energy would push out traditional power plants.

APS would end up with about 8,000 megawatts of renewable-energy capacity, Burke said.

That much energy is fine for hot summer days. In 2030, APS customers are expected to need more than 11,000 megawatts of electricity during the peak demand, which is late in the afternoon when air conditioners are running at homes and businesses and solar power production drops off as the sun sets.

On those days, APS would need all the renewables plus 3,000 megawatts of additional power from natural gas, coal or nuclear plants to serve its customers during the peak hours.

Mild spring days create biggest problems

But on a mild spring day, APS would see customer demand dip as low as 4,000 megawatts because customers' rooftop solar would be pouring into the grid. The company would need to turn off some of its own power plants because overproducing power on the grid can cause problems.

If APS chose to turn off some of its own solar during mild weather, it would not meet the renewable-energy mandate. So, it would turn off Palo Verde, Burke said.

Nuclear and coal plants are referred to as "baseload" because they are built to run around the clock for most of the year. Turning them up or down to match the demand for electricity from customers is inefficient and costly.

"They operate near full capacity all the time throughout the year," Burke said.

Curtailing Palo Verde would mean closing the plant, he said.

"That spreads out over months, and it becomes uneconomical to operate the baseload," Burke said. "They can't operate that way. It will challenge their economics."

Starting in the mid-2020s, APS would close its Cholla and Four Corners coal plants in Arizona and New Mexico, respectively. By 2025, the amount of renewables would force the closure of the nuclear plant, according to APS' analysis of what it would take to meet the requirements of the ballot initiative.

Economics could turn negative

ASU's economic analysis of the ballot initiative looks positive at first, reflecting what initiative backers have said about creating jobs and benefiting the economy.

"During the construction phase, these are big, earth-moving projects — big solar farms and wind farms," said report author Timothy James, research director at ASU's Seidman Research Institute.

"Then the job effects flip around," James said.

Once the solar farms are built, the construction jobs go away. Once the solar farms displace the baseload plants, thousands more jobs go away, including 2,500 at Palo Verde, plus 800 to 1,000 more who are needed twice a year for monthlong refueling procedures when repairs are made.

"Nobody is in a solar farm," James said. "Nobody is taking care of a wind farm, either."

But the economy would be hit by more than the job losses.

APS would have to build some new gas plants in addition to the new solar so it could increase power after dark and continue to meet demand when the renewable energy wasn't available.

"We do need to make sure we keep the lights on on days when we don’t have enough solar production," Burke said.

Like all utility expenses, those gas and solar plants will be charged back to customers in rates. James estimated the proposal would reduce disposable income for Arizonans about $42.5 billion from 2018 through 2060. His figures are based on estimates provided by APS.

APS figures disputed

The NRDC's Steinberger said APS' estimates that electricity prices would rise are highly debatable.

He cited research that shows that so far, renewable-energy standards across the country have had negligible effects on electric bills.

One study from the Lawrence Berkeley National Laboratory reviewed the effects on rates of all 29 states with renewable-energy standards, including Arizona's existing standard of 15 percent renewables by 2025.

That study found wholesale electricity prices dropped as much as 1.2 cents per kilowatt-hour of electricity with such standards in place, along with other benefits.

"We’ve seen across the country that (clean-energy standards) can bring in a wide range of benefits," Steinberger said, "not only public health and climate benefits, but jobs in the fast-growing clean energy sector."

Another study by the Lawrence Berkeley National Laboratory estimates that the cost of complying with renewable-energy standards averaged about 1.6 percent on customer bills in 2015, though the cost was nearly 5 percent in Arizona that year.

Steinberger said the price impacts provided by APS also are suspect.

"The economic findings (from the ASU study) are dependent on the inputs used, and one of the inputs APS provided was that Palo Verde would be shutting down," Steinberger said. "We don't think that is a foregone conclusion."

He said the 50 percent renewable standard could be met with "modest costs with benefits that far outweigh the costs."

APS attacks the ballot measure

APS has already persuaded Arizona lawmakers to pass a bill, signed into law by the governor, that will minimize the penalty for not complying with the ballot initiative, but the utility still is fighting.

The bill Gov. Doug Ducey signed said the penalty for a utility not complying with such a constitutional amendment will be between $100 and $5,000, something the utility could easily afford.

Another resolution at the state Capitol awaiting lawmakers' final approval will put a competing measure on the ballot for voters.

The second measure has nearly identical title and provisions, except that it will allow the Arizona Corporation Commission to ignore the requirement if it threatens to push prices too high or causes too much trouble for APS to comply.

"That is a protective measure to keep that authority with that body," APS spokeswoman Jenna Rowell said. "We would much rather keep Arizona regulators at the commission the ones making these decisions."

But Rodd McLeod, a spokesman for the original ballot measure, said the sole purpose of the second initiative supported by APS is to confuse voters. He also said the closure of Palo Verde is an empty threat from the utility.

"We should not trust the claims from APS," McLeod said. "They made half a billion dollars in profits last year from their monopoly.

"They have been a bad actor in our politics," McLeod added. "They are trying to drown out the voice of the people with their own money."

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