Sustainability
Challenges
By Marc Potkin, Entergy Wholesale
Commodities.
Marc Potkin
Marc Potkin is Vice President of Power
Marketing for Entergy Wholesale
Commodities. He serves as Entergy’s
Executive
representative to
the New York ISO,
New England ISO
and the Midwest
ISO. Previously,
Potkin lead Entergy’s
marketing team
with oversight and
responsibility for all
origination, hedging
activities and power
purchase contract
administration for
the Northeast nuclear
fleet.
Potkin has 40 years of nuclear power
generation experience and has held
various management positions in
engineering, operations and construction
management. He has earned a Senior
Reactor Operator Certification and
was qualified on several naval nuclear
reactor designs. Potkin has a Bachelors
Degree in Mechanical Engineering from
Northeastern University and a Masters
Degree in Business Administration from
Anna Maria College.
An interview by Newal Agnihotri, Editor
of Nuclear Plant Journal, at the Utility
Working Conference in Amelia Island,
Florida on August 10, 2015.
1.
What are the challenges to the
nuclear power plants in selling their
electricity to the grid?
Merchant nuclear units are facing
numerous economic challenges to their
continued viability, especially smaller
units located at single unit sites. Certainly
lower natural gas prices, resulting from
the increases in shale gas production, is
a major driver by lowering the day-ahead
energy prices, which is where nuclear
units derive the majority of their revenues.
In addition, the actual market mechanics
are flawed and are producing energy
prices that do not
accurately reflect the
true costs incurred by
generators to serve the
load. Finally, public
policy
initiatives
that fail to recognize
and compensate the
existing nuclear fleet
for the attributes they
provide
including
clean energy, fuel
diversification
and
reliability are adding
to the challenges.
While there is
not too much that can be done about the
impact that shale gas is having on market
prices, several industry groups including
NEI, EEI, EPSA (Electric Power Supply
Association) and several Natural Gas
trade organizations have asked the Federal
Energy Regulatory Commission (FERC)
to direct the RTO’s to address the market
structural flaws especially focusing on
accurate energy price formation in the
day ahead and real time energy markets.
2.
Explain the role played by different
organizations?
The RTO’s or Regional Transmission
Operators are the organizations that
are responsible for the operation of the
transmission system in competitive
energy markets. In addition, the RTOs
administer the energy and capacity
markets in their regions. The RTOs
are regulated by the FERC. FERC,
among its other responsibilities, is the
independent organization that regulates
the transmission and wholesale sales of
electricity in interstate commerce. That
is why we are looking to the FERC to
require the RTOs to make the necessary
market design changes that will lead to
fair and accurate energy price formation.
When the markets first went into
operation, gas prices were high enough
so that the resulting energy prices were
sufficient to keep the nuclear fleet
economically viable. There was also an
expectation of some form of national
carbon tax. Over the years, even though
nuclear operating costs increased and gas
prices also rose. We now find ourselves
in an environment where gas prices have
retreated to those last seen in the 2001 and
2002 timeframe but the costs to operate
our facilities continue to escalate. In
addition newregulations dealingwith 9/11
and Fukushima for example are driving
nuclear owners to evaluate whether or not
to make the required capital investments
or simply to retire the unit. As a result,
market participants including Entergy
have started to take a closer look at the
market design in an attempt to ensure that
the markets provide a level playing field
for our nuclear plants to compete in. It
is important to understand however that
we are not looking for some type of out
of market subsidy, instead we are trying
to ensure that our plants are afforded an
equal opportunity to compete against
other technologies including wind and
solar as an example.
3.
Who fixes the energy price, and who
fixes the gas price?
Ideally the markets should determine
the appropriate prices for gas and energy
and to a large extent we have seen that in
the gas markets with supplies increasing
and prices decreasing accordingly.
That is not necessarily the case with
the energy markets. In fact some would
say and I would agree that we are not
operating in a competitive market; in fact
we are operating in a “Hybrid” market
where we see artificially low prices being
paid to generators, growing from out of
market contracts to entice or maintain
existing generation and continued
state intervention. As a result we have
already seen the premature retirement of
otherwise reliable economic units such
as Vermont Yankee, higher retail prices
being paid by consumers, and more
volatile market prices.
Getting back to energy price
formation however, under FERC
leadership and guidance, it will ultimately
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NuclearPlantJournal.com Nuclear Plant Journal, September-October 2015
