Electricity-market price and nuclear power plant shutdown: Evidence from California

• Published in: Energy policy Vol. 73; no. C; pp. 234 - 244
• Main Authors: Woo, C.K., Ho, T., Zarnikau, J., Olson, A., Jones, R., Chait, M., Horowitz, I., Wang, J.
• Format: Journal Article
• Language: English
• Published: Kidlington Elsevier Ltd 01.10.2014; Elsevier; Elsevier Science Ltd
• Subjects: Applied sciences; California; Disasters; Earthquakes; Economic data; Electric energy; Electric rates; Electricity; Electricity distribution; Electricity generation; Electricity market; Energy; Energy economics; Energy market; Energy policy; Exact sciences and technology; General, economic and professional studies; Japan; Market prices; Markets; Methodology. Modelling; Natural gas; Nuclear power plants; Nuclear shutdown; Power plants; Price increases; Prices; Real time; Regression analysis; Seismic phenomena; Shutdowns; Studies; U.S.A; United States > US; Japan; California; USA, California; Prices; Energy policy; Nuclear shutdown; Electricity market
• ISSN: 0301-4215; 1873-6777
• DOI: 10.1016/j.enpol.2014.05.027

Japan׳s Fukushima nuclear disaster, triggered by the March 11, 2011 earthquake, has led to calls for shutting down existing nuclear plants. To maintain resource adequacy for a grid׳s reliable operation, one option is to expand conventional generation, whose marginal unit is typically fueled by natural-gas. Two timely and relevant questions thus arise for a deregulated wholesale electricity market: (1) what is the likely price increase due to a nuclear plant shutdown? and (2) what can be done to mitigate the price increase? To answer these questions, we perform a regression analysis of a large sample of hourly real-time electricity-market price data from the California Independent System Operator (CAISO) for the 33-month sample period of April 2010–December 2012. Our analysis indicates that the 2013 shutdown of the state׳s San Onofre plant raised the CAISO real-time hourly market prices by $6/MWH to $9/MWH, and that the price increases could have been offset by a combination of demand reduction, increasing solar generation, and increasing wind generation. •Japan׳s disaster led to calls for shutting down existing nuclear plants.•We perform a regression analysis of California׳s real-time electricity-market prices.•We estimate that the San Onofre plant shutdown has raised the market prices by $6/MWH to $9/MWH.•The price increases could be offset by demand reduction and renewable generation increase.