American Economic Journal Applied Economics · 2016 · 110 citations · 25 references
Social SciencesEconomicsResource EconomicsEnergy EconomicsEnergy PolicyEnvironmental EconomicsClosure Cost EstimationEnergy SecurityGas EconomicsMarket FailureNatural Gas Market EconomicsPower Sector EconomicsEconometric IdentificationGas GenerationImpactsNatural GasNatural Gas GenerationNatural Gas Production EconomicsNuclear Energy EconomicsPower Plant Investment Economics
Falling revenues and rising costs have put U.S. nuclear plants in financial trouble, with some threatening closure. To understand the potential private and social consequences, this study examines the abrupt shutdown of the San Onofre Nuclear Generating Station in 2012. Using a novel econometric approach, the authors show that the lost generation from SONGS was largely replaced by increased in‑state natural gas generation. Natural gas generation costs rose by $350 million in the twelve months after the closure, and binding transmission constraints caused short‑run inefficiencies that may have made it more profitable for some plants to act non‑competitively.
Falling revenues and rising costs have put US nuclear plants in financial trouble, and some threaten to close. To understand the potential private and social consequences, we examine the abrupt closure of the San Onofre Nuclear Generating Station (SONGS) in 2012. Using a novel econometric approach, we show that the lost generation from SONGS was met largely by increased in-state natural gas generation. In the twelve months following the closure, natural gas generation costs increased by $350 million. The closure also created binding transmission constraints, causing short-run inefficiencies and potentially making it more profitable for certain plants to act noncompetitively. (JEL D24, L25, L94, L98, Q42, Q48)
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