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Market Impacts of a Nuclear Power Plant Closure

Author

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  • Lucas Davis
  • Catherine Hausman

Abstract

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)

Suggested Citation

  • Lucas Davis & Catherine Hausman, 2016. "Market Impacts of a Nuclear Power Plant Closure," American Economic Journal: Applied Economics, American Economic Association, vol. 8(2), pages 92-122, April.
    • Handle: RePEc:aea:aejapp:v:8:y:2016:i:2:p:92-122
    Note: DOI: 10.1257/app.20140473
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    References listed on IDEAS

    as
    1. Joseph A. Cullen & Erin T. Mansur, 2017. "Inferring Carbon Abatement Costs in Electricity Markets: A Revealed Preference Approach Using the Shale Revolution," American Economic Journal: Economic Policy, American Economic Association, vol. 9(3), pages 106-133, August.
    2. Matthew J. Kotchen & Erin T. Mansur, 2014. "How Stringent Are the US EPA’s Proposed Carbon Pollution Standards for New Power Plants?," Review of Environmental Economics and Policy, Association of Environmental and Resource Economists, vol. 8(2), pages 290-306.
    3. Koichiro Ito, 2014. "Do Consumers Respond to Marginal or Average Price? Evidence from Nonlinear Electricity Pricing," American Economic Review, American Economic Association, vol. 104(2), pages 537-563, February.
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    More about this item

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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