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Trump poses risks for nuclear, S&P says

Though some regulatory relief may be welcome, the administration’s opposition to the Clean Power Plan and commitment to coal could add further stress to an already strained energy sector, a report states.

President Trump’s promises to scrap the Environmental Protection Agency’s Clean Power Plan and bring back coal jobs could spell trouble for the nuclear industry, according to Standard & Poor’s.

Uncertainty surrounding the CPP, which the ratings agency called a “significant boon for nuclear generation”, will make states hesitant to subsidise nuclear assets, S&P said in a report. The CPP, which promotes carbon reduction, had allowed carbon-free nuclear assets to record value gains.

Trump’s promise to bring back jobs in the coal industry, if achievable, also threatens to push down prices and harm the nuclear sector’s viability.

“Adding coal assets back to the generating stack, at least in merchant markets, or maintaining existing ones longer than is thought to be economically practicable, will only serve to further weaken market heat rates and depress wholesale pricing to the detriment of nuclear generators that rely on substantial quark spreads,” the report stated.

Trump’s election also brings potential benefits, S&P noted. His plan to target excessive regulatory costs could be a lifeline for struggling nuclear plants, improving their economic rationale as they approach relicensing.

The sector’s fundamental challenges remain regardless of who is president, as low power prices, increased operating costs and regulatory uncertainty have put pressure on nuclear energy. Last year alone saw announcements that the Indian Point nuclear plant in New York and the Palisades plant in Michigan would close, and the S&P report calls the construction of new plants in the near to medium term unlikely.

“With headwinds still gusting strong in the nuclear industry, we expect diminished profitability to persist during 2017 and 2018,” S&P concluded. “We'll be on the lookout for policy developments that could improve the lot for nuclear generators; but even with those possible benefits, we brace for the next round of closures.”