Davis, Lucas and Hausman, Catherine “Market Impacts of a Nuclear Power Plant Closure” Revised May 2015) (Revised version published in the American Economic Journal: Applied Economics, 8(2), 92-122, April 2016) | WP-248R | Blog
Falling revenues and rising costs have put U.S. 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 non-competitively.