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Tough Environment for Nuclear: Two Exelon Plants Fail to Clear PJM Auction

PJM recently closed its 2020-2021 delivery year capacity auction. The auction was the first for grid resources under PJM’s new capacity-performance regime. Two Exelon nuclear facilities, Three Mile Island in Pennsylvania and Quad Cities in Illinois, failed to clear the auction. Exelon has cited two primary reasons for failing to clear the auction. The first being the lack of federal or Pennsylvania energy policies that value zero-emission nuclear energy, and the second being the fact that Illinois has not yet decided whether to include Quad Cities in their zero-emission credit program under the newly signed state Future Energy Jobs Act.

Key Details:

  • Capacity prices cleared at $76.53/MW-day, below most analysts’ clearing price between $100 – 125/MW-day, as well as below the $100/MW-day clearing price last year
  • For the second straight year, Exelon failed to submit a winning bid for Quad Cities
    • Exelon was expected to submit a lower bid this year after the passage of the zero-emission credits for Illinois nuclear plants, but the state of Illinois has still not decided if Quad Cities will be selected to receive credits under the Future Energy Jobs Act, preventing them from offering a lower bid
  • Pennsylvania does not have state legislation to support nuclear generation, which would have helped Three Mile Island submit a bid low enough to clear the auction
    • The first state legislative caucus to focus on nuclear energy issues was formed in March
    • Pennsylvania electric power stakeholders have formed a coalition to oppose any potential legislation that would cost taxpayers more, citing an abundance of affordable natural gas
  • After failing to clear the auction, Exelon announced May 30, 2017 their intention to close the Three Mile Island station on or around September 30, 2019, unless Pennsylvania undertakes policy reforms to provide zero-emission credits or include nuclear in the state’s alternative energy portfolio standard
  • In addition to Illinois, New York has already passed financial support legislation for nuclear plants, and similar legislation is being considered in Ohio, New Jersey, and Connecticut

Implications

The failure of these two nuclear stations to clear the PJM capacity auction highlights the continuing struggle between nuclear power generators and non-nuclear power generators (i.e., independent, renewable, and natural gas generators). Non-nuclear generators feel the nuclear financial subsidies create an unfair advantage for nuclear generators, while the nuclear generators argue that without appropriate recognition of the value of carbon-free, baseload generation, such as through zero-emission credits, they cannot compete. Should the non-nuclear generators win in their efforts to prevent financial support to nuclear generators, we could see more nuclear station closings in non-regulated markets, removing carbon-free, resilient baseload generation from the electric grid and putting grid reliability at greater risk.

More Information

Utility Dive: http://www.utilitydive.com/news/pjm-capacity-auction-2-exelon-nukes-fail-to-clear-as-dr-reels-from-new-per/443416/

Utility Dive: http://www.utilitydive.com/news/after-failing-to-clear-pjm-auction-exelon-says-three-mile-island-nuke-will/443794/

Green Tech Media: https://www.greentechmedia.com/articles/read/pjms-capacity-auction-a-poor-showing-for-nuclear-and-demand-response

Exelon: http://www.businesswire.com/news/home/20170524005403/en/Exelon-Announces-Outcome-2020-2021-PJM-Capacity-Auction

Exelon: http://www.exeloncorp.com/newsroom/exelon-to-retire-three-mile-island-generating-station-in-2019

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