Illinois agencies outlined a range of policy solutions in a report issued yesterday aimed at helping prop up three Exelon Corp. nuclear plants that the company said have struggled to remain profitable in recent years.
The report was produced by four state agencies at the request of the General Assembly. The Legislature requested the reports last spring amid lobbying by the Chicago-based power producer.
The possible solutions identified range from doing nothing — relying solely on changes in federal regulation and regional wholesale markets to drive change — to a cap-and-trade policy, carbon tax and making nuclear energy part of a low-carbon portfolio standard in Illinois.
All of the policy suggestions listed in the report are aimed at helping Illinois’ largest and most powerful energy company keep struggling nuclear plants in the black while enabling the state meet more stringent emissions targets for carbon dioxide as proposed by U.S. EPA’s in its Clean Power Plan. The EPA proposal would reduce carbon dioxide emissions from existing power plants by nearly a third over the next 15 years.
Yesterday’s report makes no specific recommendations for Illinois legislators. In fact, it doesn’t have an executive summary and is intended as a "reference point" to be used by lawmakers as a tool in the upcoming session to convene later this month.
And the agencies noted that their projections come with a huge caveat — that any economic modeling depends on numerous assumptions about the future of state and federal policies, commodity markets, economic growth and technology.
"The right energy policy has the potential to minimize cost increases, guarantee reliability, improve the environment, create and retain jobs, and grow the Illinois economy," the report broadly states. "If Illinois is to move forward with a robust response, the full impact of such a policy would have to be fully explored."
Paul Elsberg, an Exelon spokesman, said company officials were still reviewing the 269-page report yesterday afternoon and had no immediate comment.
"We appreciate the state taking the time and the effort to work on this important issue," Elsberg added. "We think it’s critical for the state’s energy future."
NRG Energy Inc., a new entrant in the Illinois power market through its April purchase of Midwest Generation’s Chicago-area coal fleet, likewise didn’t have an immediate comment and said it would respond after fully digesting the report.
A spokesman for Dynegy Inc., which operates the state’s largest coal fleet, couldn’t be reached for comment. Robert Flexon, the power producer’s chief executive, several months ago characterized Exelon as seeking a "nuclear welfare plan."
Chicago-based Exelon has threatened to close as many as three of its six Illinois nuclear plants unless the company sees a path to sustained profitability, with a decision on the future of the plants coming as soon as the middle of the year.
The threats from Exelon are made all the more real by the closure of Dominion’s Kewaunee nuclear plant on the western shore of Lake Michigan in 2013 and Entergy’s Vermont Yankee plant, which is in the process of shutting down.
The Exelon plants, identified in the report as the Byron, Clinton and Quad Cities generating stations, have struggled to be profitable in wholesale power markets where prices have been suppressed by inexpensive natural gas, wind and flat demand, according to the company and industry analysts.
Statewide, Illinois has the nation’s largest nuclear fleet with 11 reactors at six plant sites with a combined capacity of 12,000 megawatts. The nuclear plants produce about 90 billion kilowatt-hours of energy a year and for the past several years represent about half of the energy delivered by Illinois utilities.
The ICC was asked to look at Illinois, a net producer of electricity, potential to expand transmission to move clean energy outside of the state, as well as the rate impact of any nuclear plant closures.
Exelon cost data limited
The agency concluded that "because of the limited cost data available, it is not entirely clear whether or not Exelon’s Illinois plants earn sufficient revenues to cover their operating costs." Using cost data from one source, economic modeling by EPA, Exelon’s Illinois nuclear plants would require increased revenues compared with 2013 prices to break even.
But clean energy advocates said the report makes it clear that the state’s energy market and economy won’t suffer if one or more of the nuclear plants is forced offline.
"It’s far from clear that there’s an emergency on our hands," said Rebecca Stanfield, deputy director for policy in the Natural Resources Defense Council’s Midwest program. "There’s no reason to rush to invest hundreds of millions of dollars a year to solve a problem that might not exist."
Illinois’ participation in a regional cap-and-trade program could produce benefits, including lower emissions and an increase in jobs from renewable energy and efficiency, she said. But lawmakers should make sure they’re acting "in the public interest and not one special interest."
The fate of the Exelon plants is expected to be among several energy issues that legislators grapple with this spring after Gov.-elect Bruce Rauner (R) is sworn in.
Exelon officials initially said the company would decide the future of the at-risk nuclear plants at the end of 2014 but agreed to push back the timeline after meetings with Illinois House Speaker Michael Madigan (D).
Madigan sponsored a resolution adopted in May that asked the ICC, the Illinois Power Agency, the state EPA and Department of Commerce and Economic Opportunity to study various aspects of how nuclear plants closures affect the state’s ability to meet federal carbon reduction goals, energy markets and the economy (EnergyWire, May 29, 2014).
In seeking pro-nuclear policy changes, Exelon has maintained that it isn’t seeking a "bailout" of any Illinois nuclear plants and that it supports "market-based solutions" that give the units appropriate credit for their attributes, such as the ability run almost continually, even amid last year’s polar vortex, with zero carbon emissions.
Much of the political momentum for keeping the nuclear plants humming, however, has less to do with the intricacies of complex regional power markets and more the direct hit to local economies if one or more of the plants was closed. All three plants are major employers in small Illinois communities where they operate.
The state’s economic development agency noted that early retirement of the three Exelon plants could affect 2,500 direct jobs and almost twice as many indirect jobs, $1.8 billion in economic activity and additional economic losses as a result of higher wholesale power prices.
However, the report said the losses would be mitigated by nearly 10,000 new jobs and economic gains from investments in energy efficiency and renewable energy.
Said Howard Learner, executive director of the Chicago-based Environmental Policy & Law Center: "This report shows that Exelon’s nuclear plants that aren’t economically competitive can be retired without added costs to Illinois consumers, without hurting reliability, and with more net job creation by growing clean renewable energy and energy efficiency."
