Illinois' nuclear standoff is over -- or at least deferred.
Exelon Corp., the nation's largest nuclear operator, yesterday announced that its Quad Cities nuclear plant in western Illinois was chosen in last week's capacity auction run by the region's grid operator. That means it will be required to remain ready to run until at least mid-2018.
The surprising disclosure comes a day after PJM Interconnection LLC announced results of its final transitional capacity auction (EnergyWire, Sept. 10). And it complicates Exelon's push for legislation to create a low-carbon portfolio standard in Illinois that would have provided a revenue lift for the company's 11 reactors in the state.
Critics of the bill, meanwhile, were quick to conclude that the extra millions of dollars that Exelon will receive in capacity revenue eliminate the need for what they have called a "bailout" of the nuclear fleet.
They also question how the Quad Cities plant cleared the PJM auction for 2017-18 at $151.50 per megawatt-day and failed to clear the 2018-19 auction at $215 per MWd (EnergyWire, Aug. 24).
"Exelon pursued two bailout strategies. One was at PJM. The other was at the Illinois General Assembly," said Dave Lundy, a spokesman for the BEST Coalition, a business group that was the most vocal critic of the low-carbon standard bill. "They got the first one. It's time for them to abandon their legislative strategy."
Exelon, however, said punting a decision on retirement of Quad Cities was based on "rigorous analysis of the present and future economics of the plants, taking into consideration the constructive market trends stemming from the PJM capacity auction reforms."
The Chicago-based company will continue to work on advancing its legislation in Springfield while deferring any decision on the fate of Quad Cities by a year. It also plans to bid the plant and other "eligible" nuclear plants into the 2019-20 PJM capacity auction.
"While Quad Cities and Byron remain economically challenged, we are encouraged by the results of the recent capacity auctions. The new market reforms help to recognize the unique value of always-on nuclear power, while preserving the reliability of our electric system," Chris Crane, Exelon's CEO, said in a statement.
Crane, however, said the decision represents only "a short-term reprieve" and that "policy reforms are still needed to level the playing field for all forms of clean energy and best position the state of Illinois to meet EPA's new carbon reduction rules."
Exelon's legislative proposal gets complicated
An Exelon regulatory filing Tuesday detailed how much the company's generating segments cleared each of the PJM auctions and at what price.
The Illinois nuclear plants alone will receive in excess of $1.5 billion in capacity payments from mid-2016 through mid-2019, according to the filing. And that includes the fact that the Quad Cities plant failed to clear the 2018-19 auction.
Analysts said the auctions and the new PJM capacity performance standards, which are meant to reward generators whose plants can perform when the grid is stressed, produced exactly the benefits sought by Exelon, which was among the companies that pushed for the rules.
"Capacity performance is certainly working well for Exelon, and the results of the auction showed that," said Morningstar Inc. analyst Travis Miller.
While beneficial to generators, the PJM capacity auctions are expected to increase electricity bills for residential consumers by $80-$100 a year -- a reason they are strongly opposed by consumer groups and other critics, including Federal Energy Regulatory Commission Chairman Norman Bay.
Howard Learner, executive director of the Chicago-based Environmental Law & Policy Center, said the "financial windfall" realized by Exelon underscores the fact that the company's Illinois nuclear fleet doesn't need subsidies.
"It undermines the legislative argument in Springfield that they need a bailout from consumers," Learner said.
ELPC and other environmental groups, he said, aren't pushing for Exelon to close any nuclear units and don't want to see workers lose their jobs. Likewise, he said the company shouldn't get special treatment from lawmakers at a time when the state faces a fiscal crisis and is cutting services, and other Illinois employers have themselves been forced to shutter manufacturing plants.
Exelon proposed the measure in late February, confident that it could "run it through the Legislature" within a couple of months (EnergyWire, Feb. 17). The legislation would create a requirement that 70 percent of electricity purchased for distribution in areas served by ComEd and Ameren Corp. come from low-carbon resources, such as nuclear plants or renewables. But critics maintained that the bill would have given Exelon's nuclear plants an advantage over wind and solar energy.
A coalition of environmental, clean energy and consumer advocates continues lobbying for the Legislature to pass a bill that would fix and enhance the state's renewable and energy efficiency standards (EnergyWire, Feb. 20). The bill would not only help Illinois meet its requirements under U.S. EPA's Clean Power Plan but position the state as a clean energy leader in the region and produce jobs and other economic benefits.
Shifting focus from Quad Cities
Exelon, meanwhile, has said its Illinois nuclear fleet likewise is important to the state meeting its Clean Power Plan obligations in a cost-effective manner. The company cites a report by the Illinois EPA that the loss of two nuclear plants would increase emissions by about 24 million short tons, more than doubling the emissions reductions required under EPA's carbon reduction rules and making it twice as costly to comply.
The company has warned for almost two years that some of its Illinois nuclear plants were under financial pressure because of competition from relatively inexpensive natural gas and wind energy.
Crane initially said the company would make a decision on the future of the troubled nuclear units -- Byron, Quad Cities and Clinton -- by the end of 2014. The company agreed to put off a decision until at least 2015 and again deferred a decision on the fate of Quad Cities while pressing lawmakers to pass the low-carbon standard legislation.
While Quad Cities has been the focal point of the company's lobbying efforts, the new focus may be the Clinton nuclear plant about 150 miles to the southeast.
By all accounts, the 1,065-megawatt Clinton plant faces the greatest financial challenges of all Exelon's Illinois nuclear plants because of its location in the Midcontinent Independent System Operator's footprint and the fact that it has a single reactor.
The Clinton plant did benefit from a sharp rise in MISO capacity prices earlier this year, realizing $30 million in revenue, but it was not enough to offset losses at the plant, company officials have said. Exelon said the Clinton plant lost $100 million in 2014.
"I definitely believe Exelon will keep the full-court press on state legislators," said Miller, the Morningstar analyst. Even the increase in capacity prices in PJM, he said, "is not going to keep them from knocking on doors."