Exelon units fail in capacity auction

25 August 2015

Three of Exelon's nuclear power plants failed to clear in regional grid operator PJM's capacity auction for the 2018-2019 planning year, although the company's CEO described the overall auction results as encouraging.

The three plants - Oyster Creek, Quad Cities and Three Mile Island - will still be able to sell power into the competitive electricity market but will not receive capacity revenue from the auction. Quad Cities and Oyster Creek, along with Byron, also failed to secure capacity payments for the 2017-2018 planning year under an auction held by PMJ in May 2014. Capacity revenue is paid to generators for reliably delivering electricity when needed by the system.

Think-tank gives warning

A US think-tank has warned that premature closure of US nuclear power plants will result in it missing carbon emission targets recently outlined by the US Environmental Protection Agency's Clean Power Plan. Washington, DC-based Third Way found that under a worst case scenario of accelerated reactor retirements, emissions would revert to peak levels in 2005, basically eliminating a decade of progress in carbon reduction.

PJM holds an annual auction to ensure enough power generation resources are available to meet predicted future energy demand in its region, which covers all or part of 13 US states plus the District of Columbia. Generators who clear the auction receive capacity revenue for reliably delivering power for electricity customers when needed, especially during power system emergencies. The revenue system aims to provide greater consumer protection against power interruptions and price spikes during weather extremes. Furthermore, by matching energy supply with future energy demand and creating long-term price signals, the capacity market should help to attract investments in generation infrastructure.

The latest round of PJM auctions were the first to be held under new rules approved by the Federal Energy Regulatory Commission (FERC) to reflect the changing nature of the generation fleet as more intermittent renewable and gas-fired generation comes on line. Exelon CEO Chris Crane welcomed the reforms as a "step in the right direction" towards recognizing nuclear energy's high reliability. "[W]hile three of our plants in PJM did not clear, we view the auction results as an encouraging sign that these reforms will begin to level the playing field," he said.

Crane said that the company would consider the auction results as it makes decisions about the future of its nuclear assets. The company pointed out that, although an important consideration in long-term plant viability, single-year capacity revenue is "just one of several factors" affecting decisions on future plant operations. The company must inform PJM by the autumn if any of its nuclear plants will not be participating in next year's auction.

The short-term nature of deregulated electricity markets have left some US nuclear power plants at risk of premature closure for economic reasons, despite their long-term future and their potential contribution to achieving greenhouse gas emissions targets. In early 2014 Exelon said that it would consider closing non-profitable nuclear units, with Byron, Clinton and Quad Cities identified as being at risk of possible closure. Market reforms such as the new capacity auction rules introduced by PJM have been suggested as a means of addressing this.

The single-reactor Oyster Creek plant is already scheduled for early closure in 2019, ten years before its current operating licence ends, to avoid the expense of incoming state environmental regulations that would require the construction of $800 million cooling towers.

Researched and written
by World Nuclear News