Independent auditors recommend financial support for Illinois plants

Exelon Generation announced last year that the two-unit Byron and Dresden nuclear power plants will both be retired in 2021, citing unfavourable market rules in the the PJM capacity auction. The company at that time warned that further plants would also be at risk of premature closure due to these unfavourable market rules. The Illinois Environmental Protection Agency in January appointed Cambridge, Massachusetts-based Synapse Energy Economics Inc to carry out the audit of claims by Exelon Corporation about the financial outlook for its Byron, Dresden, Braidwood and LaSalle plants over a five-year and ten-year period from this year. Synapse's redacted report has now been released by the state of Illinois.

The report uses a Monte Carlo simulation to identify a range of possible net present values (NPV) for the future operation of the units, representing a span of potential future market and operational conditions.

"As a private entity, Exelon will have profitable years and unprofitable years," the report notes. "That said, our analysis demonstrates that Byron and Dresden do face real risk of becoming uneconomic in the near term. This has implications for Illinois's policy goals because the plants generate carbon-free electricity that is currently undervalued or even ignored within current wholesale electricity markets," the report finds. Exelon's Braidwood and La Salle plants were not identified as being at risk of becoming uneconomic.

"State support of the Exelon nuclear power plants could help provide certainty for the plants through the period of anticipate risk," it says, adding that such support could be part of a strategy for the Illinois economy to transition to less carbon-emitting resources.

A programme to offer financial support to the existing plants - if Illinois decides it is "in the interest of state public policy" - need not extend beyond five years, as the 10-year NPVs for all four plants are positive, Synapse said in its recommendations.

Exelon's Clinton and Quad Cities plants are already in receipt of financial support in the form of zero-emission credits (ZECs) under legislation passed in 2016.

Exelon in February announced plans to separate its regulated utility and competitive energy businesses into two publicly traded companies, and has previously said it will retire uneconomic assets.