Exelon says revamped PJM auction won't spare Quad Cities plant
PJM Interconnection LLC's annual capacity auction will almost certainly mean more revenue for some power plant owners. It will also probably spark renewed outcry from critics who fought new capacity performance standards -- rules aimed at avoiding a repeat of near system collapse related to the 2014 polar vortex.
Just about admitted they are running these plants with inadequate funding. They are going use this added funding to plow it all right back into the plants. Sounds like this inadequate funding is going to menace the community for a longer period of time? At some point, the NRC is going to have to step in to make a example; we can't allow you maga powerful utilities in crisis to operate nuclear plant like rag dolls.But the auction, results of which will be released tomorrow afternoon, will not provide a lifeline for Exelon Corp.'s money-losing Quad Cities nuclear plant, the Chicago-based company said.
The problem with all these nuclear utilities is we have to take them for their word...they won't show us the books.
Should any nuclear unit ever be "severely challenged"?Contrary to suggestions by some, any additional revenue from the auction and its new rules will have little if any effect on the prognosis for the 1,1819-megawatt dual-reactor plant in western Illinois. And what additional revenues it does bring in will be invested back into units to enhance reliability or used to offset a decline in energy prices.
We have severely challenged units. We expect those challenges will persist even after the auction," said Joe Dominguez, Exelon's executive vice president of governmental and regulatory affairs and public policy.
Also increasingly clear, the timeline for the company to make a decision whether to shutter the plant isn't as imminent as had been suggested. While the company could announce the plant's retirement in September, there remains time for lawmakers to enact the proposed low-carbon portfolio standard during a fall veto session and perhaps even into early 2016.
"There is no magical drop-dead date," Dominguez said yesterday morning during a conference call with reporters.
Illinois, home to 11 Exelon nuclear reactors at six plant sites, is at the forefront of the policy debate about keeping the nation's fleet of aging nuclear reactors running while combating climate change (EnergyWire, Aug. 4). In fact, the company said it will be twice as difficult for Illinois to meet its carbon dioxide emissions reduction target under U.S. EPA's Clean Power Plan if two of the three troubled nuclear plants in Illinois were to shut down.
And the Quad Cities plant, which employs 800 people and pumps millions of dollars of tax revenue into local government, is in the most immediate need of help to keep running.
While the carbon rule should indirectly benefit existing nuclear plants, the help won't be immediate. Exelon says some of its plants -- Quad Cities, Clinton and Byron -- continue to bleed red ink.
The company's Clinton station, a 1,065-MW single-unit plant an hour northeast of Springfield, Ill., faces the greatest financial challenges, Dominguez said. Exelon has said the plant lost more than $100 million last year.
But the timeline for making a decision about retirement is further off because it is part of the Midcontinent Independent System Operator Inc.'s grid. And the next cutoff for notifying MISO about participation in its next capacity auction isn't until next spring.
How about operating the system holistically. Some years the nukes will be more profitable and other years the fossil plants will be more profitable...the stronger energy sources then temporally carry the weaker sources. What about the golden years of nukes, say 2000 to 2010 when they carried the whole utility with their profits. Is that ever accounted for. If Exelon would have massively plow back nuclear plant profits in the golden years to the plants themselves, certainly they would have been more economically now. I think they massively waste money on the excessive bureaucracy instead of building up their infrastructure.The threat to the Quad Cities plant is more immediate. It has lost $350 million over the last five years, Dominguez said. And analysts have projected losses in excess of $100 million for Quad Cities and Clinton this year.
While Exelon and its merchant nuclear fleet as a whole are profitable, the company has made clear that each generating asset must stand on its own, the same way McDonald's or Starbucks won't let unprofitable stores remain open even though the chain is doing well.
Exelon's plants have two revenue streams -- income for energy they generate and payments for capacity standing ready to run whenever they're needed.
Under PJM's rules, those capacity payments are determined through an annual auction conducted three years ahead. The auction results to be announced tomorrow cover the 12 months beginning June 1, 2018.
Two of Exelon's nuclear plants in PJM -- Quad Cities and Byron -- failed to clear last year's auction at a price of $120 per megawatts-day. The company said before this year's auction, conducted electronically last week, that the plants are a "long shot" to clear for 2018-19, even with new capacity performance standards in place, according to CEO Chris Crane.
The capacity performance standards, approved by the Federal Energy Regulatory Commission, significantly raise penalties for generators that fail to perform during emergencies like the polar vortex and increase payments for those overperforming.
Dominguez, however, said the new PJM standards, while they could produce incremental revenue for plants that clear, are offset by other factors. First, the company expects to invest $350 million to $450 million in its fossil fleet in PJM to meet the new rules.
Perhaps more importantly, the decline in forward power prices over the past year offsets even a $75 per MW-day increase in capacity prices for 2018-19, putting the company in the same spot it was in from a total revenue standpoint, he said.
Exelon continues push for new energy policies
Exelon maintains that the only real solution to the financial challenges faced by its three Illinois nuclear plants is a state policy that rewards its nuclear fleet in the same fashion as wind, solar and other zero-carbon energy sources.
The company's low-carbon standard proposal is one of three major energy bills filed this spring, none of which passed. Legislators have expressed a desire to look at energy policy on a comprehensive basis, something that could even happen during a fall veto session (EnergyWire, June 2).
Critics and supporters of competing legislation question the need for the legislation proposed by Exelon, and said the PJM 2018-19 auction and 2016-17 transitional auction held this month could bring the company hundreds of millions of dollars in additional revenue beginning next year.
Dave Lundy, a spokesman for the BEST Coalition, a business group that opposes the Exelon bill, expects the company to announce the closure of Quad Cities as it seeks to bolster its case with legislators.
"I think you need to take a holistic look at this, from the credibility of the threat and what happens if there's a closure," Lundy said.
Wall Street analysts, too, expect a Quad Cities announcement if, as expected, the plant doesn't clear the 2018-19 auction.
"We expect firm plant closure commitments to ratchet up pressure in the state this fall," UBS research analysts said in an Aug. 10 note to investors.
Critical decisions ahead for Quad Cities
Dominguez said Exelon faces several key decision points in the coming months with respect to Quad Cities. And while there's no firm cutoff date for getting legislative help, the longer it takes will make keeping the plant in business more difficult and expensive.
First, the company must notify PJM 18 months in advance whether its plants will be available for the annual capacity auction. That means by September for Quad Cities to participate in the spring 2017 auction (for 2020-21).
It's possible Exelon could announce a Quad Cities closure in September and still have time to reverse the decision if the Legislature acts on the low-carbon standard proposal by the end of the year or even early 2016.
Exelon also faces operational decisions at Quad Cities. One unit at the plant requires refueling in March, and the company hasn't yet decided if it will order a fuel core assembly that enables the reactor to operate for two years, as usual, or if it will order a single year's worth of fuel. At the Clinton plant, Exelon has moved to annual refueling outages, which, while less efficient and more costly, enable the company to operate the plant from year to year.
The company must notify Westinghouse of its decision whether to fuel one of the reactors for one or two years by the end of September. But even that could be changed if the Legislature acts.
"Action by the end of the year would likely put us in a posture where we could reverse that decision," Dominguez said.
No comments:
Post a Comment