Three Exelon Generation Co. LLC nuclear power plants did not clear PJM Interconnection's capacity auction for the 2022-2023 planning year, the company announced June 3, further imperiling the future of the reactors and adding pressure to Illinois state lawmakers to provide financial aid.
The 2,346-MW Byron Generating Station, 1,805-MW Dresden and 1,819-MW Quad Cities nuclear plants failed to clear the auction, Exelon Corp. said June 3, following the release of results by PJM that were significantly lower than the previous auction, and came in well below analyst estimates. The clearing price for the majority of PJM fell to $50/MW-day, compared with $140/MW-day for the unconstrained regional transmission organization region in the 2021-2022 auction.
The Braidwood Generating Station and LaSalle County Generating Station nuclear plants cleared in the auction for the upcoming year but, like Byron and Dresden, the company said they "face premature retirement due to unfavorable market rules that favor emitting generation." Exelon plans to continue operating Braidwood and LaSalle through May 2023, which it said should provide enough time to plan their retirements safely if policy changes don't rescue them before then.
Despite not clearing the auction, the Quad Cities plant will continue to operate due to support provided by the Illinois Future Energy Jobs Act, which took effect in 2017.
Exelon Generation cleared a total of 13,050 MW of capacity in the most recent auction, according to a June 3 filing, consisting of 9,900 MW of nuclear and 3,150 MW of fossil fuel-fired generation.
In August 2020, Exelon announced plans to retire Byron and Dresden by September 2021 and November 2021, respectively, citing wholesale power market rules that fail to compensate the generators for their emission-free attributes.
Exelon executives said on a May 5 earnings call that they still hope for additional state subsidies for Byron and Dresden, despite reports that the Biden administration was weighing federal nuclear production tax credits as part of its net-zero climate goals. Media reports indicate Illinois state lawmakers are still negotiating legislation to potentially provide financial aid to the nuclear plants.
"The latest data points from PJM only further support [Exelon's] push for policy solutions to support its zero-carbon fleet," Guggenheim Securities LLC analyst Shahriar Pourreza wrote June 3. "While the balance of the fleet largely cleared at the EMAAC breakout, the results remain a bitter reminder that PJM is oversupplied and ill-equipped to compensate for environmental attributes."
A report released in August 2020 by Illinois Democratic Gov. JB Pritzker said that while the state's existing nuclear units were "integral" to achieving its goal of a 100% carbon-free electric grid by 2050, taxpayer and ratepayer financial support for the plants "cannot be a blank check."
Exelon's announcement about retiring Byron and Dresden prompted Illinois lawmakers to propose six different bills aimed at keeping Byron and Dresden online. The company's 1,078-MW Clinton Power Station and Quad Cities nuclear plants receive $235 million in annual subsidies under the state's zero-emission credit, which passed in 2016 and took effect the following year.
Exelon cited the Minimum Offer Price Rule recently implemented by PJM as the reason Quad Cities did not clear the auction. Northern Illinois customers and those throughout PJM will pay for more capacity from polluting generation instead of nuclear power that would have been cleaner and cheaper without the new rule, the company argued in a June 3 filing.
All of Exelon Generation's other nuclear and fossil generation power plants in the PJM market cleared the auction, according to the company. The auction results take effect June 1, 2022.
On the May 5 call, Exelon President, CEO and Director Chris Crane said the subsidies proposed so far for Byron and Dresden had fallen short of what the company needed to maintain subsidiary Exelon Generation Co. LLC's investor-grade credit rating. The Biden administration has since indicated it would support a nuclear production tax credit as part of a $2 trillion infrastructure push to decarbonize the U.S. electric grid by 2035.
U.S. Sens. Ben Cardin, D-Md.; Sheldon Whitehouse, D-R.I.; and Bob Casey, D-Penn., introduced an amendment to the energy tax reform legislation, the Clean Energy for America Act, on May 26 that would provide a tax credit of $15/MWh for existing nuclear power plants in states with deregulated power markets.
