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Exelon warns 3 more Illinois nuclear plants are at risk of early retirements

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Exelon warns 3 more Illinois nuclear plants are at risk of early retirements

America's largest nuclear fleet operator Exelon Corp. has warned that three of its Illinois nuclear power plants are at risk of early retirement after most of their capacity failed to clear PJM Interconnection's latest capacity auction.

In a Feb. 8 filing with the U.S. Securities and Exchange Commission, Exelon said its 2,384-MW Braidwood, 2,346-MW Byron, and 1,805-MW Dresden nuclear power plants are "showing increased signs of economic distress, which could lead to an early retirement."

Exelon blamed a flawed market for failing to "compensate them for their unique contribution to grid resiliency and their ability to produce large amounts of energy without carbon and air pollution."

In an era of low wholesale electricity prices suppressed by an influx of cheap natural gas supplies, Exelon said PJM's May 2018 capacity auction for the 2021-2022 commitment period saw "the largest volume of nuclear capacity ever not selected in the auction, including all of Dresden, and portions of Byron and Braidwood." The capacity auctions procure obligations from generating sources to be available to supply power for a delivery year three years in the future.

Two other Exelon nuclear plants in Illinois — the 1,078-MW Clinton and 1,819-MW Quad Cities facilities — are currently compensated through the state's 10-year "zero-emissions credit" initiative for their avoided emissions. Before the ZEC subsidies went into effect in June 2017 Clinton and Quad Cities were uneconomic and slated to close in 2017 and 2018. While Quad Cities — which is co-owned by MidAmerican Energy Co. — failed to clear PJM's May 2016 capacity auction for the 2019-2020 planning year, Clinton cleared Midcontinent ISO‘s primary reliability auction but the clearing price was not enough to cover operating costs and a risk-adjusted rate of return.

Regarding Byron, Braidwood and Dresden, Exelon said in its latest SEC filing that the company continues to "work with stakeholders on state policy solutions, while also advocating for broader market reforms at the regional and federal level."

Exelon Corp. CEO Chris Crane confirmed in a Feb. 8 investors call that Exelon is engaging Illinois lawmakers on possible state legislation but said the "productive conversations" are just "at the beginning of the sausage-making right now."

Among those interested in engaging with Exelon are Republican state lawmakers Sen. Sue Rezin and Rep. David Welter, who requested a meeting to discuss the future of two of the plants, which are located in their constituencies. Both Rezin and Welter sit on environmental committees in their respective legislative chambers.

As a potential solution, Exelon could seek to expand Illinois' ZEC programs to shore up the economics of the three "at-risk" plants. But a company spokesperson said that a June 2018 Federal Energy Regulatory Commission order, finding that state clean energy programs are interfering with the operation of wholesale capacity markets, undermines Illinois's ZEC program and therefore expanding it will not solve the problem.

Instead, the spokesman said the nuclear plants need "a broader, more comprehensive approach that addresses market flaws that fail to value zero-carbon nuclear energy for its environmental and grid resiliency benefits, while at the same time addressing the devastating impacts of climate change and expanding the clean energy sector in Illinois."

Crane and executives of other nuclear energy companies met with U.S. President Donald Trump in the White House on Feb. 12 to discuss the importance of nuclear energy in the economy and in safeguarding national and international security.

Federal legislation could also help keep the Exelon plants online if U.S. Rep. Darin LaHood, R.-Ill., or others reintroduce his proposed Nuclear Powers of America Act. Originally filed as House Resolution 5732 in May 2018, the bill sought to support existing nuclear facilities by creating a 30% investment tax credit for refueling costs and qualified nuclear power plant capital expenditures.