Exelon CEO calls for state-by-state clean energy negotiations
EPA’s proposed rule to curb existing power plants’ greenhouse gas emissions, due June 1, is an opportunity for such negotiations, he said.
Agency officials have promised that while the rule’s requirements will be strict and enforceable, not “aspirational,” it will be flexible in permitting states to develop their own implementation plans before the rule is final, scheduled for June 1, 2015.
Crane said the EPA process “could go a long way to having individual state designs. Then you can come up with a clean energy standard” or something like the Regional Greenhouse Gas Initiative, the Northeastern states’ model — “something we all can come together and debate and negotiate from the different argument factions,” he said.
“You’ve got nuclear arguing against wind. You’ve got wind arguing against nuclear. And solar is off on its own arguing against the world. It would be much more constructive if we could come to the table with the policymakers and demonstrate the benefits of a combined clean stack, an all-of-the-above clean stack, along with the economic advances each one can bring,” he said.
Nuclear power under pressure
Nuclear power operators are facing stiff competition from a rush of cheap natural gas from shale deposits, from renewable power and from a slowing growth rate in demand for electric power.
Pressure on nuclear power could force Exelon to close up to five of its nuclear units in the Midwest, the company has said, although Crane yesterday said that market conditions appear to be improving.
The Chicago-based utility has told its shareholders and employees that there is no “imminent announcement of plant shutdowns” — only that there will be tough conversations about which plants may have to close if market conditions do not improve by the year’s end, Crane said.
Crane has singled out Exelon’s Clinton plant just south of Bloomington, Ill., and the Quad Cities plant just north of Davenport, Iowa, among those nuclear operations that face challenges (EnergyWire, Feb. 7).
The Clinton plant, in particular, is located within the footprint of the Midcontinent Independent System Operator, the Midwestern regional grid. Unlike the PJM Interconnection, MISO lacks a long-term capacity market, making it more difficult for merchant generators to wait out a power market recovery. Exelon also plans an early retirement of its Oyster Creek nuclear plant in New Jersey, which would otherwise face costly environmental investments.
Crane also addressed natural gas yesterday, noting that a “simple rule” is that a $1 increase (per million British thermal units) in the price of natural gas equates to about a $5 increase in a megawatt-hour’s cost.
“So there’s that sensitivity you can see — a marginal nuclear plant is running for about $33, $34 a megawatt-hour, you get markets that at some periods are in the $20s, suppressed markets because of excess generation with renewable. You have markets on the East Coast that are $40, $50, $60 [per megawatt-hour],” he said. “It’s definitely locational on the impacts of the pricing with natural gas.”
The company sees long-run natural gas prices cycling between $4 and $6 per million Btu, he said.
Crane said Exelon believes “the majority of our nuclear fleet can compete in that range” but acknowledged that the company’s smaller units strain to match the efficiency and profitability of larger units.
“We’re saying we don’t want to be subsidized and no one should be subsidized in the competitive market, so there are a few that may not make it,” he said.
Also challenged are some of Exelon’s larger nuclear units in transmission-constrained zones with an oversupply of wind power on off-peak hours.
But Crane added that Exelon is not anti-renewables, noting that the company has up to 1,600 megawatts of wind on its system at this point and offers rooftop solar to commercial customers.
“It’s unfortunate it’s such a polarizing debate right now,” he said.
Exelon is part of the debate. The company has stepped up its public interaction in recent months to oppose tax incentives for wind and solar generators, push market changes that could buttress nuclear’s future and promote nuclear as a source of power to tackle climate change — all messages Crane reiterated yesterday.
Exelon, notably, is funding a public campaign with Nuclear Matters at the fore, a group that has garnered the membership of former White House climate adviser Carol Browner and former Arkansas Sen. Blanche Lincoln, a Democrat. Nuclear Matters has taken a swing at federal and state policies that subsidize wind and solar power.
Nuclear power in the United States has benefited from federal research investments and federal law that limits the liability of plant owners in the case of a serious nuclear accident, the industry’s critics note. It is also the nation’s most closely regulated power source.
Crane said production tax credits have helped jump-start the wind industry, but the 70 gigawatts of wind power now installed is “some pretty good penetration” and the government should no longer be subsidizing wind, he asserted.
Battling over state renewable energy standards
Crane’s plea yesterday for a negotiated result comes as political strife heats up over the 30 renewable portfolio standards enacted by states and the District of Columbia.
Some conservative political forces are pressing for repeal of state renewable portfolio standards, led by the American Legislative Exchange Council, as a ClearView Energy Partners research report noted in March. Their involvement came as the Kansas Legislature debated a move to repeal the state standard. The repeal effort ultimately failed.
The ClearView report said, “RPS programs will continue to face pressure from some state lawmakers on behalf of their conventional energy constituents and a conservative ‘free market’ policy posture.” However, the firm’s review of state legislative developments did not show that the repeal movement was gaining traction, ClearView said.
The wind energy industry is fighting back with appeals to Congress to reinstate the expired production tax credit for operating wind generators. The PTC, as part of a tax extenders package, took a step toward passage in the Senate yesterday, but final action to approve the tax credits is not expected until after the midterm elections (E&E Daily, May 14).
Crane said 50 states are paying subsidies to support the 30 mandates, and that’s having an effect on other low-carbon sources like nuclear plants. “We all support renewables, but we need to make sure the penetration of the renewables is not at the detriment of the reliable clean sources of generation. That is where we want the future to be,” he said.
“We have to engage with all the stakeholders … to design our future and not just let our future be dictated upon us by special interests lobbies and commercial [interests],” he said, quickly recognizing that those forces include Exelon.
“The large lobbies that we all have: It’s commercial. At the end of the day, solar wants to sell panels. Wind wants to sell more turbines. Nuclear wants to stay relevant in the game going forward. So we all know what we’re here for.
“We need to do that in a combined, coordinated approach as opposed to being at each other’s throat,” he concluded.