Buoyed by State Aid, U.S. Nuclear Plant Still Fails at Auction
(Bloomberg) -- Even the promise of state subsidies wasn’t enough to help a struggling nuclear power plant in the biggest electricity market emerge a victor in a closely watched auction.
Exelon Corp. said its Quad Cities plant in Illinois didn’t clear at the annual auction of capacity rights by PJM Interconnection LLC. It was the first time the grid operator had held a sale since a handful of nuclear reactors in Illinois and New York won subsidies to stay open.
In the run-up to the auction, opponents of subsidies had feared Exelon might undercut rivals in the knowledge that Quad Cities would be a recipient of state aid. With reactors reeling under competition from cheap shale gas and renewables, more states could now face pressure to help out ailing nuclear plants, according to Kit Konolige, a utilities analyst for Bloomberg Intelligence.
“Exelon could make the other argument, that even with the subsidy it wasn’t able to clear,” Konolige said by phone on Wednesday. “That’s how bad its economics were.”
At the auction covering the power market that stretches from Chicago to Washington, payments plunged to a four-year low of $76.53 a megawatt-day for the year starting June 2020, PJM said in a release on Tuesday.
“Since Quad Cities didn’t clear, it probably had no effect on the auction price,” Konolige said. “You can’t be definitive, because companies don’t disclose their bidding strategies.”
Exelon said the plant has not yet been selected to receive zero emissions credits under the Future Energy Jobs Act, which is designed to promote a clean energy future for Illinois, and is expected to come into force in June.
“Exelon remains fully committed to keeping the Quad Cities plant open, provided that FEJA’s Zero Emissions Credit program is implemented as expected and provided that Quad Cities is selected to participate,” Joe Dominguez, Exelon’s executive vice president of government and regulatory affairs and public policy, said in a statement.
Exelon’s Three Mile Island station, scene of the worst accident in the history of U.S. commercial nuclear energy, may not be so lucky. After failing to clear at the past three PJM auctions, the plant is at risk of early retirement. It hasn’t made a profit in five years and remains “economically challenged” given the lack of federal or Pennsylvania energy policies that value zero-emissions nuclear power, the company said.
Exelon’s other nuclear plants in PJM cleared in the auction. Oyster Creek didn’t take part, since it’s scheduled to shut in 2019.