Friday, June 13, 2014

Exelon Explains What Happened at 2014 PJM Capacity Auction

Map of PJM Interconnect
Over the past few months we've been writing a lot about how flaws in merchant electric markets have been placing significant economic stress on nuclear plants operating in those areas.

The latest piece of news on that topic came out late last month when PJM revealed the results of its 2014 Capacity Market Auction - one where three of Exelon's nuclear plants failed to "clear" the bidding.

To help provide some clarity on exactly what's going on, we sat down for a Q&A with Joseph Dominguez, a senior vice president at Exelon to ask some questions about what it means for those three plants and the future of the electric grid.

NEI: Exelon has said that Quad Cities and Byron in Illinois and Oyster Creek in New Jersey did not clear the PJM capacity auction. Why not?

Dominguez: These auction results reveal that the market does not sufficiently recognize the significant value that nuclear plants provide in terms of reliability and environmental benefits. As proven during the record-cold temperatures this winter, nuclear plants are an incredibly reliable generation source, typically producing power 24/7 regardless of weather. And they do so without producing emissions, which makes them an indispensable resource if we are to meet greenhouse gas reduction requirements outlined in the draft regulations from the U.S. Environmental Protection Agency.

Yet some of our nuclear plants face a perfect storm of economic challenges that threaten their continued operation. These include an influx of low-cost natural gas, slow load growth, and the unintended consequences of market structure and government policies that subsidize renewables and fail to recognize nuclear’s unique value as a clean, reliable workhorse of the electric grid.

You can read the whole interview over at NEI's website, "Exelon on the 2014 PJM Capacity Market Auction."


Martin Burkle said...

After reading the "full" article, I do not feel that I got a very good explanation. For instance, when there are auctions, there are winners and losers. Obviously, some nuclear plants were losers, but who were the winners? Demand response was the only maybe winner mentioned. So are factories that promise to shut down during peak electricity use the major competitor to nuclear?

Why did some nuclear plants win and some lose?

What I expected to see in the article was that gas and wind under bid the nuclear plants but that was not there.

If I were the interviewer, I would also ask if these plants bit higher than in previous auctions.

What is the rest of the story?

martin.burkle said...

Interesting. No response.

Either nobody reads the comments or nobody is willing to share the rest of the story.

tfstacy said...

Martin, wind is not a significant capacity market player because it simply cannot deliver much across peak demand periods.

Demand Response is NOT capacity - it is the SACRIFICE of PRODUCTIVITY to reduce capacity requirements.

These are the only comments I can provide from my limited knowledge.

Anonymous said...

I think its important to note the fact that Exelon is "urging the exploration of opportunities to avoid closing such plants" with the State of Illinois legislature. I imagine failing to clear these plants in a PJM auction is a good way to make your case for state assistance seem more dire.

The Exelon representative being interviewed appears to just be pushing that case. They want the money being allocated for renewable energy development.