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$10 billion bonanza to save Exelon nuclear plants in Illinois?

New power rules may preserve Exelon nuclear plants in Illinois, St Louis Post Dispatch,    By Scott DiSavino Reuters , 30 July 15, New rules for U.S. electricity providers could save two money-losing nuclear power plants in Illinois from shutting down and may amount to a $10 billion bonanza to U.S. power producers.

A system of rewards and penalties is part of a requirement approved last month by federal energy regulators that applies to a power auction next month.

It may benefit some costly nuclear reactors in the PJM power region, which stretches from New Jersey to Illinois, that have had a tough time competing against the growing use of wind turbines and power plants fired with cheap natural gas.

That is particularly true for two plants operated by Exelon Corp., the biggest U.S. nuclear power plant operator. It has warned it might be forced to shut its Quad Cities and Byron nuclear plants in northern Illinois, unless the reactors’ revenues increase.

 Other generators expected to benefit from the new requirements, including those with nuclear plants located far away from the Midwest wind farms, include Dynegy Inc., NRG Energy Inc., Public Service Enterprise Group Inc. and Talen Energy Corp.

Thanks to the growth of alternative power sources and abundant gas from shale formations, PJM power prices have fallen an average of 20 percent over the past five years to around $50 per megawatt hour compared with the prior five years…….

The rule creates a niche for nuclear plants, which run consistently, unlike breeze-dependent wind turbines, and do not need potential upgrades to withstand harsh winter temperatures like gas plants.

Under so-called capacity performance requirements, generators will receive higher fees to keep plants available but face stiff penalties if their units don’t deliver power when needed during system emergencies. Fines for an average 100-megawatt plant would be around $350,000 an hour………

If analysts’ estimates are correct and all ten of Exelon’s reactors in northern Illinois are selected to provide capacity in the auction, the company could receive around $600 million for those reactors during the 2018-2019 delivery year………

Exelon has lost close to $1 billion over the past five years on its nuclear operations — about $350 million at Quad Cities alone. It expects those losses to continue, based on forward power prices, Dominguez said.

Even if Byron and Quad Cities clear the auction, Dominguez said they still face the risk of shutdown unless federal, state and regional policy makers find ways to compensate generators for the environmental and reliability benefits that non-carbon emitting nuclear plants provide.

In the meantime, extra revenues from the capacity auction could keep the money losing reactors operating for a few more years until possible new carbon standards are available. http://www.stltoday.com/business/local/new-power-rules-may-preserve-exelon-nuclear-plants-in-illinois/article_e4007591-df54-5795-9b5f-de5a1e6ab3f8.html

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July 31, 2015 - Posted by | business and costs, politics, USA

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