Nuclear Energy Market Avoids Major Disruption, For Now
A funny thing happened on the way to buy electricity: the Clean Power Plan, which requires cuts in heat-trapping emissions. Its creation, in fact, may have kept alive some struggling nuclear energy plants and in doing so, helped certain states meet their carbon restrictions under the new regulations.
Absent a successful legal challenge, the United States must come to terms with the Environmental Protection Agency’s carbon regulations finalized in August, which mandate 32 percent cuts in carbon emissions by 2030, from a 2005 baseline. Nuclear energy is a major benefactor, especially those facilities that are now under construction as well as any existing plants that upgrade to increase output.
Exelon Corp., which owns nuclear plants that sell electricity at market rates, is the first to benefit. Simply, the PJM Interconnection that orders up electric generation and schedules the flow of electrons across the wires in 13 states agreed to buy its nuclear output for a few years.
That futures contract has enlivened its unregulated — or “merchant” — nuclear operations, for now: Exelon’s plants, actually, had a competitive bid, well below the auction cap. Until now, the running theme has been that the shale gas boom, which has created sustained low electricity prices, has made it too difficult for nuclear plants to compete in this new and unforgiving merchant world.
Already, two merchant units owned by Dominion Resources and Entergy Corp. have retired. As much as 6 percent of the total nuclear capacity is at risk of closure. In total, 99 nuclear reactors generate 19 percent of the nation’s electricity.
“We must compete against the marginal source: natural gas. And we do not see those prices rising. We need diversification. We need a balanced portfolio,” said Chris Crane, chief executive of Exelon at the Edison Electric Institute’s annual meeting in New Orleans, before reporters.