The energy markets have already begun the transition to a clean energy future, and its benefits will be great. The combination of abundant, inexpensive natural gas; competitive markets; and EPA enforcement of the Clean Air Act will get us the rest of the way there.
Energy Policy: Do No Harm [PDF, 428 KB]In May 2011, former Exelon Chairman and CEO John Rowe urged Congress to allow the nation's transition to a clean energy future in a speech at the American Enterprise Institute.
EPA Clean Air Rules. A number of key environmental rulemakings (including the Mercury and Air Toxics Rule and the Cross-State Air Pollution Rule) have been finalized by the U.S. Environmental Protection Agency (EPA) under the Clean Air Act over the last several years. Exelon has supported these rules during both the rulemaking and litigation processes, as these rules will improve the health of our customers, employees and communities; provide regulatory certainty so that both competitive and regulated companies can make prudent investment decisions; and ultimately spur investment in cleaner, more efficient generation.
Exelon Clean Air Rules testimony to FERC [PDF, 600 KB]On Nov. 30, 2011, Exelon Vice President for Federal Regulatory Affairs Kathleen Barron testified to the Federal Energy Regulatory Commission that the electric utility industry can comply with the EPA’s clean air rules – the proposed Mercury and Air Toxics Rule and the final Cross-State Air Pollution Rule – while maintaining the reliability of the nation’s electricity grid.
- “Americans do not have to choose between clean air and affordable electricity. Every day that goes by, there is more and more evidence that the electric utility industry can comply with EPA’s new air pollution rules without steep rate increases and create badly needed jobs at the same time.”
Joseph Dominguez, Senior Vice President
EPA's Toxics Rule. Proposes national limits on the amount of mercury and other toxic air pollution released from power plant smokestacks.
Exelon Toxics Rule StatementIn an Aug. 4, 2011, statement, Exelon said the Toxics Rule can be implemented on time and without threatening grid reliability.
Federal Wind Production Tax Credit
Exelon has long believed that there is no need to promote subsidies for proven technologies at any cost, nor for electricity consumers or taxpayers to pay more than required for a clean electricity supply. The federal wind energy production tax credit (PTC) is a prime example of the negative consequences of subsidies through which the government picks energy technology winners and losers.
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The wind PTC has achieved its goal of jumpstarting the industry and is no longer necessary. More than 13,000 MW of new installed wind capacity were added in 2012, surpassing all other electricity generation sources in new installations for the first time ever. This growth comes on the heels of wind accounting for 35% of new generation over the last five years. The PTC has worked.
However, the subsidy is distorting today’s wholesale electricity markets, putting at risk the operation of more reliable clean generation. Perversely, because of the PTC subsidy, wind producers often pay the market to run (rather than getting paid by the market to run), yet still profit because of the subsidy’s steep $35 per megawatt hour (pre-tax) payout. For example, a wind producer could pay the market $10 per MWh and still make $25 because of the value of the PTC. This forces around-the-clock baseload power, like nuclear and coal, producers to pay to run their plants or to shut down for long periods of the day when their power is needed most. In Texas, for instance, where new generation is needed, investors are reluctant to build new power plants – even low-cost natural gas – because subsidized wind has so distorted the market.
Proponents of the PTC argue that negative prices are a good thing because such pricing drives consumer electricity prices lower. This simplistic reasoning doesn’t hold up when one considers what is not included in the market price, including the cost of back-up generation needed for when the wind doesn’t blow, transmission costs to get the power where it is needed and the taxpayer cost of the PTC. According to the Congressional Joint Committee on Taxation, the recently enacted, one year extension of the PTC will cost taxpayers more than $12 billion.
Artificially lowering prices through government intervention undermines the market and stops the development of new generation, as well as environmental retrofits of existing fossil units and uprates of nuclear plants. The artificial pricing also threatens to drive other reliable and clean competitors from the market. These market distortions lead to serious electricity reliability problems, costing electric consumers more.
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Competition is a fundamental principle for Exelon. We believe a sound energy policy must recognize the essential role of competitive electricity markets in meeting our energy and environmental challenges. Competition is the best way to foster needed innovation in new clean energy technologies and it is the only way to ensure that we ultimately adapt to these changes in the most efficient way possible. In other words, competition will discipline us as we make the massive investments needed to improve our energy infrastructure
Properly designed competitive markets are the best mechanism to ensure cost-effective, reliable power supplies and these markets have also demonstrated the ability to reduce GHG and air emissions in the most efficient way. Our customers are harmed when markets are not allowed to function freely.
Competitive markets, not taxpayer or ratepayer subsidies, are the more efficient and least cost way to incent new generation when it is needed. Subsidized plants are paid for by consumers who will bear the risks of these plants rather than shareholders by paying more for these plants than they could have obtained from the market. Although there may be short-term benefits to customers by distorting the market through lower prices, these same customers will be paying the high costs of subsidies for these plants for decades. In the long-run, customers will pay an even greater price because all future generators will expect a subsidy to enter the market and reliability will suffer.
Benefits of Competition [83 KB PDF] Exelon believes that a sound energy policy must recognize the essential role of competitive electricity markets in meeting the nation's energy and environmental challenges.
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Exelon owns and operates the largest nuclear fleet in the nation, and the third-largest fleet in the world. Nuclear energy is a clean, safe, affordable way to meet future energy demands in the United States and around the world, and Exelon supports national policies that will encourage the extended and expanded operation of existing plants.
My Last Nuclear Speech [PDF, 106 KB]In an address to the U.S. nuclear industry, former Exelon CEO John W. Rowe stresses the important role of nuclear power in the nation’s future energy supply, while recognizing the challenges of building new nuclear projects in the current economic climate.
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