- "Without preserving the existing fleet of nuclear plants, achieving our emissions reduction goals would be nearly impossible. Even losing just a handful of these plants – as seems increasingly likely – could put these goals out of reach for decades."
David Brown, Senior Vice President
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. The PTC has recently expired and should not be renewed.
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.
Therefore, Exelon supports Congress' decision in December 2013 not to extend the wind PTC.
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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.
Electricity & Natural Gas Customer Choice in Illinois [2 MB PDF] Electricity & Natural Gas Customer Choice In Illinois—A Model For Effective Public Policy Solutions
A February 2014 report of the Illinois Chamber of Commerce, Illinois Manufacturers’ Association, Illinois Retail Merchants Association and Illinois Business Roundtable details how competitive restructuring in Illinois has driven customer choice and savings.
Gould Total Energy Speech [PDF, 180 KB]The Economics of Sustainable Energy: A Case for Well Functioning Markets
As we transition to a sustainable energy future, Exelon believes that sound energy policy is imperative in order to encourage innovation and unleash competition to deliver the best results for customers and the long-term health of our economy.
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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.
Exelon’s fleet includes six nuclear energy facilities in Illinois, which provide significant economic, environmental and reliability benefits to the state. A combination of the economic factors and inefficient energy policies threaten the continued operation of some of these facilities. The Nuclear Energy Institute conducted an analysis of the value Illinois’ nuclear plants deliver and the consequences for the state if at-risk facilities were to retire early. Read it here.
Bipartisan Policy Center [PDF, 413 KB]Greenhouse Gas Regulation of Existing Power Plants
In her presentation to the Bipartisan Policy Center, Exelon Senior Vice President Kathleen Barron stresses the important role existing nuclear power plays in the nation meeting its carbon emissions goals.
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