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Exelon Calls for Energy Policy and Market Reforms to Ensure Clean, Reliable Energy Supply

Kenneth W. Cornew tells Platts Global Power Conference that market rules and policies must evolve to keep pace with changing market environment



LAS VEGAS (April 9, 2014) - In a keynote address to the 29th Annual Platts Global Power Markets Conference, Exelon Generation President and CEO Kenneth W. Cornew said that competitive market rules and state and federal energy policies need immediate reforms to ensure a diverse, clean, reliable and affordable energy supply.

Cornew said the energy industry has experienced seismic shifts in how energy is produced and consumed, with an influx of low-cost natural gas, rapid expansion of subsidized renewable generation, smart grid deployment, behind the meter technologies and low demand growth combining to reshape the energy landscape. Market rules have failed to keep pace, he said.

"Rules that are in place today were designed for a fundamentally different energy market," Cornew said. "They need to be reformed to reflect our current environment and recent changes in how we produce and use energy."

The urgent need for changes that support a diversity of generation sources was on display this past winter, Cornew explained. Demand for energy surged during a series of cold snaps that blanketed much of the country in January. But grid operators struggled to keep up with demand as many resources had high forced outage rates or were otherwise unable to perform. A large number of natural gas plants across the country were unable to get access to fuel, highlighting the consequences of an overreliance on gas generation.

Cornew noted that during the height of the polar vortex, nuclear plants, which have 18 months to 24 months of fuel on site, performed at a 95 percent capacity factor, a key measure of reliability.

"The extreme cold highlighted for many what Exelon has known all along - that a diverse fleet of generation that includes high-performing baseload power plants that have firm fuel, such as nuclear, is critical to grid reliability," Cornew said.

However, flawed market rules and the current patchwork of state and federal energy policies subsidizing renewable energy do not properly compensate nuclear for its unrivaled reliability and 24/7 emissions-free energy, Cornew said. The problem is exacerbated in regions where low load growth and an oversupply of subsidized wind generation are driving wholesale energy prices even lower.

The combination of competitive market forces and artificial price suppression resulting from well intended but poorly designed energy policies could force some highly efficient nuclear plants to shut down, threatening grid reliability and setting back efforts to meet the nation's carbon reduction goals, Cornew said.

"The economic viability of these highly reliable, low-carbon generation sources is at risk, not because they can't compete in the marketplace, but because they can't compete when the playing field is uneven," he said.

Exelon has long advocated for market-based policies that treat all carbon-free resources equally, regardless of technology, Cornew said.

"We need to better align our energy policies with our competitive market rules to ensure we have a clean, reliable and economic energy supply going forward," he said.