Exelon CEO: Carbon price preferable to 'band-aid' nuke subsidies
Chris Crane said he would prefer a market-based climate solution to state resource subsidies and does not know the status of a White House bailout proposal for coal and nuclear plants.
The CEO of the nation's largest nuclear operator on Monday renewed his call for a price on carbon emissions, saying it would be preferable to current state subsidies for nuclear plants or a federal plant bailout contemplated by the White House.
"What we're doing right now is band-aids," Exelon CEO Chris Crane said at an event in Washington. "What we need to do is a regional or national fix."
For a time, it appeared that a fix of a different kind could come from Washington. President Trump in June directed the Department of Energy (DOE) to devise a plan to keep at-risk coal and nuclear plants online to protect national security, but it has reportedly been shelved at the White House. Crane said he is not aware of its status.
"I don't know where it stands," he told reporters after the event. "It's a discussion and a policy between the White House and the DOE and we know as much as the rest of the public."
As that plan languishes, Crane said Exelon is working with the administration to identify plants critical to national security, part of a DOE initiative to model potential weak points in the power system.
That initiative could provide justification for preserving uneconomic nuclear plants, but Crane said he did not know when it will be complete.
"We're not close to the day-to-day workings. We check in," Crane said. "I know the DOE gets it. FERC gets it, it's just how do we work through all of the agencies to make sure we come up with a collaborative effort that gives us that [threat assessment]."
"I met with the Secretary of Energy," he added. "It's top on his list. "We've toured him around a nuclear plant and discussed it."
Regardless of the White House plan, Crane said Exelon would like to see a nationwide price on carbon that would preserve nuclear plants on environmental grounds.
"As a company we would prefer a market-based approach that would allow creativity and technologies to compete," he said.
Crane's comments came during a wide-ranging discussion at the Brookings Institute where he addressed pricing reform in wholesale electricity markets, reliability concerns in New England and the future of climate action in the utility industry. He said despite gridlock in Washington, the power sector will steadily move to cut emissions in the years to come.
"We can't make false promises to a part of the country that we're going to make fossil fuels cool again," he said. "What we have to do is worry about what [climate change] is going to do to the whole country."
'Band aid' nuclear subsidies
Exelon is the nation's largest utility holding company, owner of six electric utilities, 13 nuclear plants and a fleet of natural gas plants and renewable assets. In recent years it has won approval for nuclear subsidies in Illinois, New York and New Jersey for plants threatened by competition from cheaper natural gas and renewables.
Those subsidies sparked two federal court challenges from rival generators and a rewrite of market rules in PJM, the nation's largest electricity market. Crane said the policies were never the company's first choice, but it pushed for their approval as a last resort to save its assets.
"It's a band aid, Crane said. "As a company that said do not subsidize individual technologies or reward them in this methodology … we had to go in that direction or we were going to be shutting down a lot of nuclear plants a whole lot faster."
Exelon is the only utility to have signed on to the Baker-Shultz carbon dividend plan, which would set a price on greenhouse gas emissions and reimburse taxpayers for the cost. Chances of enacting that plan during the Trump administration are slim, but Crane said the coalition is focusing on making its case for the next presidential election.
"As companies come together like ours we need to be focused on what is the message that we can provide with a much larger voice by 2020 and try to make those changes," Crane said.
In the absence of a nationwide price on carbon, Crane said Exelon would support factoring a carbon price into regional electricity markets. The New York ISO is currently devising such a "carbon adder" and Crane said his company is also involved in discussions in PJM and ISO-NE.
"That would be a better fix than trying to do it with an individual technology," Crane said. "The most beneficial would be a federal [price], but what we've got now is just buying us time and time is running out on many of these assets."
Greenhouse gas pricing is also at play in the ongoing rewrite of PJM's capacity market rules at the Federal Energy Regulatory Commission (FERC). Crane said Exelon could support carbon pricing as part of that initiative, but the politics of PJM states could make it difficult.
"You know that New Jersey is very focused on [climate change], you know Maryland is very focused on it, Virginia is becoming focused on it, but where is Ohio, where is Pennsylvania?" he said. "A regional solution has got to have a regional agreement on that design and some states are still in different places on what they believe on carbon and the environment."
"We think it's the next fix," Crane said of regional carbon adders. "We think we're dealing with band-aids with the ZECs right now. We appreciate those, keeping those units alive, but we think a regional to national [solution is best]."
Whatever the solution, Crane said it should come quickly. Three Ohio nuclear plants owned by a rival generator, FirstEnergy, are slated to come offline in the early 2020s, he noted, and their retirement would mean a significant decrease in carbon-free power.
"If those four reactors shut down … every dollar that's investing in [renewable energy credits] in PJM will be for naught," he said. "It will totally wipe away the benefit."
New England reliability concerns
While Exelon pushes to preserve its nuclear plants in PJM, it is also campaigning to save its 1700 MW Mystic natural gas plant in Boston.
Both ISO-NE and Exelon say Mystic is critical to maintain power reliability in the region, but the planned retirement of the adjacent Everett liquefied natural gas import facility, which supplies its fuel, threatened its operation.
"Mystic is very unique. There is no gas supply line that comes into it," Crane said. "The previous owners of the … Everett LNG facility were in the process of shutting it down. If they shut that down we would not be able to operate those [Mystic] units and make our reliability commitments to 2022."
Facing that situation, Exelon bought the Everett facility and asked FERC to approve cost recovery for Mystic to keep them both operating. The plant is also at the center of pricing reforms at ISO-NE after FERC ordered the grid operator in July to rewrite its capacity market rules to boost plants with onsite fuel supplies.
The region's reliance on Mystic was highlighted last month when an outage at the plant pushed the ISO-NE grid into emergency conditions. Crane said he did not expect the outage to affect either the cost recovery proposal or ongoing fuel security proceeding.
Keeping Mystic on the system is critical, Crane said, particularly in the face of warnings last week from ISO-NE, which told FERC that the loss of one gas pipeline during the winter months could threaten blackouts.
"What we're trying to do in a regulatory space is make sure we can keep that LNG facility running and keep our gas plants reliable," Crane said. "I don't want a disaster because we'll be all at fault if we do have a disaster."
Correction: This post has been updated to reflect the actual number of nuclear plants Exelon owns.
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