PJM loses a quarter of its nuke capacity in latest power auction

Dive Brief:

Cleared nuclear capacity fell by more than a quarter in PJM’s latest Base Residual Auction, the grid operator announced Wednesday, while demand response, renewables, natural gas and coal all increased their cleared capacity compared to last year.
Capacity prices for much of the market came in higher than last year, at $140/MW-day compared to $76/MW-day. PJM said the increase is due to lower prices in its energy market and higher entry costs for new generators, while analysts said some plants likely sat out the auction this year.
The auction for delivery in 2021/2022 cleared 163.3 GW of capacity, a 2% decrease from last year, resulting in a 22% reserve margin. Of that, nearly 14 GW was demand response or energy efficiency, with both increasing significantly over the last auction.

Dive Insight:

The 2021/2022 Base Residual Auction cleared about 20,000 MW of nuclear power, PJM Vice President Stu Bressler told reporters Wednesday, while last year’s auction cleared about 27,400 MW.

Analysts had expected cleared nuclear capacity to decrease, Bressler noted, saying the 7,400 MW drop was “less than some of the expectations I saw as far as nuclear risk.”

The drop in cleared capacity is the result of some nuclear plants not winning capacity contracts this year.

FirstEnergy Solutions, which has three nuclear plants slated to retire before the auction date, said Thursday those facilities did not clear the auction. The company last month asked the Department of Energy for emergency relief to keep those generators online, and a spokesperson said the results will have "no immediate impact" on those plans or company operations.

Exelon, the nation's largest nuclear operator, said Thursday it bid its nuclear plants into the auction, but Three Mile Island (TMI), Dresden and all but a small portion of its Byron plant failed to clear. Exelon did not bid the Oyster Creek plant in New Jersey, which is slated to retire this year.

It is the fourth year running that TMI did not clear, spokesperson Paul Adams noted.

New Jersey nuclear operator PSEG told Utility Dive it bid its plants into the auction, even though state legislation to subsidize its plants was not signed until Wednesday, after the auction had concluded.

"An added benefit of our participation and clearing in the RPM auction is that the clearing price and capacity costs to New Jersey customers was in all likelihood lower than it would have been if we had not cleared as many MWs," spokesperson Mike Jennings said in an email.

The decrease in nuclear capacity came amid higher prices across most of PJM, though regions with most of the market’s nuclear capacity saw smaller price increases, noted Robbie Orvis, policy director at think tank Energy Innovation.

“In EMAAC, which has roughly 25% of PJM’s nuclear capacity, prices actually dropped by $22.14/MW-day,” Orvis noted. “In COMED, which has about 32% of PJM’s nuclear capacity, prices only increased by $7.43/MW-day. The remaining regions with nuclear capacity saw healthy price increases ranging from $53.96/MW-day to $94.80/MW-day.”

Bidding behavior resulted in separate prices for five of PJM's 20 transmission owner regions.

PJM

“It’s unclear how some units might have changed their bidding behavior in response to state nuclear subsidy programs,” Orvis added, “but given the economic hardships for many nuclear plants in PJM, these results don’t point to any kind of dramatic change in market conditions.”

The decrease in nuclear was met with increases in a variety of other power resources.

Wind resources increased by 529 MW, PJM reported, from 887 MW last year to 1,416 MW this year. Solar jumped from 125 MW last year to 570 MW this year, an increase of more than four and a half times.

Natural gas also fared well, increasing by about a gigawatt in cleared capacity, while coal increased by 500 MW.

No new coal plants are being built in PJM, but Bressler said higher capacity prices and greater efficiencies at coal plants allowed more capacity to clear.

“The death of coal has been greatly exaggerated," Bressler said. "It hung in there this year.”

Auction results for demand response were particularly significant, the PJM vice president said. DR providers complain that PJM’s capacity performance options, which only allow year-round resources, unfairly disadvantage their resources. But more than 11 GW of DR cleared the auction this year, up from 7,820 MW the year before.

“I was surprised by the magnitude of the increase in annual demand response that was willing to commit to the capacity performance requirements in this auction,” Bressler said, “and I question whether we really have a seasonal issue.”

The PJM auction results are likely to increase calls from nuclear energy advocates to support the resource, which they say is not valued for its zero-carbon generation and contributions to grid resilience in PJM’s market today.

“Reforms are needed but they need not be limited to the capacity market,” said a spokesperson for the Nuclear Energy Institute, which is still reviewing the auction results. “Markets need to better value nuclear attributes, and that can be done through improvements in how energy is valued or through state policies that explicitly recognize these benefits."

This post has been updated to add comments from Exelon, FirstEnergy and PSEG.