By Christine Cordner

Coming from different worlds of regulation, chief executives of three major U.S. investor-owned utility companies on June 11 agreed that developing new nuclear plants will be challenging in the coming years, especially if "flawed" wholesale power markets and renewable energy subsidies continue to prevent a leveling of the playing field for all generation types.

During a panel discussion about the electric industry's evolving supply portfolio at the Edison Electric Institute's annual convention in San Francisco, Exelon Corp. President and CEO Christopher Crane said nuclear plants have a future in competitive markets when natural gas prices rebound "as long as [these markets] are allowed to work as designed." But in today's world where Exelon is the largest owner and operator of nuclear plants in the U.S., market distortions, such as wind energy subsidization through an extended production tax credit, are threatening nuclear energy, he said, specifically the company's 1,078-MW Clinton plant in De Witt County, Ill., within the Midcontinent Independent System Operator Inc.'s footprint.

"People have got to understand that if you throw up another hundred windmills around it … there are unintended consequences," Crane said, not indicating whether Exelon is nearing a decommissioning decision on Clinton, which "doesn't make any money," since the company will "not pull the trigger quick on it."

Exelon in August 2012 decided to pull out from its proposed 3,000-MW Victoria nuclear plant in Texas, dropping development in a market that lacked a capacity market and had large volumes of wind energy lowering wholesale prices. Such a market, just like in MISO, has created "a dangerous situation to make an investment," Crane said. Its Victoria modeling, which used an $8/MMBtu gas price and a $25 price on carbon based on a national cap-and-trade program, reflected a much different world than today, he noted.

Exelon supports an "all of the above" generation strategy that reflects each generation's true cost, Crane said, hoping that wind subsidy funds are moved to research and customers are left to "decide if they want to pay for [renewables] or not."

Already a victim of MISO pricing, Dominion Resources Inc. was forced to decommission its 574-MW merchant Kewaunee nuclear plant in Wisconsin due to low wholesale prices. Fresh from that experience, Dominion Chairman, President and CEO Thomas Farrell II said he backs nuclear expansion as a way to ensure Americans have abundant energy but expects no large-scale development in deregulated states in the foreseeable future.

"The idea of a new nuclear plant in a deregulated market is just dead. … [Regulated states] are the places where people will build them. … I think you can make a free market structure work, but some are terribly flawed," Farrell said. He expects to see "a balkanization of energy costs between states," with some states allowing for long-term thinking and diverse energy portfolios and others focusing on capital investments in short-term markets that ensure their generation resources "all go to gas."

Farrell said he supports renewable energy but also took aim at the subsidy issue, saying questions need to be raised about whether economic and job growth benefits actually do offset the costs of greater development. "I am not sure if you can prove that. … We don't talk about that enough" to counter the "complete fantasy [that] renewables solve all problems," he said. "I am not opposed to renewables, but we need to be more frank with policymakers."

Also on the panel, Southern Co. Chairman, President and CEO Thomas Fanning said his company is going to keep nuclear energy's share of its generation portfolio at 16% over the next 35 years, with its development focused on its ongoing 2,200-MW Vogtle nuclear plant expansion in Burke County, Ga.

Southern's Vogtle 3 and 4 expansion is one of the largest generation projects in the country from the standpoint of capital costs. The price tag of at least $14 billion — shared by Southern subsidiary Georgia Power Co. with partners Oglethorpe Power Corp., the Municipal Electric Authority of Georgia and the city of Dalton, Ga. — has attracted critics who argue that the new reactors are highly expensive compared to other generation alternatives.

Also during the panel, the CEOs discussed the results of the PJM Interconnection LLC's 2016-2017 Reliability Pricing Model auction, which yielded a surprising clearing price for the RTO of $59.37 per MW-day, well below last year's clearing price of $136 per MW-day, as well as most pre-release forecasts for a clearing price of about $120 per MW-day.

Crane said the record clearing of generation imports from MISO is good initially for PJM utility customers but will not be good for long-term reliability for the region, while Farrell said the auction raised the question, "Capacity? What's capacity?" as he expected the region "at some point will end up with not enough power." Fanning said, "It may be instant gratification, but it doesn't benefit customers long term" by putting long-term generation investment in short-term revenue markets.