FERC Commissioner: Exelon attacks on PTC "a distraction"

Commissioner Norris calls Exelon’s attacks on the PTC “a distraction;” AWEA releases further analysis showing the trivially small impact of negative pricing on Exelon’s nuclear plants.

FERC Commissioner Norris today thoroughly rejected Exelon’s attacks on the renewable production tax credit as a “distraction.” Commission Norris stated that “AWEA offered a report that demonstrated the infrequency of negative pricing in day-ahead markets, and the minimal impact of negative pricing on the nuclear fleets.… After these discussions, I have concluded that the argument regarding the impact of negative pricing on nuclear viability is a distraction and not productive to the larger conversation regarding how to ensure that the existing nuclear fleet is maintained. I have concluded that negative pricing is having a very small impact on the nuclear fleet. It certainly would not pass a “but for” test. That is to say, I do not believe that “but for” negative pricing, the currently troubled nuclear units would be economic.”

“Transmission development is the better, and more proactive, solution to negative pricing rather than forcing that issue into the debate on the merits of the production tax credit (PTC). It’s important to note that subsidies have existed for all forms of energy in this country. The additional supply of new energy, regardless of whether it is subsidized or not, will always impact existing energy supply. That does not make the PTC bad policy. I believe that our energy policies should focus on promoting new wind, solar, and other forms of renewable energy, and maintaining our existing nuclear fleet, as these resources bring diversity to our fuel mix and are consistent with our nation’s carbon reduction objectives. The current low gas prices and increased reliance on our gas fleet pose the biggest economic challenge to our nuclear fleet.”

Today’s comments build on comments Commissioner Norris made at last month’s meeting, when he called AWEA’s March analysis “compelling.” That report used grid operator data to demonstrate that negative prices occur at Exelon’s nuclear plants at a fraction of the rate claimed by Exelon, that the majority of those negative price occurrences are actually caused by the inability of Exelon’s nuclear plants to change their output in response to transmission outages and other factors unrelated to wind, that nationwide negative prices are rapidly being eliminated and relegated to remote areas, and that low natural gas prices and declining electricity demand are by far the largest factors challenging nuclear plants by driving electricity prices down. As a result, wind energy and the renewable tax credit are compatible with well-functioning electricity markets.

Today, AWEA took its initial analysis further by fully quantifying the impact various factors are having on the economics of Exelon’s Illinois nuclear plants, as well as further rebutting Exelon’s claims about the impact of negative prices. As summarized in the chart below, our analysis shows that the decline in natural gas prices is having a more than 1,000 times larger impact on Exelon’s nuclear plants than negative prices, coal price declines are having a 325 times larger impact than negative prices, while reductions in oil generation and declining electricity demand are each having around a 50 times larger impact than negative prices, even if one conservatively includes the impact of all negative price occurrences that could potentially be related to wind output. The combined impact of all of these factors is 1,450 times larger than the impact of negative prices.

Figure 1: Annual economic impact of various factors on Exelon’s Illinois nuclear plants, based on change in fuel prices and demand from 2008 to 2013

Data from PJM’s independent market monitor report[1] show that declines in fuel prices and changes in the fossil fuel generation mix have drastically reduced electricity prices over the 2008-2013 time period in PJM, the regional electricity market operator for the Mid-Atlantic and Great Lakes states, including Exelon’s service territory in Northern Illinois, as indicated in the following table. The $/MWh impact of each component was multiplied by the 2013 generation of Exelon’s Illinois nuclear plants to arrive at the total dollar figures in the chart above. The total economic impact of fossil fuel price and fossil generation changes amount to a staggering $3.37 billion per year in lost revenue for Exelon’s Illinois nuclear plants.

Table 1: Components of PJM wholesale electricity prices, 2008 and 2013, in $/MWh




$ change

% of total decline

Gas generation





Coal generation





Oil generation





Wind generation















As discussed in our initial report, since 2008 electricity demand has also significantly declined in Exelon’s ComEd service territory in Northern Illinois, which is also reducing electricity prices and negatively affecting the economics of Exelon’s Illinois nuclear plants. To quantify that impact, the average change in ComEd demand from 2008 to 2013 across all hours of the year was multiplied by the linear function[2] that best fits the relationship between demand and pricing for each of Exelon’s Illinois nuclear plants, and the result was summed for all of Exelon’s plants. This resulted in a total annual revenue loss of $114 million.

To conservatively account for the maximum possible impact wind-related negative prices could plausibly be having on Exelon’s nuclear plants, all negative price hours that were not definitively attributed to a non-wind cause in AWEA’s first analysis were included in this analysis.[3] This includes the removal of all negative price hours that were attributed to the inability of Exelon’s nuclear plants to reduce their output during localized transmission outages (regional wind output was extremely low during all of these events), as discussed in our initial report. However, many negative price hours when electricity demand was low and wind output was also low, and thus were likely not caused by wind but rather by the inability of Exelon’s nuclear plants to respond to low demand, were still included in this analysis to conservatively assess the maximum plausible impact of wind-related negative prices. All of these negative prices were summed and multiplied by the average 2013 hourly generation for the affected Exelon nuclear plant. Even with these extremely conservative assumptions, the total impact of negative prices on Exelon nuclear plant revenue was 1/1,450th of the combined impact of the other factors discussed above.

Rebutting Exelon’s Response to our Report

While acknowledging that the data presented in AWEA’s March report is correct, Exelon has attempted to rebut the conclusions of our report. Exelon’s rebuttal centers on the fact that our report focused on day-ahead electricity market prices and not real-time electricity market prices. However, as we explained on page 10 of our March 2014 report,

“The above chart focuses on day-ahead market prices instead of real-time market prices because merchant nuclear plants almost exclusively sell their energy into day-ahead markets, so day-ahead data captures the true impact of negative prices on Exelon’s nuclear plants. However, real-time market price data also show that negative pricing occurrences are still very far below the frequency claimed by Exelon. While these real-time prices have little to no impact on merchant nuclear plants because they sell their electricity in the day-ahead market, they are included to verify that they also do not support Exelon’s claims.”

Our report then includes the following table of grid operator data confirming that the real-time market prices still do not support Exelon’s claims. Moreover, as was the case with the day-ahead market prices, many of the negative price occurrences in the real-time market are caused by the inability of Exelon’s nuclear plants to respond to transmission outages and periods of low electricity demand, and are not in any way related to wind energy.

Table 2: Occurrence of negative prices in the real-time market at Exelon’s Illinois nuclear plants

Exelon has acknowledged that its nuclear plants almost exclusively sell their electricity into the day-ahead market, as we correctly pointed out in explaining our report’s primary focus on day-ahead pricing data. Exelon has countered that due to arbitrage between the day-ahead and real-time markets, over the long-term the average power prices are the same between the two markets, which is correct. However, Exelon then incorrectly argues that because the real-time market prices are negative more often than the day-ahead prices, and because the prices between the day-ahead and real-time market must converge to an equal average over the long-term, therefore the renewable tax credit must be indirectly driving down day-ahead prices.

In reality, the greater frequency of negative prices in the real-time market is simply driven by the statistical fact that prices in the real-time market show greater variance than prices in the day-ahead market. The critical implication of the fact that real-time prices show greater variance is that the negative prices on the low end are simply canceled out by high prices on the other end of the spectrum, so the renewable tax credit is not causing a significant price decrease in either the real-time or day-ahead markets. The following chart of 2013 day-ahead and real-time market pricing at Exelon’s Clinton nuclear plant illustrates the two critical facts that prove this to be true: 1. the real-time market prices show much higher variance than the day-ahead prices, which is why there are more negative prices in the real-time market; and 2. pricing in the real-time market is normally distributed, i.e. it has a typical bell-curve shape, so that lower prices on the low end (relative to day-ahead) are canceled out by higher prices on the high end.

Figure 2: The left side of the chart shows that real-time prices have a much wider distribution than day-ahead prices, so there are more negative prices but they are canceled out by more high prices; the right side shows the center of the distribution in more detail to confirm that both sets of prices approximate a normal distribution and that negative prices are extremely rare. From 2013 market data for Exelon’s Clinton nuclear power plant.

In the case of pricing at the Clinton nuclear plant, the standard deviation for the real-time pricing is $23.6/MWh, much higher than the $11.3/MWh standard deviation for day-ahead pricing. PJM independent market monitor data also confirm that market-wide, real-time market prices show much higher variance than day-ahead market prices, with real-time prices having a standard deviation of around $23.70/MWh for 2012 and 2013, versus $15.50 and $18/MWh for the day-ahead market.[4]

Ultimately, precisely because the day-ahead and real-time markets have the same average price, the fact that wind-related negative prices are essentially a non-factor in the day-ahead market (as we proved in our first report) requires that they must also be a non-factor in the real-time market. Regardless, as shown in Table 2 above, real-time market price data still do not support Exelon’s claims about the frequency and impact of negative prices.

Data from PJM’s independent market monitor report confirm that wind almost never sets the market clearing price in the real-time market, and that therefore the renewable credit is almost never reflected in market prices, countering Exelon’s claims. Table 3-64 from the 2013 PJM independent market report, which was the basis for the data presented in Table 1 above, is reproduced below.[5] It shows that while wind did not set the real-time market price in 2013, in 2012 wind energy did contribute -$0.04/MWh to the average real-time price. Wind’s contribution in 2011 was -$0.03/MWh.[6] So while declines in the price of fossil fuels drove real-time electricity market prices down by $34.71/MWh over the period 2008-2013, wind’s impact from setting market prices was 1/1,000th of that amount, at three or four cents per MWh. By 2013, that impact had dropped to $0.00/MWh.

The data thoroughly disprove Exelon’s claim that the renewable tax credit is having a major impact on its nuclear fleet by causing frequent occurrences of negative prices. While wind energy is reducing electricity prices by displacing more expensive forms of generation, this is a beneficial market-based mechanism that occurs with any resource with low fuel costs, including nuclear. In fact, Exelon touts this impact as a benefit when it occurs at its nuclear plants.[7]

[1] Data from Table 2-57 in 2008 State of the Market Report for PJM, Table 3-64 in 2013 State of the Market Report for PJM, both available at http://www.monitoringanalytics.com/reports/pjm_state_of_the_market/2013.shtml

[2] A best-fit linear equation was applied to each plant-specific scatterplot of electricity demand versus electricity price on page 14 in AWEA’s March 2014 report, available at http://awea.files.cms-plus.com/FileDownloads/pdfs/AWEA%20white%20paper-Cutting%20through%20Exelon%27s%20claims.pdf. Depending on the plant, this linear function showed a decline in electricity price of between $0.29/MWh and $0.46/MWh for each 1% decrease in electricity demand. Each plant’s linear function was multiplied by the 2.7% decline in ComEd electricity demand from 2008 to 2013, and then the resulting dollar figure was summed for the MWh generated by each of Exelon’s Illinois nuclear plants.

[3] This analysis focuses on negative prices at Exelon’s nuclear plants because that is the claim Exelon has made in attacking the renewable tax credit. Exelon has focused on this argument and not the real impact that wind and other low-cost sources of energy have in the electricity market by displacing more expensive forms of generation. As explained at length in our report, that real impact is entirely market-based, occurs for all low-cost sources of energy including nuclear, and is widely regarded as beneficial, including by this Exelon report that touts this impact as a benefit when it occurs at one of its nuclear plants: http://www.exeloncorp.com/assets/energy/powerplants/docs/Limerick/dwnld_LGSBenefitsReport.pdf

[4] Table 3-60 and 3-66 in 2013 State of the Market Report for PJM, available at http://www.monitoringanalytics.com/reports/pjm_state_of_the_market/2013.shtml

[5] Ibid. Table 3-68 shows a similar pattern for the Day-Ahead market, with coal and gas making the largest contributions of any fuel to market prices, in contrast to wind’s direct impact of $0.00/MWh.

[6] 2011 State of the Market Report for PJM, Table 2-39.


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