Data show wind energy reduces energy bills through market competition, contradicting Exelon’s claims

WASHINGTON—The American Wind Energy Association today released a large body of independent grid operator data that directly contradicts claims Exelon has made about the market impact of wind energy.

Exelon, the largest owner of merchant fossil and nuclear power plants in the U.S., has been leading a campaign to undermine broad bipartisan support for wind energy with the argument that the renewable Production Tax Credit causes frequent occurrences of negative electricity prices at Exelon’s nuclear power plants.

“The evidence tells a different story,” said Michael Goggin, AWEA’s Senior Electric Industry Analyst and author of the new study, “The Facts About Wind Energy’s Impact on Electricity Markets: Cutting through Exelon’s claims about ‘negative prices’ and ‘market distortion.’”

“Exelon’s campaign confuses the consumer benefits of wind energy with an exceedingly rare and isolated issue called negative pricing,” Goggin said. “Grid operator data show Exelon has overstated the frequency of negative prices at its nuclear plants by a factor of 20, and that in fact the majority of these negative prices were actually caused by Exelon’s own nuclear plants and not wind. Regardless, negative price occurrences are being eliminated anyway by long-needed grid upgrades.”

“Wind energy’s impact on markets is positive, by displacing more expensive forms of energy,” Goggin said. “Moreover, this impact is entirely market-driven, is widely seen as beneficial, and occurs for all low-fuel-cost sources of energy, including nuclear. In fact, Exelon has touted this impact as a benefit when it occurs at its nuclear plants.”

The study provides evidence that:

• Negative electricity prices at Exelon’s nuclear plants are extremely rare, occurring at a fraction of the rate claimed by Exelon. Grid operator data document that Exelon has repeatedly overstated the frequency of negative prices at its nuclear plants by a factor of 10-20 times the actual frequency.

• The majority of those negative prices are not caused by wind energy, with many apparently caused by Exelon’s own nuclear plants. The vast majority of these negative price occurrences occurred when wind output was very low. Instead, the data show most of these negative prices were caused by the inability of Exelon’s nuclear plants to reduce their output in response to periods of low electricity demand or localized transmission outages. Nationwide, negative prices are rapidly being eliminated as long-needed transmission upgrades are completed to solve bottlenecks on the power grid, and regardless negative prices are typically limited to isolated areas where they have little to no impact on other generators.

• The wind Production Tax Credit is almost never factored into the electricity market prices that other power plants receive. For the PTC to be reflected in electricity market prices and cause negative prices, wind energy would have to set the market clearing price. That almost never happens because wind energy has no fuel cost and a much lower marginal operating cost than other resources that have fuel costs. Regardless of whether a wind plant receives the PTC, the wind plant does not have the highest operating cost and therefore does not set the market price.

• The real threats to Exelon, and the economics of nuclear generation in general, come from cheap natural gas and low electricity demand. Numerous utility industry experts, and even Exelon’s own statements and reports, show that declining natural gas prices and flat electricity demand are by far the largest challenges to the sector.