Capacity pricing a rare bright spot for U.S. nuclear as Clean Power Plan and PTC threaten

The topics here are too complex to review in detail outside of a book, but in one blog post I'll try connect some recent articles to demonstrate a recent capacity auction, while positive for reliable generators, is unlikely to halt the impacts of the President's Clean Power Plan (CPP) and currently idled Production Tax Credit (PTC). Combined, the CPP and PTC spell trouble for existing nuclear generators.

Exelon has many nuclear reactors, a number of which are in Illinois. The company recently released financial information which is communicated in Crain's "Exelon's case for how poorly its nukes are doing."

In a bid to build more support for subsidies financed by rate payers, the state's largest power generator provided Crain's with its most detailed look at the financials of the company's six Illinois nuclear stations.
...
Five of its six Illinois nukes are dual-unit stations with costs that are roughly the same—$33 to $34 per megawatt-hour of electricity produced...
At Exelon's plant in Clinton—a single-unit generator between Peoria and Springfield—costs run higher, at $38 to $39 per megawatt-hour.

That probably sounds cheap to end consumers,- but market prices are far different:

Round-the-clock energy prices right now for 2016 and 2017 are a little over $30.50 per megawatt-hour. That's down from about $33 a year ago for those time frames. Capacity prices are on the rise thanks to auction changes PJM has engineered to increase them.

Crain's is totally out to lunch on why PJM changed capacity rules. They get it exactly wrong elsewhere in the article:

Sloppy Electricity Rate Making, reporting and politics

If you follow the economic challenges of an electricity environment with variable intermittent generation being forced onto the grid, you really must read the latest from Severin Borenstein, The Decline of Sloppy Electricity Rate Making

Something is dying alright, just not the utility. It’s the ability of regulators, utilities, and interest groups to push around revenue collection among customers without the customers pushing back.

Read the bill from carefully - important to understand net metering in California 

• Try to punish high-consuming households by raising their price many times above cost – as has been done in California for the last 15 years – and they will now install solar to reduce their grid purchases, undermining revenue collection.

• Try to use “demand charges” that are based on a customer’s peak usage — regardless of whether its peak coincides with system peak — and soon they will be installing batteries to smooth their peak, but in many cases without helping to lower grid costs.

• Try to raise retail rates for most customers in order to offer discount electricity to low-income households and the high-price customers will turn to all forms of distributed generation instead of subsidizing the poor.

• Try to stick commercial and industrial customers with more of the utility costs and they will invest in CHP and other onsite technologies.

• Try to encourage demand shifting to off peak with exaggerated peak-period prices during all summer weekdays and the customer will use batteries to shift not just on the hottest high-demand days, but also on days when there is no benefit to society, though still an arbitrage play for the customer.

While Professor Borenstein lays out the limitations of tricks to shift costs to politically weak user groups (as Ontario has done), a more popular figure was speaking against actions such as changing grid charges to reflect the value of connection to a grid:

Ontario's electricity market gamed: OEB ...and others

The Ontario Energy Board today posted a letter to the head of the IESO (Ontario's electricity system operator) regarding the gaming of one aspect of the IESO's operation.

Dear Mr. Campbell: 

RE: Market Surveillance Panel Investigation Report

The Market Surveillance Panel’s (MSP) Report on an Investigation into Possible Gaming Behaviour Related to Congestion Management Settlement Credit Payments by Abitibi-Consolidated Company of Canada and Bowater Canadian Forest Products Inc. was posted today on the OEB’s website. In its Report, the MSP concludes that the two market participants, through deliberate market conduct, engaged in gaming in relation to Congestion Management Settlement Credit (CMSC) payments at a time when they were operating as dispatchable loads.

...
I would appreciate if you would advise me in writing within 30 days of: a) the steps that the IESO plans to take in response to the recommendation in the MSP’s Report and the timelines for completion of those steps; and b) whether, in the IESO’s view, any actions or market rule amendments, in addition to those reflected in the MSP’s recommendation, should be taken or initiated.

The particulars of the gaming scheme couldn't be as interesting as the head of the regulator requesting the head of the IESO inform of any possible action on gaming 6 months after the February report was produced - but I glanced through for dollar values anyway.

Bowater’s high bid prices were used to obtain CMSC payments that more than compensated Bowater for operating profit reductions by at least $10.3 million. 

... All customers in the wholesale energy market were disadvantaged by paying additional Uplift charges of $0.12/MWh as a result of Bowater’s behaviours.

...Bowater exploited market defects. In so doing, Bowater received $11.0 million in CMSC payments during the Relevant Period, and there was a corresponding disadvantage or expense to the market. Bowater’s conduct constitutes gaming.

and for Abitibi

From 140% Wind Power Record to Calm

Several international media reported enthusiastically about the 140% wind power record in Denmark during the night of 10th July. However, the wind dropped already the next day

I've not visited Paul-Frederick Bach's blog for a while. This report (.pdf) can be a great introduction to the analysis there or, as it was for me, a reminder to keep going back.

The happy message that Danish wind power production reached 140% of the electricity demand was distributed by several international media, for instance with these headlines:

The Danish Broadcasting Corporation (DR) boosted the success by claiming that wind has covered 140% of Denmark’s energy demand...

On the other hand some people have claimed that the surplus electricity was exported at very low prices, while Denmark had to pay high prices for the import. This note presents facts on production and exchange of electricity in Denmark from 9th to 11th July 2015. The note is based on data, which are published daily by www.nordpoolspot.com and energinet.dk.