NEW YORK (Reuters) - U.S. nuclear power generators are sticking with plans to shut several reactors after none of them won the right to supply capacity in an auction by the country’s largest power grid despite higher winning prices, energy companies and analysts said on Thursday.
Major nuclear power providers, including Exelon Corp and FirstEnergy Solutions, bid in an annual auction held this month by grid operator PJM Interconnection to make sure there is enough resources available for upcoming years.
This year’s auction, which was awarded on Wednesday, came to $9.3 billion for the June 2021-May 2022 delivery year, said PJM, which controls the grid in 13 Mid-Atlantic and Midwest states. Last year’s auction fetched $7 billion.
In recent years, natural gas has become the nation’s dominant provider of power generation, with nuclear and coal slipping because of elevated costs for those fuels.
Nuclear and coal operators have said they want to see additional subsidies and market rule changes to allow them to keep operating as they provide what is known as base-load generation - power available around the clock.
This auction involves bids for capacity; PJM awards the capacity to the generators that can offer the lowest cost. This auction produced a price of $140 per megawatt-day for much of the PJM footprint, compared with $76.53 last year.
That figure was still too low for some of Exelon and FirstEnergy’s plants. Those operators are looking to Washington and individual states for relief to keep operating.
Exelon, the biggest U.S. operator of nuclear power plants, said after the auction that it still planned to shut its 805-megawatt Three Mile Island reactor in Pennsylvania in October 2019 and the 615-MW Oyster Creek plant in New Jersey this October. Oyster Creek did not participate in the auction.
FirstEnergy Solutions, a bankrupt unit of FirstEnergy Corp, said the auction had no impact on its operations. The company said in March it planned to retire the 1,240-MW Perry and 894-MW Davis-Besse nuclear plants in Ohio and 1,808-MW Beaver Valley in Pennsylvania in 2020 and 2021.
One megawatt can power about 1,000 U.S. homes.
While the auction was tough on nuclear reactors, it was a boon to energy companies that burn gas and coal to generate power like NRG Energy Inc and Vistra Energy Corp, which both saw their shares rise by nearly 4 percent on Thursday.
Exelon and FirstEnergy both said they will continue to work with federal and state officials and PJM on broader market reforms that could keep some reactors from shutting.
“Now, more than ever, we need federal, regional and state policymakers to urgently take action to preserve the benefits that our nation’s largest and most resilient source of emissions-free energy provides to our customers,” Kathleen Barrón, Exelon’s senior vice president of government and regulatory affairs and public policy, said in a statement.
Nuclear operators have complained that the way energy prices are set in PJM does not compensate them for their contribution to grid resiliency and their ability to produce large amounts of carbon free energy. Some states provide subsidies, including New York and Illinois, and this week, New Jersey passed a bill that will compensate nuclear operators providing power to the state.
Resiliency became an issue after U.S. Energy Secretary Rick Perry in September 2017 asked federal energy regulators to adopt rules to protect so-called fuel secure coal and nuclear plants from early retirement.
“We remain skeptical that long-term federal or state subsidies are likely, but we’re more optimistic about reforms put forward by PJM,” said Katie Bays, an energy analyst at Height Securities in Washington.
PJM is testing the resiliency of its grid and is also developing a plan that could change the way the market compensates generators for the energy they produce, which could increase revenues for both coal and nuclear plants.
Of the 99 nuclear reactors operating in the United States, capable of generating about 99,300 MW, 33 are in PJM. Those units are capable of producing almost 34,000 MW.
Reporting by Scott DiSavino; Editing by Steve Orlofsky and Marguerita Choy
Our Standards: The Thomson Reuters Trust Principles.