Minding the Energy Gap What’s at Stake for U.S. Nuclear Plants William A. Von Hoene, Jr. Senior Executive Vice President and Chief Strategy Officer April 23, 2014
Exelon Overview: Clean Energy in Restructured Markets Exelon Generation Exelon Utilities Power Generation Constellation ComEd, PECO & BGE Retail ail & Wholes lesale ale Generation • One of the largest merchant • Leading U.S. competitive • One of the largest U.S. electric fleets in the nation (~35 GW) energy provider and gas distribution companies • One of the largest and best • Customer-facing business, with (~6.6 M customers) E • Diversified across Illinois, managed nuclear fleets in the ~1.1 M competitive customers x world (~22 GW) and large wholesale business Maryland and Pennsylvania e • Significant gas generation • Extensive suite of products • Significant Smart Grid l o capacity (~10 GW) including Load Response, investments n • Renewable portfolio (~1.5 GW), • Transmission infrastructure RECs, Distributed Solar mostly contracted improvement Regulated Business Competitive Business Exelon is one of the largest competitive integrated energy companies in the U.S. 1
Nuclear Reliability Nuclear provides 20% of the nation’s power • Highest capacity factor of any source • No other always-on generation provides such reliable baseload output U.S. . Capac acit ity Factor ors by Fuel l Type e (2012) 1 Average verage Capacit ity Pe Percen entage tage Oil - il - 10% Gas as (Steam am Tur urbine) ine) - 15% “Nuclear energy is Solar lar - - 2 27% 7% Win Wind - 31% important tant to Hydro - o - 42% meeting our nation’s Coal Co al - 55% Gas as (Co Combined ned Cy Cycle le) - 56% energ ergy needs eds ” Biom Bi omas ass - 62% Geo eothe hermal al - 69% 2013 National Nuclear Plant Neighbor Nuc ucle lear - 86% Survey of Exelon’s Illinois nuclear fleet, Bisconti Research Inc. Exe xelo lon n Nuc ucle lear ar - 93% 0 20 40 60 80 100 1 Source: Ventyx Velocity Suite / Energy Information Administration Updated: 4/13 2
Nuclear Performance During Polar Vortex “Frigid Winter Reduces Natural Gas Supplies to 11 - Year ar Low ow ” “Polar Vortex – Nucl clear ear Saves aves The e Day ” Energy gy “ERCOT Sets New Winter Peak Demand - Real al Time me Pric ices es Hit $5,000/ ,000/MWh MWh Cap on January 6, 2014” In Insi sider er “Cold Drives Electricity Demand to New Winter High; PJM Interc tercon onne nectio ction n Repo ports ts Reco cord rd Winter nter Mega gawat att t Use ” “Frigid Temperatures from Polar Vortex Drive Record Winter nter Demand and ” 3
Efficient, Productive Operations Nuclear Production Cost ($/MWh) (1) Capacity Factor (%) (2) 14% 100.0 EXC (3) 32.00 31% Nuclear Production Cost (‘ 08- ’12) 30.00 Nuclear Capacity Factor (‘ 08- ’12) 14% 95.0 28.00 EXC (3) 26.00 90.0 24.00 22.00 85.0 36% 20.00 18.00 80.0 16.00 14.00 75.0 Range 5-Year Average Range 5-Year Average 12.00 10.00 70.0 Operat ator or Operat ator or Among major nuclear plant fleet operators, Exelon is consistently one of the lowest-cost and most efficient producers of electricity in the nation (1) Source: 2012 Electric Utility Cost Group (EUCG) survey. Includes Fuel Cost plus Direct O&M divided by net generation. (2) Source: Platts Nuclear News, Nuclear Energy Institute and Energy Information Administration (Department of Energy). (3) Exelon fleet averages exclude Salem and CENG 4
Perfect Storm of Economic and Policy Challenges • Key factors contributing to the dramatic deterioration of nuclear plant profitability since 2008: • Natural gas prices (which fuels marginal generators in many regions) have dropped by more than 50% • Load growth is down due to both the economy and increased energy efficiency programs • Subsidized generation uneconomically suppresses market prices • Wholesale market rules do not support the nation’s carbon goals and under-compensate existing resources critical to reducing GHG emissions 5
What Experts Are Saying “ It is increasingly likely that the United States could see a significant percentage of its nuclear power plants close, thanks to low natura ural gas pri rices es and ongoing ng subsidies sidies for renewable energy y … [I]f you care about climate change this is very bad news .” Shutting Down U.S. Nuclear Plants is Still Bad News for Environmentalists (3/2014) “ We see the combination of state-by by-sta tate renewable les s mandates es and energy y effici ciency ncy ini niti tiati tives es as inevitably leading to a supply/demand imbalance that will put further pressure on baseload coal and nuclear retirements...” (11/15/2013) “ Quite frankly, subsidiz sidized d wind d is one of the things that is putting pressure on those prices, particularly in some areas of our footprint where we’re seeing these nuclear units really starting to struggle … It concerns us when nuclear starts to prematurely retire, only because we’re not going to get them back once they go.” Michael Kormos, PJM, FERC Technical conference (4/1/2014) “Complex mark rket et policy y fa factor ors s and the abunda dance nce of natura ural gas have made operating nuclear power plants uneconomical in some parts of the country, resulting in shutdowns of four nuclear reactors, with another planned for next year.” Peter Lyons, Assistant Sec. for Nuclear Energy, House Appropriations Hearing (3/25/2014) “ We are concerne rned d about the economic mic viability ty of the exist sting ng nuclear ar fleet et in our region n due to pricing pressure from all of these exogenous events.” Letter from PJM President and CEO to EPA Administrator Regina McCarthy (1/30/2014) 6
Clean Generation Growth Projects Solar Wind Nuclear Uprates • Antelope Valley Solar Ranch • Six projects totaling 404 • Peach Bottom Extended Power Uprate ― Large-scale solar project MW integrated into totaling 230 MW when commercial operation in — Adding 130 MW: 65 fully operational 2013 MW in Q1 2015 and — All have long-term PPAs 65 MW in Q1 2016 153 MW added in 2013 with ~10-year Expected completion in anticipated payback first half of 2014 • 45.6 MW Michigan wind ― 25-year PPA with Pacific farm to be built in 2014 Gas & Electric Expanding contracted wind and solar portfolio while adding megawatts to existing nuclear fleet 7
Nuclear Closures’ Impact on Carbon Goals Retirement of 25% of nuclear fleet would give back over half the progress to date towards meeting 2020 emission reduction goal Carbon Emission Reductions vs 2005 (Million Tonnes) 0 -50 Announced -100 Retirements -150 5% -200 100% 78% -250 32% -300 60% -350 22% -400 Goal -450 Electric Sector Emission Reductions Emission Increase Due Portion of Goal Met Emission Reduction from 2005 to 2011 to Announced Nuclear and Remaining Goal: 17% of 2005 Retirements plus Reductions Needed Emissions by 2020 Retirement of a Further 25% of Fleet Nuclear retirement increase assumes retirement of SONGS, Crystal River, Kewaunee, Vermont Yankee, and Oyster Creek plus 24.6 GW of additional “ generic ” capacity (29.4 GW total, including the announced retirements). Nuclear output is assumed to displace carbon at a rate of 0.67 tonnes per MWh of lost output. Exelon ’ s nuclear fleet contribution is measured at the overall plant level, rather than at ownership. “ Nu Nuclea lear r power er has an impor ortan tant role le to play in the climate e action tion plan as a low-carb rbon on source e of ener ergy. ” - Ener ergy Sec ecretar tary Ernest est Moniz iz at the Amer eric ican Nu Nucle lear ar Socie iety ty 2013 Winter er Meetin ting Source: EIA; Exelon Estimates 8
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