Exelon Corp.has been a climate change evangelist for 20 years, billing itself as one of the greenest, lowest-pollution-emitting power producers in the country.
The nation’s largest owner of nuclear power plants also is one of its top wind power owners.
But with nearly half of its profits coming from its nuclear fleet and low-cost wind power cutting into its margins, Exelon is in Washington leading a fight to kill a tax credit the wind industry says is crucial to its survival.
“The (production tax credit) has been in place since 1992, I believe,” Exelon Chief Executive Christopher Crane said in a conference call with investors and analysts Wednesday. “And I think that’s enough time to jump-start an industry, 20 years. So we’ve made it known, even as a wind company, that it should be stopped.”
Crane, who comes from the nuclear power industry and took over the helm of Chicago-based Exelon this year, also said $425 million the company had earmarked for wind investment in 2013 and 2014 will likely flow to other technologies, in particular, solar, if the tax credits are not extended by their expiration date at the end of 2012.
The company’s lobbying has outraged wind power advocates and runs counter to efforts by wind power and utility industry groups that count Exelon as a member.
“Exelon has been advertising for years how green the company is. They’ve been showcasing wind turbines on their materials. They’ve been proud of their sustainability footprint,” said Howard Learner, executive director of the Chicago-based Environmental Law and Policy Center. “Exelon coming out to oppose reasonable incentives that are working to spur wind power development is just tone-deaf.”
Learner added that other forms of power generation also receive subsidies, and that “everyone would like to pick and choose the subsidies they want and get rid of others. Wind power is growing significantly enough that Exelon appears to fear it will erode the market price for its nuclear generation and it wants to stymie a competitor. That’s what going on.”
David Loomis, director of the Center for Renewable Energy at Illinois State University, said at a news conference last month that the wind power industry is “on the cusp of seeing real price declines, which is why the subsidy is needed. In three to five years wind energy will be cost competitive with other forms of electrical generation without the subsidy.”
Wind power provides a fraction of power in the U.S., but once the turbines are running, they depress electric prices because wind as a fuel is free. At certain times, such as the middle of the night, wind power can help drive electricity prices to below zero, experts said.
“Primarily as zero cost wind enters the system, fewer and fewer coal and gas plants are needed to meet electricity demand, and that lowers the marginal cost in the market for power,” said Travis Miller, director of utilities research at Chicago-based Morningstar. He added that the surge in wind investments in Exelon’s backyard is compressing margins for its nuclear fleet.
A recent study by Synapse Energy Economics, a consulting firm in Cambridge, Mass., confirmed that Midwest wind installations are driving down electricity prices.
Exelon also has been hurt by low natural gas prices, which are driving down prices overall, and a lower demand for power. The company Wednesday reported second-quarter net income of $286 million, or 33 cents per share, on sales of $5.95 billion – below Wall Street expectations.
In response to questions posed by the Tribune, Exelon said it will only invest in wind power if the technology makes sense economically. Exelon’s portfolio consists of 55 percent nuclear; 28 percent natural gas; and less than 3 percent wind power.
Edison Electric Institute, the industry association for shareholder-owned electric companies, and the American Wind Energy Association, which both count Exelon among their members, have supported the extension of the wind production tax credit.
Illinois U.S. Sens. Dick Durbin and Mark Kirk have announced their support for the extension. The state was second in the nation for the amount of wind power it installed last year and is fourth for overall wind power installed. Thirteen wind power businesses have their global or North American headquarters in downtown Chicago.
Crane told investors this week that subsidizing a single source of power can create distortions in the market.
“Exelon is part of a growing contingent of companies and other stakeholders who recognize that the production tax credit for wind has achieved its goal of jump-starting the wind industry and after 20 years, should be allowed to sunset as required by the existing law,” the company said in a statement.
“These groups agree that it is now time for federal government to stop picking energy technology winners and losers through subsidies like the PTC and to allow market forces and state and local renewable portfolio standards to work. Exelon is a leading wind energy company and supported Illinois’ 2007 legislation, creating a goal of 25 percent renewable energy by 2025.”
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