Thursday, February 5, 2015

Grain Belt Express, Illinois jobs, and the Cost of Energy



"When the common good of a society is regarded as something apart from and superior to the individual good of its members, it means that the good of some men takes precedence over the good of others, with those others consigned to the status of sacrificial animals." Ayn Rand



Yes, I take a bit of a libertarian view on the energy market.   Deregulation in itself is not that bad of an idea.  Let energy generators compete in an open balanced market.  In theory this is who the wholesale market was supposed to work in Illinois.   Based on supply and demand a price is determined where energy retailers buy it from to resell it to consumers.  The industry calls this Locational Marginal Price (LMP).  This price fluctuates throughout the day, and in theory generators can choose to sell energy or not at the price.

The problem with this is the government cannot keep from messing with energy.  The governor, state politicians, state bureaucrats, the Illinois Commerce Commission, the Federal Energy Regulatory Commission, the Environmental Protection Agency, the President of the United States, the Department of Energy, and federal Legislature all believe it’s their job to create, promote or enhance energy policy.  Consequently, with all these hands in the pot, an open deregulated market is bastardized.    Sweetheart deals are given.  Winners are chosen and losers can … well just go suck it. 

 
A Simple Explanation on the Wholesale Energy Market
Illinois consumers are not the only ones who suffer from bureaucrats tinkering with energy policy in this “deregulated” economy.   With all the sweetheart deals given to wind energy, baseload generators are finding the price being suppressed by wind.   Exelon’s Clinton plant is struggling and not profitable. 

Wind gets the production tax credit and most wind farms receive a 20 year Power Purchasing Agreement where they receive a premium.  I think ComEd customers are buying wind energy at over $55 per megawatt through the Illinois Power Agency, while the current price of energy in the Northern Illinois Hub is $28.63 per megawatt.  Wind is getting a premium plus the Production Tax Credit to give in an incentive and doesn’t give a dang what the actual market price is.



Exelon’s Dilemma
Because of this situation, Exelon’s nuclear plants are struggling to be profitable.  The Clinton plant  receives the MISO Locational Market Price (LMP) unlike the remainder of Exelon’s Illinois plants that are sell off the PJM LMP (the wholesale price based on supply and demand).  Unfortunately for Exelon, the Clinton, Byron, and Cordona are in rural Illinois, do not feed the Chicgoland market directly, and these plants are struggling.  You don’t have to be a bureaucratic energy commissioner to see these are the regions heavy with wind generation.  Wind generation is driving down the LMP price with excess supply generated where it was never needed, and wind isn’t affected by the low market low price they are creating.  Wind farms are living in their own little bubble while Exelon is living in the real world.     

Making things more complicated, Exelon’s Clinton plant is an island of sorts within the MISO region.  To describe it as simply as possible, Chicagoland (the bulk of Exelon’s Illinois territory) is a part of the PJM region of the grid, while the Clinton station is a special case down in Central Illinois and in MISO (different multistate regions who operate “the grid”).  As the current price, the Clinton area LMP price is 30.08

Because the Clinton, Illinois plant is not profitable, Exelon is considering closing the plant.  Exelon’s CEO feels each plant's profitability should stand on its own.  If it’s profitable, good.  If the plant is not profitable, Exelon leadership is asking themselves “why are we keeping this place open”.  Opponents like the Environmental Law & Policy Center claim nuclear cannot compete with heavily subsidized wind and Citizens’ Utility Board feel Exelon should consider all six of Exelon’s nuclear plants collectively and not consider the profitability of an individual plant. 

Exelon has a valid point.  Clinton is not profitable.  The company is losing money on this plant because the price of energy is too low.  Basic business common sense say if you don’t make a profit on a business venture, shut it down.  It is as simple as that.  The corporation is not in the business to provide baseload energy for the benevolence of Illinois ratepayers while wind farms are getting a sweetheart deal.  Exelon is not a charity and this is not a short term problem.   

Relying purely on the market and external initiatives to make corrections is ideally the best idea.  This means scraping the state’s Renewable Portfolio Standard and changing the law where ComEd and Ameren is not mandated to buy high priced wind energy from the Illinois Power Agency.


Under current circumstances as they may be, why is the Grain Belt Express Clean Line good for Central Illinois?

GBE will be dumping Kansas wind energy in the backyard of the Clinton nuclear station.  Would are Illinois legislatures risking closing down a nuclear plant that supplies 652 of legitimate well paying jobs, plus the supporting employment?  Clinton plant has a payroll of $54 million.  That’s an aver pay of over $82,000 a year.  Why are Illinois legislatures risking millions of dollars annually in tax money from this nuclear station and considering the “benefit” of wind energy from Kansas? 

No, Exelon is not holding a gun to the heads of Illinois consumers and saying “if GBE comes through Illinois to just across the Indiana border, Exelon will shut down Clinton”.  At this point no one else is asking this question, but what are we doing here?  Are we willing to job economically priced energy made in Illinois for wind plus the cost of transmission from Kansas?  

 This isn’t like wind energy is more competitive and nuclear energy is inefficient.  Big Sky Wind Farm in Lee County went bankrupt in 2013 because it could not make a profit without a sweetheart Power Purchasing Agreement.  There is simply a surplus, a glut, in the energy market.  We overbuilt wind farms with Obama Stimulus of 2008.  We didn’t need wind farms but America built them anyway with no regard to market pricing. 

How much more do Illinois ratepayers need to sacrifice to wind corporations?  Haven’t we given enough yet?  A deregulated energy economy is not a bad thing, but the politicians need to keep their grimy hands off it.  If we don't need Kansas wind, we surely do not want Grain Belt Express being built across the state.

When wind, nuclear, hydroelectric, natural gas, and coal generation are all competing in the same market and making market based decisions, we all win.  We buy the most economically priced energy and the least cost generator produces it while making a profit.  Once the government gives wind energy special precedent over other energy generation, everyone else loses.  There will be ramifications.  It is basic cause and effect.  Illinois will lose jobs, tax revenue, and pay more for energy. 

These are the sacrifice Illinois ratepayer pay when politicians tinker with energy policy.  We have been the politician’s sacrificial lamb to their false god of wind energy long enough.   We don't want Grain Belt Exress in Illinois.

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