American Wind Energy Association I www.awea.org | March 2014 | Page 1

The facts about wind energy’s impacts on electricity markets:

Cutting through Exelon’s claims about

“negative prices” and “market distortion”

Michael Goggin, Senior Electric Industry Analyst | American Wind Energy Association I March 2014

American Wind Energy Association I www.awea.org | March 2014 | Page 2

Exelon, the largest owner of merchant fossil

and nuclear power plants in the U.S., has

been leading a campaign to undermine the

broad support for wind energy with the

argument that the lower electricity prices

brought about by wind energy are somehow

a bad thing.

The crux of Exelon’s campaign against wind energy

has been to conflate two very different phenomena:

1. The real economic savings wind energy

provides to consumers by displacing more

expensive forms of energy, and

2. The exceedingly rare and geographically

isolated occurrences of negative prices,

which have no significant impact on other

energy sources and which are being

eliminated by long-needed grid upgrades.

Wind energy does have an impact on markets by

displacing more expensive forms of energy. However,

this impact is entirely market-driven, is widely seen as

beneficial, and occurs for all low-fuel-cost sources of

energy, including nuclear.

In fact, Exelon has touted this impact as a benefit

when it occurs at its nuclear plants. This real story of

wind energy successfully competing against more

expensive forms of energy in the market doesn’t

make for a compelling argument against wind energy.

Instead, Exelon has developed an alternate story

about wind’s market impact, built around the claim

that the renewable energy Production Tax Credit is

distorting markets by causing frequent occurrences of

negative electricity prices at Exelon’s nuclear power

plants. However, that claim is false for a number of

reasons:

The Production Tax Credit is almost never

factored into the electricity market prices that

other power plants receive;

Negative electricity prices at Exelon’s nuclear

plants are extremely rare, occurring at a fraction

of the rate claimed by Exelon;

The majority of those negative prices are not

caused by wind, with many apparently caused by

Exelon’s own nuclear plants; and

Across the U.S., transmission upgrades are

eliminating the remaining instances of negative

prices.

Introduction

American Wind Energy Association I www.awea.org | March 2014 | Page 3

This report presents the facts on wind’s impact on

electricity markets, which are documented with

detailed data in the body of the report and

appendices. To summarize:

Wind energy reduces electricity prices

because it has no fuel cost. Exelon’s central

argument that the renewable energy Production Tax

Credit (PTC) significantly distorts electricity markets is

false because the PTC is almost never factored into

the electricity market prices that other power plants

receive. Exelon’s campaign rests on a bait-and-switch

that conflates two entirely separate phenomena:

1. The real impact of wind energy on electricity

markets is that it displaces more expensive, polluting

sources of energy with zero-fuel-cost wind energy,

driving down electricity prices and saving consumers

money. This impact is an entirely market-based

phenomenon that occurs whether or not wind energy

receives the PTC.1 Moreover, it occurs with any low-

fuel-cost energy source, including nuclear, as Exelon

has noted. This effect is widely regarded as

beneficial, as replacing the most expensive and

polluting sources of energy is why utilities chose to

build wind energy in the first place, and why the public

overwhelmingly supports greater use of wind energy.

Wind energy’s benefits for consumers are quite large,

and have been documented by more than a dozen

studies by independent grid operators, state

governments, academics, and others.2 However, the

real story of wind energy successfully competing in

the market against more expensive forms of energy

doesn’t make a compelling argument against wind.

Instead, Exelon has developed a different story.

2. The second type of phenomenon, which Exelon

has tried to conflate with the first, are exceedingly rare

and geographically isolated instances of negative

electricity prices. Negative prices occasionally occur

1 Because wind energy has no fuel cost and a much lower

marginal operating cost than other resources, it is the lowest cost resource whether or not it receives the PTC. It doesn’t matter whether the wind plant offers a low positive price without the PTC or a negative price with the PTC, as except under the extremely rare circumstances discussed later the wind plant is not the most expensive power plant and therefore its offer does not set the market price. 2 A list of these studies is available in our report, “Wind

Power’s Consumer Benefits,” at http://awea.files.cms-plus.com/AWEA%20White%20Paper-Consumer%20Benefits%20final.pdf

in isolated pockets of the electric grid, when

congestion on transmission lines keeps low-cost

energy from reaching the consumers who want it.

Exelon has misrepresented the frequency, cause, and

impact of those occurrences, and then tried to

conflate them with the real, widespread, and highly

beneficial impact that wind energy has on electricity

markets.

Contrary to Exelon’s claims, negative prices

at its nuclear plants are extremely rare, and

getting rarer. On numerous occasions Exelon has

claimed that its Illinois nuclear plants face negative

prices around 14% of the time.3 As shown in the table

below, regional grid operator data4 document that in

all cases Exelon has grossly overstated the frequency

of negative prices at its nuclear plants, by a factor of

at least 10 in most cases, and in some by a factor of

20 or more. Specifically, Exelon’s claim for the rate at

which its Illinois nuclear fleet sees negative prices is

more than 20 times too high. In 2011 and 2012, the

Byron nuclear plant saw negative prices at 1/10th the

rate claimed by Exelon’s CEO, and 1/20th of that rate

in 2013. Similarly, the Exelon CEO’s claim for the

number of hours the Clinton plant sees negative

prices is 10 times higher than reality. The LaSalle

plant that Exelon claimed it had chosen not to uprate

due to negative prices has seen negative prices only

0.13% of the time over the last three years.

3 For example, in February 2013, Exelon’s CEO stated that

its Byron nuclear plant sees negative prices 16% of the time. In May 2013, Exelon’s CEO said that its Clinton nuclear power plant, along with the rest of the nuclear fleet, sees negative prices about 14% of the time. In June 2013, Exelon announced that it would not be uprating the capacity of its LaSalle nuclear plant in Illinois, blaming that decision on negative prices caused by wind plants. On an October 2013 earnings call, Exelon’s Senior Vice President claimed that its most-affected nuclear plant (presumably Quad Cities) saw negative prices in about 14% or 15% of off-peak hours in 2012, and that the frequency was only 4-6% lower in 2013. 4 Day-ahead market price data for the PJM and MISO

independent system operators. We primarily focus on day-ahead market prices instead of real-time market prices because merchant nuclear plants almost exclusively sell their energy into day-ahead markets. Regardless, real-time market price data, presented in the body of this report, also show that occurrences of negative prices are very far below the frequency claimed by Exelon.

Executive Summary

American Wind Energy Association I www.awea.org | March 2014 | Page 4

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton Fleet-wide

Share of day-

ahead prices

below $0, 2013

0.10% 0.01% 0.42% 0.78% 1.15% 1.31% 0.63%

% <$0, 2012 0.03% 0.00% 0.30% 1.55% 3.80% 2.38% 1.34%

% <$0, 2011 0.27% 0.08% 0.34% 1.40% 1.32% 1.28% 0.78%

What Exelon

claimed

Enough

to

cancel

uprate

NA NA 16%

14-15% of

off-peak

hours

14.00% 14.00%

Moreover, the majority of these negative

price occurrences were not caused by wind

energy, and Exelon’s nuclear plants

themselves appear to have caused a large

share of these negative prices. If Exelon were

correct, and wind plants were the primary factor

causing these negative prices, one would expect to

only see negative prices during hours when the

region’s wind plants were producing at nearly full

capacity. However, for four of Exelon’s six nuclear

power plants, most negative price instances occurred

when wind plant output was below average, while for

the other two plants they occurred on average when

wind output was only slightly higher than average, as

shown in the table below.5 In addition, a large share of

these negative prices were too high or low to be set

by wind projects.

5 PJM grid operator data indicate that for the PJM West

region, the average wind output as a share of maximum wind output was around 32.7% in 2013. Wind output data for the neighboring grid operator, MISO, are also analyzed in the body of the report, and they further confirm that wind plant output tends to be below average during most negative price occurrences at Exelon’s nuclear plants.

What did cause these negative prices? Three

distinct events that are unrelated to wind energy,

likely localized transmission outages, are alone

responsible for more than half of these negative price

occurrences. Many of the remaining instances of

negative price appear to have been caused by

periods of extremely low electricity demand. These

data not only exonerate wind energy for at least a

large share of these negative price occurrences, but

also implicate another cause – the inability of Exelon’s

nuclear plants to reduce their output in response to

periods of low electricity demand or localized

transmission outages.

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton

For negative price

hours, wind plant

output as share of

maximum output

21.5% 6.1% 47.3% 24.6% 29.7% 44.1%

American Wind Energy Association I www.awea.org | March 2014 | Page 5

Transmission upgrades are eliminating

negative prices. As compellingly documented in

the following chart by utility consulting firm Scott

Madden, instances of negative prices have rapidly

declined in all regions of the country. This is occurring

as long-needed transmission upgrades are completed

and grid operating procedures are modernized.

Moreover, because negative prices are caused by

transmission congestion, they are typically confined to

isolated pockets of the grid where they have little to

no impact on other power plants. In addition, negative

prices should not lead to confusion about wind’s

value, as every amount of wind energy that is

produced benefits consumers and the environment by

displacing an equivalent amount of output from the

most expensive, least efficient power plant.

The real challenges for Exelon, and the

economics of nuclear and merchant6

generation in general, come from cheap

natural gas and low electricity demand.

Numerous utility industry experts, and even Exelon’s

own statements and reports, show that declining

natural gas prices and flat electricity demand are by

far the largest challenges for the sector. In June

2013, just after the cancellation of the nuclear

capacity uprate, a Senior Vice President at the

company explained that cheap natural gas was the

driver of that decision, without mentioning wind

energy at all. Exelon’s quarterly financial reports have

also heavily focused on low natural gas prices and

stagnant electricity demand as the drivers of the

financial woes affecting Exelon and its nuclear fleet,

6 Merchant power plants sell their output into the day-ahead

and real-time electricity markets, while non-merchant power

plants have their output contracted under long-term power

purchase agreements with utility buyers. In most markets,

natural gas power plants set the price in day-ahead and real-

time markets the majority of the time, so electricity market

prices are extremely closely linked to the price of natural

gas. Merchant nuclear generators are highly profitable when

gas and power prices are high, but not during periods when

they are low, such as today. See Appendix 3 for more.

with scant mention of wind energy (see Appendix 3).

In 2007, Exelon moved nearly half of its generation

from long-term contracts to selling in the spot market,

a strategy that pays dividends when gas and power

prices are high, but not when they are low. In recent

weeks Exelon has been circulating a chart showing

how Exelon’s stock price has moved in almost perfect

lockstep with natural gas prices.

In summary, Exelon’s claim that the PTC

distorts market prices is false. Wind’s true

market impact is competing with and displacing more

expensive forms of energy. This market-driven impact

occurs for all low-fuel-cost sources of energy,

including nuclear. In fact, Exelon has touted this

impact as a benefit when it occurs at its nuclear

plants. Competing with and displacing more

expensive forms of energy is clearly not “market

distortion,” and doesn’t make for a compelling

argument against wind energy. Instead, Exelon has

developed an alternate story about wind’s market

impact, built around the myth that the PTC is

distorting markets by causing frequent occurrences of

negative electricity prices at Exelon’s nuclear power

plants. While that may sound more compelling, the

problem is that it is not true.

American Wind Energy Association I www.awea.org | March 2014 | Page 6

The crux of Exelon’s campaign against wind

energy has been to conflate two very

different phenomena:

1. The real economic savings wind energy

provides to consumers by displacing more

expensive forms of energy, and,

2. The exceedingly rare and geographically

isolated occurrences of negative prices that

have no significant impact on other energy

sources, and are being eliminated by

transmission upgrades.

The first phenomenon is large and widespread, is

entirely market-driven, and has tremendous benefits

for society and consumers. In fact, last month AWEA

released a white paper explaining how wind energy

reduces energy costs for consumers, as documented

by 15 independent studies and a large body of data.

Wind energy reduces consumers’ energy costs

through four distinct market-based mechanisms:

1. Wind energy displaces the most

expensive, least efficient power plants.

Zero-fuel-cost wind energy directly displaces the

output of the most expensive and least efficient power

plants that are currently operating. Like the

functioning of almost any market, electricity market

operators rank power plants based on their cost of

producing an incremental amount of electricity. They

then start by using the least-cost power plants first,

and then move up the list (the supply curve) until they

have enough electricity to meet demand (see the

conceptual illustration later in this section). The power

plant rank order is based on the cost of producing an

incremental amount of electricity, so only fuel costs

and variable O&M costs are considered.

As a result, wind energy and other low-fuel-cost

resources are always used first, and they are used to

displace the most expensive power plant that

otherwise would have operated. Because that is

almost always the least efficient fossil-fired power

plant, adding wind energy significantly reduces fossil

fuel energy costs, as well as pollution.

2. Wind energy decreases electricity prices.

A potentially far larger benefit for consumers is that

wind energy drives down the market price for all

electricity that is being sold in the market. The market

price for all electricity purchasers is set by the last and

most expensive power plant that was chosen to

operate.

By offsetting the most expensive power plants that

are currently operating, wind energy typically causes

the electricity price to be set by a more efficient and

less expensive power plant than it otherwise would be

. This results in a lower electricity price for all market

purchasers. Because the supply curve of generation

options is often quite steep, even a modest amount of

additional supply greatly reduces the market

electricity price. Moreover, because this market price

applies to all electricity sold in the market, not just the

wind generation, the savings are further multiplied.

3. Wind energy reduces prices in fossil fuel

markets. Through a similar mechanism, additional

wind energy supply also reduces prices in fossil fuel

markets, providing savings for all fossil fuel users.

Wind energy offsets a mixture of coal and gas that

depends on the regional energy mix, and in many

regions wind energy significantly reduces natural gas

prices. Because the natural gas price curve is often

very steep, and because the market price applies to

all transactions in the market, wind energy can

produce large savings for all natural gas users by

driving down the market price.

4. Wind energy acts as hedge against fuel

price volatility. Wind energy also protects

consumers against variability and uncertainty in the

price of fossil fuels. The risk of fossil fuel price

volatility makes consumers worse off, and one of the

most effective tools for reducing that risk is by

diversifying the energy mix with zero fuel cost wind

energy.

Over the long-term, wind energy helps to hedge

against volatility in the price of fossil fuels even during

periods of low natural gas prices, much like a fixed-

rate mortgage protects consumers from interest rate

fluctuations. Wind’s role in protecting consumers from

price spikes in the short term was demonstrated in

three separate cold snaps that caused electricity and

natural gas shortages in early 2014. During each

event, high wind energy output helped to keep price

spikes for both electricity and natural gas in check.

I. Wind energy reduces electricity prices and

benefits consumers, without any “distortion”

American Wind Energy Association I www.awea.org | March 2014 | Page 7

Exelon agrees that adding low-fuel-cost

energy benefits consumers. The market impacts

described above occur for any low-fuel-cost energy

source, including nuclear energy. In fact, Exelon has

extolled the economic value created by displacing

more expensive forms of energy through the exact

mechanisms described above.

In May 2011, Exelon commissioned a report touting

how its Limerick nuclear plant in Pennsylvania

provides billions of dollars in savings for consumers

by reducing electricity prices through the mechanisms

described above. The key finding of the report was

that “Limerick provides economic benefits to

Pennsylvania and to the surrounding Mid-Atlantic

region by lowering wholesale market prices for

electricity.”

This exact conclusion would hold for any low-fuel-cost

resource, including wind energy. However, a year

after the 2011 report, Exelon commissioned the same

author to write a report that takes the opposite view

when the same impact is caused by wind energy.7

The methodology from Exelon’s 2011 nuclear report

applies so equally to wind energy that it is possible to

extrapolate from the results to calculate wind’s

consumer benefits. Exelon’s 2011 report found that

the 19 million MWh produced by its Limerick nuclear

plant saved consumers $2.1 billion that year. In 2012,

U.S. wind energy produced 140 million MWh. So by

rough extrapolation from Exelon’s 2011 report, wind

energy saved U.S. consumers more than $15 billion

in 2012, or nearly $50 per year per person. That

figure lines up well with the results of the studies on

the consumer benefits of wind energy cited above.

Exelon’s bait-and-switch: Wind’s benefits for

consumers are entirely market-driven and occur for

other low-fuel-cost energy sources such as nuclear,

which is widely seen as beneficial (including by

Exelon). While market-based competition from wind

energy may be reducing Exelon’s profits, that doesn’t

make for a compelling argument against wind energy.

Instead, Exelon has developed an alternate story

about wind’s market impact, built around the claim

7 The 2012 report argues “[Wind’s price] impacts hurt

competitive wholesale electric markets by damaging the economic viability of traditional generating resources…,” the opposite of how the same impact was viewed in the 2011 report when it was caused by Exelon’s nuclear plant.

that the PTC is distorting markets and causing

widespread occurrences of negative electricity prices

at its nuclear plants. Although that may sound more

compelling, the problem is that it is simply not true.

The PTC is not reflected in the market prices

that other generators receive. For the PTC to be

reflected in electricity market prices and cause

negative prices, wind energy would have to set the

market clearing price. That almost never happens

because wind energy has no fuel cost and a much

lower marginal operating cost than other resources

that have fuel costs. Regardless of whether a wind

plant receives the PTC, the wind plant does not have

the highest operating cost and therefore does not set

the market price. As explained above, wind only sets

the market price during extremely rare events on

pockets of the grid that are isolated by transmission

constraints, and regardless these occurrences have

little to no impact on other generators and are rapidly

being eliminated anyway.

A wind project has the same impact on real-time and

day-ahead electricity markets regardless of whether it

receives the PTC. A wind project that does not

receive the PTC will offer into power markets at just

above $0/MWh, based on wind’s zero fuel cost and

very low variable O&M costs. This offer will always be

lower than almost all other offers, because other

energy sources have higher fuel costs and therefore

higher marginal costs for producing an incremental

amount of electricity. Because the electricity market

clearing price is set by the most expensive power

plant that operates, which is almost never a zero-fuel-

cost wind plant, the impact on the market is the same

whether a wind project offers at $0/MWh or negative.8

The hypothetical supply curve below from the U.S.

Energy Information Administration helps illustrate why

this is true. Whether a wind project receives the PTC

only determines its place among the resources at the

very left side of the supply curve. The electricity price

is set only by the last power plant that is needed to

run to meet demand. In the example below, demand

varies between 67 GW and 114 GW, a range in which

8 This is confirmed by the fact that the large number of wind

projects that receive the ITC, and therefore offer into the market at slightly above $0/MWh, have the same impact on markets as projects that receive the PTC.

American Wind Energy Association I www.awea.org | March 2014 | Page 8

a natural gas or coal power plant is setting

the price. As a result, the exact ranking

and offer prices of power plants on the very

left side of the supply curve have no impact

on the market clearing price, as that will

almost always be set by one of the natural

gas or coal power plants much farther

along the supply curve. This explains the

data, presented later in this report

confirming that the PTC is not causing

frequent occurrences of negative prices at

Exelon’s nuclear plants.

This is not to say that the renewable energy

Production Tax Credit and Investment Tax

Credit (ITC) are not important. The PTC and ITC

allow wind projects to offer low long-term

contract prices, which encourages utilities to

buy the output and helps cover the capital

costs of the turbines and other fixed project

costs. However, as explained above, sunk capital

and other fixed costs are not factored into electricity

market offers. These incentive payments occur

outside of the electricity market and are rarely

reflected in electricity market prices.9

The PTC and ITC do play a role in reducing prices for

consumers, as more wind energy supply enters the

market when those policies in effect. In addition, the

PTC and ITC allow wind projects to offer utilities lower

long-term contract prices, and those savings are

directly passed on to those utilities’ customers.

This is no different from incentives that bring new

fossil and nuclear supply into the market. All forms of

electricity production, including nuclear, receive

significant federal support. The Nuclear Energy

Institute’s own tally of federal support finds $73 billion

in federal support for nuclear and $225 billion in

support for coal and natural gas over the last 60

years, far more than has gone to all renewable

sources combined. Exelon has also been the

9 As explained in Section IV, occasionally transmission

congestion can prevent wind energy from reaching consumers, causing wind energy to set the market price on isolated pockets of the grid. This occurs when congestion causes zero-fuel cost wind to be the resource with the highest production cost in that pocket, typically because there are no other operating power plants in that area. As a result, there is minimal impact on other generators.

beneficiary of large “stranded cost” payments for its

nuclear plants.

Similarly, DBL Investors analyzed the average annual

support over the life of each energy source. As shown

in the chart on the next page, average annual

government spending ranged from $4.8 billion

annually for oil and gas between 1918 and 2009, $3.5

billion annually for nuclear between 1947 and 1999,

and $370 million annually for renewable energy (non-

biofuels) between 1994 and 2009. Because the

duration of the nuclear and fossil incentives were

three and six times longer than those for renewables,

respectively, the cumulative amount of support is

even more heavily tipped against wind energy.

These incentives for fossil and nuclear generation

have no less of an impact on electricity markets than

the PTC. To the extent they encourage investment in

new generation, they increase the supply of energy to

the grid. The increased supply reduces power market

prices below what they otherwise would be.

Moreover, it is important to understand that the PTC

is correcting for market externalities that are not

currently accounted for, such as the cost of carbon

emissions and the other major environmental and

human health costs of fossil fuel consumption. As a

result, the PTC is actually countering the market

distortion that occurs on an ongoing basis because

market pricing does not account for these factors.

By adjusting the resource mix in the

direction that it would move if externalities

were accounted for, the PTC is actually

greatly reducing market distortion.

American Wind Energy Association I www.awea.org | March 2014 | Page 9

A critical piece of Exelon’s campaign against

wind energy is the claim that the renewable

energy Production Tax Credit is distorting

markets by causing frequent occurrences of

negative electricity prices at its nuclear

plants. On numerous occasions Exelon has claimed

that its Illinois nuclear plants face negative prices

around 14% of the time because of the impact of the

PTC.10

As summarized in the table below and reproduced in

the Appendix, regional grid operator data11

document

that in all cases Exelon has grossly overstated the

frequency of negative prices at its nuclear plants, by a

factor of at least 10 in most cases, and in some by a

factor of 20 or more.

Specifically, Exelon’s claim for the rate at which its

10

For example, in February 2013, Exelon’s CEO stated that its Byron nuclear plant sees negative prices 16% of the time. In May 2013, Exelon’s CEO said that its Clinton nuclear power plant, along with the rest of the fleet, sees negative prices about 14% of the time. In June 2013, Exelon announced that it would not be uprating the capacity of its LaSalle nuclear plant in Illinois, blaming that decision on negative prices caused by wind plants. On an October 2013 earnings call, Exelon’s Senior Vice President claimed that its most-affected nuclear plant (presumably Quad Cities) saw negative prices in about 14% or 15% of off-peak hours in 2012, and that the frequency was only 4-6% lower in 2013. 11

Day-ahead market price data for the PJM and MISO independent system operators.

Illinois nuclear fleet sees negative prices is more

than20 times too high. In 2011 and 2012, the Byron

nuclear plant saw negative prices at 1/10th the rate

claimed by Exelon’s CEO, and 1/20th of that rate in

2013.

Similarly, the Exelon CEO’s claim for the number of

hours the Clinton plant sees negative prices is 10

times higher than reality. The LaSalle plant that

Exelon said it had chosen not to uprate due to

negative prices has seen negative prices only 0.13%

of the time over the last three years.

Moreover, in Section III we demonstrate that at least a

sizeable majority of these negative price occurrences

were not caused by wind energy. In fact, three distinct

events, likely localized transmission outages, are

alone responsible for more than half of these negative

price occurrences.

II. The Data: Negative prices are exceedingly rare

American Wind Energy Association I www.awea.org | March 2014 | Page 10

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton Fleet-wide

Share of day-

ahead prices

below $0, 2013

0.10% 0.01% 0.42% 0.78% 1.15% 1.31% 0.63%

% <$0, 2012 0.03% 0.00% 0.30% 1.55% 3.80% 2.38% 1.34%

% <$0, 2011 0.27% 0.08% 0.34% 1.40% 1.32% 1.28% 0.78%

What Exelon

claimed

Enough to

cancel

uprate

NA NA 16% 14-15% of off-

peak hours 14.00% 14.00%

The above chart focuses on day-ahead market prices

instead of real time market prices because merchant

nuclear plants almost exclusively sell their energy into

day-ahead markets, so day-ahead data captures the

true impact of negative prices on Exelon’s nuclear

plants. However, real-time market price data also

show that negative pricing occurrences are still very

far below the frequency claimed by Exelon. While

these real-time prices have little to no impact on

merchant nuclear plants because they sell their

electricity in the day-ahead market, they are included

to verify that they also do not support Exelon’s claims.

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton Fleet-wide

Share of real-time

prices below $0,

2013

1.54% 0.78% 1.60% 1.84% 4.28% 1.74% 1.96%

% <$0, 2012 2.28% 1.74% 2.35% 4.87% 8.32% 4.92% 4.08%

% <$0, 2011 2.65% 2.23% 2.79% 5.45% 7.74% 4.90% 4.29%

What Exelon

claimed

Enough to

cancel

uprate

NA NA 16% 14-15% of off-

peak hours 14.00% 14.00%

American Wind Energy Association I www.awea.org | March 2014 | Page 11

Market price data and wind plant output data

show that most instances of negative prices

occurred when wind plant output was very

low, as indicated in the summary tables below and in

the raw data provided in the Appendix. If Exelon were

correct, and wind plants were the factor causing these

negative prices, one would expect to only see

negative prices during hours when wind plants were

producing at nearly full capacity.

To further confirm that wind output was low during

most negative price occurrences, we also examined

wind output data for the neighboring grid operating

area, the MidContinent Independent System Operator

(MISO). At times, Exelon has claimed that high wind

energy output flowing into PJM from MISO is causing

frequent negative prices at Exelon’s nuclear plants.

In reality, for four of Exelon’s six nuclear power plants,

most negative price instances occurred when wind

plant output was below average, while for the other

two plants they occurred on average when wind

output was only slightly higher than average, as

indicated in the table below.12

As shown in the tables

and scatterplots in the Appendix, many negative

prices occurred when regional wind plant output was

very low, and very few when wind output was high.

This helps exonerate wind energy for at least a large

share of these negative price occurrences.

The MISO data show even less of a relationship

between wind output and the negative price

occurrences. For all but one of Exelon’s nuclear

plants, wind output was below average13

during

periods of negative pricing, and for the other plant it

was only slightly above average. As shown in

Appendix 1, many negative prices occurred when

regional wind plant output was very low, and very few

when wind output was high.

12

PJM grid operator data indicate that for the PJM West region, the average wind output as a share of maximum wind output was around 32.7% in 2013. It was not possible to calculate the wind capacity factor because the installed nameplate wind capacity in the PJM West region does not appear to be provided by PJM. 13

MISO data show the average wind capacity factor for 2013 was 33.0%.

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton

For negative price

hours, PJM West

wind plant output as

share of max output

21.5% 6.1% 47.3% 24.6% 29.7% 44.1%

III. The Data: The majority of these negative price

occurrences were not caused by wind energy

American Wind Energy Association I www.awea.org | March 2014 | Page 12

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton

For negative price

hours, MISO wind

plant output as share

of full capacity

21.3% 21.5% 31.8% 32.0% 29.4% 37.4%

Moreover, a large share of these negative prices were

outside of the range of prices that would typically be

set by wind projects, further exonerating wind plants

for a majority of these negative price occurrences. As

Exelon and others have explained, a wind project

receiving the PTC and selling Renewable Energy

Credits would typically offer into the market at a price

in the range of -$20 to -$40 per MWh. However, as

illustrated in the chart below, very few of the instances

of negative prices were the range of prices that would

typically be set by wind plants, indicating that most

negative price occurrences do not have the signature

of being caused by a wind plant. Overall, prices in the

-$20 to -$40/MWh range are an extremely small share

of total hours, as indicated in the last line in the table.

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton

Share of negative

price hours in the -

$20 to -$40/MWh

range

0% 0% 27% 6% 23% 23%

Share of all hours in

the -$20 to -

$40/MWh range

0% 0% 0.11% 0.05% 0.26% 0.30%

If not wind, what caused the majority of

these negative prices? It appears that the inability

of Exelon’s nuclear plants to reduce their output

during periods when their electricity is not needed –

such as periods of low electricity demand or during

localized transmission outages – is responsible for a

large share of these negative price events. Most U.S.

nuclear power plants are operated with limited ability

to change their level of output, so during periods of

low demand, the plants continue operating and pay

negative prices instead of reducing their output. In

fact, many of the nation’s pumped hydroelectric

storage plants were built in the 1970s and 1980s to

store excess generation from inflexible nuclear power

plants during periods of low demand.

The negative price data in Appendix 1 strongly

implicate three unidentified events, all of which

appear to be unrelated to wind energy as they

occurred during periods of very low wind output, for

causing the majority of all negative price occurrences

at Exelon’s Illinois nuclear plants in 2013.

These distinct events occurred on May 5, 2013 for

LaSalle and Braidwood, September 18 through 20,

2013, for Byron and Quad Cities, and February 12

and 13, 2013, for Clinton.

These events were likely localized transmission

outages, which combined with the inability of Exelon’s

nuclear plants to reduce their output, would cause

negative prices. These three events accounted for all

of the very low (below -$80/MWh) negative prices

seen at Exelon’s nuclear plants in 2013, with prices

dropping as low as -$200 during some of these

events.

As summarized in the first line of the table below,

these three events accounted for more than half of all

negative prices at Exelon plants in 2013. Once those

events are removed, the total number of negative

price instances at Exelon’s nuclear plants is further

reduced from the already low total presented in

Section II, as demonstrated in the last two lines of the

table.

American Wind Energy Association I www.awea.org | March 2014 | Page 13

Exelon Plant LaSalle Dresden Braidwood Byron Quad Cities Clinton Fleet-wide

Share of plant’s

negative price hours

accounted for by

three events

88.8% 0% 32.4% 98.5% 52.5% 28.7% 52.12%

Total frequency of

negative prices, (from

Section II)

0.10% 0.01% 0.42% 0.78% 1.15% 1.31% 0.63%

With these three

events removed,

negative price

frequency in 2013

0.01% 0.01% 0.29% 0.01% 0.55% 0.94% 0.32%

The cause of many of the remaining negative

price occurrences appears to be the inability

of Exelon’s nuclear power plants to reduce

their output during periods of low electricity

demand. With the three events discussed above

removed from the dataset, for most of Exelon’s

nuclear plants there is an almost perfect relationship

between low electricity demand and occurrences of

very low or negative electricity prices, as illustrated in

the following scatterplots. These charts plot the

electricity prices (y-axis) at Exelon’s nuclear plants

against the electricity demand data (x-axis,

normalized to the annual average) for Exelon’s

ComEd service territory in northern Illinois.

While some of Exelon’s nuclear plants, such as

Braidwood, Quad Cities, and Clinton, have some

negative price occurrences that did not occur during

periods of low demand, five out of six of Exelon’s

plants closely hold to the pattern of negative prices

occurring during periods of very low demand.14

To sum up, more than half of negative prices were

triggered by the three apparent transmission outage

events discussed above, and a large share of the

remaining negative price occurrences were strongly

driven by low electricity demand. Moreover,

scatterplots in Appendix 2 plot PJM and MISO wind

output against these occurrences of negative prices,

and indicate only a small share of those occurrences

appear to have a clear relationship to high wind

output.

14

For LaSalle, Dresden, and Byron, the only remaining negative price instance (after the exclusion of the three apparent transmission outage events) occurred when ComEd was at 71.6% of average demand. For Braidwood, 12 out of 25 remaining instances occurred when electricity demand was below 85% of normal, while at Quad Cities 30/48 instances of negative prices occurred when demand was below 85% of normal. Only at Clinton did a clear majority of the negative price occurrences occur outside of hours when electricity demand was low.

American Wind Energy Association I www.awea.org | March 2014 | Page 14

American Wind Energy Association I www.awea.org | March 2014 | Page 15

The drop in electricity demand over the last

five years has exacerbated the impact that

low-demand hours have on nuclear power

plants. The decrease in demand has been

particularly large for hours that already had low

demand, likely due to factors such as reduced

industrial activity and greater use of more efficient

light bulbs.

This can be seen in the “load duration” chart below. A

type of chart that is widely used in the utility industry,

it shows three different years’ electricity demand data

for Exelon’s northern Illinois ComEd service territory

by sorting all hours from lowest demand to highest

demand. This makes it possible to see whether

reductions in electricity demand are occurring during

periods of high electricity demand (upper right) or low

demand (lower left). The chart shows that the last five

years have seen a reduction in electricity demand

during all but the peak demand hours.15

This decline in demand during off-peak hours can

have a major impact on nuclear generators that

typically do not reduce their output in response to

changes in electricity demand. In summary, the above

data not only exonerate wind energy for at least a

large share of these negative price occurrences, but

also implicate another cause – the inability of Exelon’s

nuclear plants to reduce their output in response to

periods of low electricity demand or localized

transmission outages.

15

2013 is not used because a weather anomaly (2013’s relatively mild summer with 933 Cooling Degree Days in Northern Illinois, versus 1181 in 2010 and 1111 in 2007) caused electricity demand for air conditioning to be significantly reduced during high demand hours.

American Wind Energy Association I www.awea.org | March 2014 | Page 16

As documented in the following chart by utility

consulting firm Scott Madden, instances of negative

prices have rapidly dropped to near zero in all regions

of the country. This strong downward trend was also

observed in the data presented in Section II above,

which showed negative price occurrences at

Exelon’s Illinois nuclear plants are rapidly on the

decline. Across the country, negative prices are being

eliminated as long-needed transmission upgrades are

completed and grid operating procedures are

modernized.

Negative prices are an efficient market

signal, indicating that more transmission

capacity is needed between areas of low-

cost generation and electricity consumers.

Numerous analyses indicate that transmission

investment more than pays for itself by providing

consumers with access to lower-cost electricity – as

well as improving electric reliability, reducing

electricity losses on congested power lines, and

ensuring that electricity markets stay competitive.

Occasionally transmission congestion can prevent

wind energy from reaching consumers, causing wind

energy to set the market price on isolated pockets of

the grid. This occurs when the transmission

congestion causes zero-fuel cost wind to be the

resource with the highest marginal production cost in

that pocket, typically because there are no other

operating power plants in that area. As a result, there

is minimal impact on other generators.

Negative prices caused by transmission congestion

have created mistaken impressions about the value of

wind energy. In reality, each amount of wind energy

produced benefits consumers and the environment by

displacing an equivalent amount of output from the

most expensive power plant, which is almost always

the least-efficient fossil-fired power plant. Regardless

of when it is produced, a MWh of wind energy

displaces a MWh that would have been produced by

burning natural gas, coal, or occasionally oil. As a

result, substituting zero-fuel-cost wind energy

for high-marginal-cost fossil fuel energy

always directly and significantly reduces the

production cost and total emissions of the

power system, producing substantial

societal benefits.

While the efficiencies of power plants vary slightly

from one generator to another, in nearly all cases

these variations do not significantly change the value

of the fuel saved by wind energy. This is even more

so the case when one incorporates the negative

environmental and public health externalities of fossil

fuel use into the equation. Without externalities, it may

appear that wind power produced at night, which

offsets lower-production-cost coal generation, has

lower value than wind power produced during the day,

which offsets natural gas generation. However, once

coal’s greater negative externalities relative to gas are

included, the value of nighttime wind production

becomes higher.

IV. Transmission upgrades are eliminating negative prices

American Wind Energy Association I www.awea.org | March 2014 | Page 17

The instances of negative prices that have occurred

are not an indication that the total power system had

excess electricity at those times, or that the value of

wind energy is low, as some have alleged. Rather,

negative prices occur in isolated pockets of the power

system because there is insufficient transmission to

move that electricity to consumers on other parts of

the power system. Now that negative prices are on

the decline because of transmission upgrades, market

prices in some wind-producing areas that had been

affected in some hours are now remaining high

because the wind power is able to flow out of its

formerly constrained pocket and offset fossil

generation elsewhere on the power system. In other

words, wind virtually never sees negative prices

because total supply exceeds total system-wide

demand, but rather almost always due to localized

transmission congestion.

However, even when negative prices do

occur, this is not an indication that the wind

energy has low societal value. For example,

suppose 7501 MW of wind generation are being

produced behind a transmission constraint that only

allows 7500 MW of wind output to reach consumers.

As the wind production exceeds 7500 MW, the market

price on that section of the grid will abruptly drop from

the price set by the production cost for the whole

power system’s marginal fossil-fired power plant to

zero or even negative. The compensation for all 7500

MW of wind generators would fall to the zero or

negative clearing price – even though the 7500 MW of

wind generation that continues to pass through the

transmission constraint continues to offset 7500 MW

of fossil generation, and reduce total system

production costs and emissions by as much as

before.

Because negative prices are caused by

transmission congestion, they are typically

confined to isolated pockets of the grid

where they have little to no impact on other

power plants. In Texas’s ERCOT market, which at

its peak had seen the country’s largest share of

negative prices at around 2% of total price points,

negative prices were almost entirely confined to the

remote West Zone of ERCOT, which only accounts

for about 5% of ERCOT’s electricity demand and

conventional generation. Similarly, the data for PJM

indicate that the rare instances of negative prices are

confined to limited areas and are not significantly

affecting other generators.

The Midwest grid operator also notes that the impact

of negative prices is highly localized to remote areas,

and “The periods of negative prices remain infrequent

and are not contributing to sustained revenue

shortfalls relative to incremental operating costs.”

Thus, Exelon’s claim that negative prices are

undermining investments in conventional

power plants is false, as negative prices

should not impact power plant investment or

operational decisions across the vast

majority of the power system.

American Wind Energy Association I www.awea.org | March 2014 | Page 18

Numerous utility industry experts, and even

Exelon’s own statements and reports, show

that declining natural gas prices and flat

electricity demand are by far the largest

challenges to existing and new generation

supply.

Low natural gas prices and low electricity demand

have negatively affected all merchant power plants,

not just nuclear plants. While non-merchant power

plants have their output contracted under long-term

power purchase agreements with utility buyers,

merchant power plants sell their output into the day-

ahead and real-time electricity markets. As explained

above, merchant power plants receive the market

clearing price that is offered by the most expensive

power plant that is needed for that time interval.

However, the price of the most expensive power plant

– and therefore compensation for all merchant power

plants – changes drastically over time as fuel prices

change. In most electricity markets, natural gas power

plants set the market clearing price the majority of the

time, so electricity market prices are extremely closely

linked to the price of natural gas, as shown in the

chart below. As one would expect, merchant nuclear

generators are highly profitable when power prices

are high, but not during periods when they are low,

such as recently.

Unsurprisingly, the economics of Exelon’s nuclear

plants are very closely linked to the price of natural

gas. In June, just after the cancellation of the nuclear

capacity uprate, a Senior Vice President at the

company explained that cheap natural gas was the

driver of that decision, without mentioning wind

energy at all. In recent weeks Exelon has even been

circulating the following chart showing how Exelon’s

stock price has moved in almost perfect lockstep with

natural gas prices.

V. The real threats to Exelon, and the economics of nuclear

in general, are cheap natural gas and low electricity demand

American Wind Energy Association I www.awea.org | March 2014 | Page 19

Source: Exelon Generation

Exelon’s financial disclosures have also

heavily focused on low natural gas prices

and stagnant electricity demand as the

drivers of the financial woes affecting Exelon

and its nuclear fleet, with scant mention of

wind energy. As one example, Exelon’s 10-K

explains that “changes in the market price of fossil

fuels often result in comparable changes to the

market price of power. For example, the use of new

technologies to recover natural gas from shale

deposits has increased natural gas supply and

reserves, placing downward pressure on natural gas

prices and, therefore, on power prices.”

“The single most disruptive technology in my 28 years

as a CEO was shale-gas fracking,” former Exelon

CEO John Rowe told a March 21, 2012 gathering of

energy industry representatives. He called it “a huge

challenge for my successors at Exelon.” Crain’s

Chicago Business concluded that Exelon’s “earnings

are projected to slide for at least the next two years,

as a series of high-priced power-purchase contracts

expires, leaving the company more exposed to rock-

bottom wholesale electricity prices.” Appendix 3

documents how Exelon’s move from long-term

contracts to spot markets looked far more attractive

as recently as 2006.

Financial analysts understand the true cause of

Exelon’s troubles. In February 2014, Fitch Ratings

changed its financial outlook for Exelon to negative

from stable, due to "continued down trend in gross

margin and credit protection measures due to the on-

going weakness in forward power and natural gas

prices, soft power demand and aggressive

competition in the retail supply business," with no

mention of wind energy.

UBS’s January 2014 analysis, “Exelon Corp: The

Clock is Ticking,” focused heavily on the impact low

natural gas prices are having on Exelon’s stock price.

Finally, the Brattle Group’s analysis of the challenges

facing merchant generators of all types succinctly

notes that: “Recent power prices are low due to low

gas prices and depressed load conditions.”

American Wind Energy Association I www.awea.org | March 2014 | Page 20

Wind energy does have an impact on

markets by displacing more expensive forms

of energy. However, this impact is entirely market-

driven, is widely seen as beneficial, and occurs for all

low-fuel-cost sources of energy, including nuclear. In

fact, Exelon has touted this impact as a benefit when

it occurs at its nuclear plants. This real story of wind

energy successfully competing against more

expensive forms of energy in the market doesn’t

make for a compelling argument against wind energy.

Instead, Exelon has developed an alternate story

about wind’s market impact, built around the claim

that the renewable energy Production Tax Credit is

distorting markets by causing frequent occurrences of

negative electricity prices at Exelon’s nuclear power

plants. That claim is false for a number of reasons:

The Production Tax Credit is almost never

factored into the electricity market prices that

other power plants receive;

Negative electricity prices at Exelon’s

nuclear plants are extremely rare, occurring

at a fraction of the rate claimed by Exelon;

The majority of those negative prices are not

caused by wind, with many apparently

caused by Exelon’s own nuclear plants; and,

Across the U.S., transmission upgrades are

eliminating the remaining instances of

negative prices.

Conclusion

American Wind Energy Association I www.awea.org | March 2014 | Page 21

The following tables list all negative price

occurrences for Exelon’s six Illinois nuclear

plants in 2013, sorted from most negative to least

negative price, along with MISO and PJM wind output

during those hours. The tables and the scatterplots

below them, which plot market price versus wind

output, show that many negative prices occurred

when wind output was very low, and very few when

wind output was high.

The tables also show that negative price hours are

extremely rare (these occurrences account for 0.63%

of all 8760 hours in a year), and that the majority of

negative price occurrences appear to have been

triggered by three distinct events unrelated to wind

energy.

These events, likely localized transmission outages,

occurred on 5/5/2013 for LaSalle and Braidwood,

9/18, 9/19, and 9/20/2013 for Byron and Quad Cities,

and 2/12 and 2/13/2013 for Clinton. Moreover, these

events account for the lowest negative prices.

LaSalle nuclear plant

Hour LaSalle

Price

MISO

wind

capacity

factor

PJM wind,

% of max

5/5/2013 6:00 -$18.53 17.5% 30.9%

5/5/2013 3:00 -$13.16 15.6% 29.4%

5/5/2013 4:00 -$12.89 14.8% 27.5%

5/5/2013 5:00 -$11.77 13.8% 25.4%

5/5/2013 7:00 -$10.93 12.6% 24.7%

5/5/2013 8:00 -$7.23 10.7% 26.9%

5/5/2013 1:00 -$6.81 9.7% 25.4%

5/5/2013 2:00 -$5.83 10.6% 24.6%

8/18/2013

6:00

-$0.86 9.9% 27.0%

Dresden nuclear plant

Hour Dresden

price

MISO

wind CF

PJM wind

% of max

8/18/2013 6:00 -$1.28 21.5% 6.1%

Braidwood nuclear plant

Hour Braidwood

price

MISO

wind

CF

PJM

wind %

of max

2/11/2013 4:00 -$36.77 79.5% 62.7%

2/11/2013 5:00 -$36.76 79.7% 66.1%

2/11/2013 3:00 -$36.17 79.5% 60.2%

2/11/2013 6:00 -$33.58 79.2% 75.0%

2/11/2013 7:00 -$27.64 78.2% 76.0%

5/5/2013 6:00 -$25.35 18.9% 28.1%

2/11/2013 16:00 -$24.51 72.9% 75.1%

2/11/2013 15:00 -$24.34 73.6% 76.5%

Braidwood, continued

2/11/2013 14:00 -$24.06 74.1% 75.9%

2/11/2013 13:00 -$23.57 75.7% 73.9%

5/5/2013 3:00 -$19.61 22.2% 21.6%

2/12/2013 0:00 -$19.25 39.9% 62.6%

5/5/2013 4:00 -$19.14 20.1% 24.7%

5/5/2013 5:00 -$17.74 18.9% 25.2%

5/5/2013 7:00 -$17.18 18.3% 26.6%

2/11/2013 23:00 -$14.35 42.5% 60.8%

5/5/2013 8:00 -$13.32 16.6% 25.1%

5/5/2013 1:00 -$12.44 30.0% 18.4%

5/5/2013 2:00 -$10.95 25.1% 17.7%

2/11/2013 18:00 -$7.97 70.0% 69.9%

2/11/2013 2:00 -$7.40 79.0% 57.6%

2/11/2013 1:00 -$7.14 77.2% 51.1%

2/11/2013 17:00 -$6.56 72.9% 73.5%

2/11/2013 20:00 -$6.21 57.9% 69.4%

10/9/2013 3:00 -$5.03 55.6% 34.9%

2/11/2013 19:00 -$4.86 63.9% 67.4%

10/9/2013 2:00 -$4.70 57.2% 37.3%

10/9/2013 0:00 -$4.18 54.3% 37.8%

10/9/2013 1:00 -$4.12 53.4% 38.4%

10/9/2013 4:00 -$4.08 52.1% 32.4%

5/25/2013 10:00 -$3.71 47.8% 16.2%

5/5/2013 9:00 -$3.23 14.3% 22.3%

5/5/2013 0:00 -$3.22 31.4% 17.9%

2/11/2013 22:00 -$1.71 46.9% 64.1%

8/18/2013 6:00 -$1.55 21.5% 6.1%

5/5/2013 16:00 -$0.85 12.0% 47.9%

5/5/2013 17:00 -$0.08 12.4% 52.8%

Appendix 1: Data tables

American Wind Energy Association I www.awea.org | March 2014 | Page 22

Byron nuclear plant

Hour Byron

price

MISO

wind

CF

PJM

wind %

of max

9/20/2013 0:00 -$204.09 39.8% 45.1%

9/20/2013 8:00 -$158.99 35.5% 23.5%

9/20/2013 6:00 -$135.59 40.2% 30.0%

9/20/2013 1:00 -$121.52 40.2% 43.8%

9/20/2013 7:00 -$115.79 36.7% 28.3%

9/20/2013 5:00 -$115.49 40.6% 26.0%

9/20/2013 2:00 -$111.62 42.1% 27.4%

9/19/2013 17:00 -$108.96 34.7% 32.1%

9/20/2013 4:00 -$108.45 38.8% 21.7%

9/19/2013 16:00 -$107.70 30.3% 34.8%

9/20/2013 3:00 -$107.07 39.6% 25.5%

9/19/2013 15:00 -$98.76 27.3% 32.5%

9/19/2013 21:00 -$98.25 43.3% 38.7%

9/19/2013 13:00 -$98.20 25.8% 32.5%

9/19/2013 20:00 -$97.89 39.5% 33.9%

9/19/2013 14:00 -$91.28 26.6% 29.8%

9/19/2013 18:00 -$89.06 36.3% 29.8%

9/19/2013 0:00 -$88.40 57.3% 29.1%

9/19/2013 11:00 -$87.56 36.9% 32.7%

9/19/2013 22:00 -$85.06 40.6% 40.8%

9/19/2013 23:00 -$85.00 38.2% 41.5%

9/20/2013 12:00 -$84.67 44.1% 13.5%

9/19/2013 1:00 -$83.03 53.7% 24.4%

9/19/2013 10:00 -$81.06 41.4% 29.0%

9/19/2013 9:00 -$80.55 44.7% 24.5%

9/19/2013 12:00 -$80.19 32.0% 34.6%

9/19/2013 19:00 -$79.45 37.1% 33.0%

9/19/2013 2:00 -$78.49 51.0% 22.2%

9/19/2013 5:00 -$77.86 45.9% 21.7%

9/20/2013 11:00 -$76.87 40.3% 14.9%

9/19/2013 6:00 -$76.59 43.5% 22.8%

9/19/2013 8:00 -$73.40 47.9% 28.3%

9/19/2013 4:00 -$72.82 46.1% 19.0%

9/19/2013 3:00 -$72.57 48.3% 19.4%

9/20/2013 10:00 -$68.48 35.9% 16.6%

9/20/2013 9:00 -$67.66 33.8% 17.5%

9/20/2013 13:00 -$66.68 44.8% 15.5%

9/19/2013 7:00 -$65.03 42.5% 27.0%

Byron, continued

9/20/2013 15:00 -$63.92 43.7% 21.2%

9/20/2013 16:00 -$60.46 41.7% 22.6%

9/20/2013 14:00 -$60.01 45.7% 18.1%

9/20/2013 18:00 -$55.39 32.2% 28.1%

9/20/2013 17:00 -$55.19 37.9% 26.3%

9/20/2013 19:00 -$47.39 26.0% 25.2%

9/20/2013 20:00 -$24.17 21.8% 24.7%

9/18/2013 0:00 -$21.76 46.3% 24.1%

9/18/2013 3:00 -$20.78 38.2% 22.3%

9/18/2013 5:00 -$20.00 38.6% 19.9%

9/18/2013 4:00 -$19.40 42.1% 21.9%

9/18/2013 2:00 -$19.33 36.3% 22.7%

9/18/2013 7:00 -$19.19 39.2% 18.6%

9/18/2013 1:00 -$19.11 39.4% 23.8%

9/18/2013 6:00 -$14.38 38.5% 17.9%

9/18/2013 8:00 -$12.68 37.3% 14.1%

9/18/2013 23:00 -$11.83 57.1% 33.4%

9/18/2013 9:00 -$9.53 35.8% 9.6%

9/18/2013 22:00 -$9.07 52.7% 34.0%

9/18/2013 10:00 -$8.10 33.8% 7.8%

9/18/2013 11:00 -$7.13 34.3% 10.0%

9/18/2013 21:00 -$5.08 48.1% 37.8%

9/18/2013 20:00 -$4.29 39.5% 27.7%

9/18/2013 12:00 -$4.14 36.8% 14.5%

9/18/2013 13:00 -$3.99 35.0% 17.0%

9/18/2013 14:00 -$1.65 36.6% 17.0%

9/18/2013 18:00 -$0.74 43.7% 13.7%

8/18/2013 6:00 -$0.55 21.5% 6.1%

9/18/2013 15:00 -$0.37 40.5% 14.9%

9/18/2013 19:00 -$0.31 38.0% 16.4%

Quad Cities Nuclear Plant

Hour Quad

Cities

price

MISO

wind

CF

PJM

wind %

of max

9/20/2013 0:00 -$99.03 39.8% 45.1%

9/20/2013 8:00 -$71.61 35.5% 23.5%

9/20/2013 6:00 -$61.03 40.2% 30.0%

9/20/2013 1:00 -$55.00 40.2% 43.8%

9/20/2013 5:00 -$52.25 40.6% 26.0%

9/19/2013 21:00 -$51.11 43.3% 38.7%

American Wind Energy Association I www.awea.org | March 2014 | Page 23

Quad Cities, continued

9/20/2013 2:00 -$50.08 42.1% 27.4%

9/20/2013 7:00 -$49.53 36.7% 28.3%

9/20/2013 4:00 -$48.54 38.8% 21.7%

9/19/2013 17:00 -$48.16 34.7% 32.1%

9/20/2013 3:00 -$47.83 39.6% 25.5%

9/19/2013 16:00 -$47.59 30.3% 34.8%

9/19/2013 20:00 -$45.32 39.5% 33.9%

9/19/2013 13:00 -$42.73 25.8% 32.5%

9/19/2013 22:00 -$42.35 40.6% 40.8%

9/19/2013 18:00 -$41.89 36.3% 29.8%

9/19/2013 15:00 -$40.91 27.3% 32.5%

9/20/2013 12:00 -$40.22 44.1% 13.5%

9/19/2013 0:00 -$39.33 57.3% 29.1%

9/19/2013 1:00 -$35.95 53.7% 24.4%

9/19/2013 14:00 -$35.66 26.6% 29.8%

9/19/2013 19:00 -$35.34 37.1% 33.0%

9/19/2013 11:00 -$34.05 36.9% 32.7%

9/19/2013 23:00 -$33.58 38.2% 41.5%

9/19/2013 2:00 -$33.31 51.0% 22.2%

9/19/2013 5:00 -$33.16 45.9% 21.7%

9/19/2013 3:00 -$32.97 48.3% 19.4%

9/19/2013 4:00 -$32.74 46.1% 19.0%

9/20/2013 11:00 -$32.42 40.3% 14.9%

9/19/2013 9:00 -$30.78 44.7% 24.5%

9/19/2013 10:00 -$30.43 41.4% 29.0%

9/19/2013 12:00 -$29.89 32.0% 34.6%

9/19/2013 6:00 -$29.71 43.5% 22.8%

9/19/2013 8:00 -$27.12 47.9% 28.3%

9/20/2013 9:00 -$25.64 33.8% 17.5%

9/20/2013 10:00 -$25.44 35.9% 16.6%

9/20/2013 13:00 -$25.00 44.8% 15.5%

9/20/2013 15:00 -$24.15 43.7% 21.2%

9/19/2013 7:00 -$23.48 42.5% 27.0%

9/20/2013 16:00 -$20.69 41.7% 22.6%

9/20/2013 14:00 -$20.24 45.7% 18.1%

9/20/2013 18:00 -$15.62 32.2% 28.1%

9/20/2013 17:00 -$15.42 37.9% 26.3%

7/19/2013 4:00 -$13.58 53.6% 45.3%

9/18/2013 0:00 -$12.65 46.3% 24.1%

7/19/2013 3:00 -$11.24 56.4% 43.4%

7/19/2013 5:00 -$11.02 49.4% 44.5%

9/18/2013 3:00 -$10.88 38.2% 22.3%

9/20/2013 19:00 -$10.69 26.0% 25.2%

9/11/2013 1:00 -$10.66 17.6% 47.5%

9/11/2013 2:00 -$10.23 15.8% 48.9%

9/18/2013 4:00 -$9.86 42.1% 21.9%

7/19/2013 6:00 -$9.32 43.7% 46.5%

9/18/2013 2:00 -$9.20 36.3% 22.7%

7/19/2013 2:00 -$9.07 59.6% 41.5%

9/11/2013 4:00 -$8.98 12.8% 43.9%

9/18/2013 1:00 -$8.81 39.4% 23.8%

9/11/2013 3:00 -$8.68 13.9% 47.4%

9/18/2013 5:00 -$8.65 38.6% 19.9%

7/19/2013 1:00 -$7.81 61.1% 35.3%

10/16/2013 0:00 -$7.22 47.0% 40.3%

9/11/2013 5:00 -$6.20 10.3% 39.5%

10/16/2013 4:00 -$5.29 40.6% 31.1%

10/16/2013 3:00 -$5.28 43.8% 34.2%

10/11/2013 4:00 -$4.53 43.3% 8.0%

10/16/2013 1:00 -$4.53 44.0% 35.9%

10/9/2013 0:00 -$4.40 54.3% 37.8%

6/1/2013 6:00 -$3.91 26.7% 42.5%

10/11/2013 3:00 -$3.74 46.5% 17.9%

6/1/2013 5:00 -$3.51 28.2% 42.4%

10/9/2013 4:00 -$3.51 52.1% 32.4%

6/1/2013 7:00 -$3.49 25.0% 32.9%

9/18/2013 6:00 -$3.33 38.5% 17.9%

10/9/2013 3:00 -$3.33 55.6% 34.9%

9/18/2013 7:00 -$3.32 39.2% 18.6%

10/9/2013 5:00 -$3.16 49.3% 24.5%

10/16/2013 2:00 -$3.00 43.8% 34.0%

10/16/2013 5:00 -$3.00 37.3% 29.6%

10/9/2013 1:00 -$2.96 53.4% 38.4%

8/18/2013 6:00 -$2.91 21.5% 6.1%

6/1/2013 23:00 -$2.90 54.7% 44.8%

10/11/2013 5:00 -$2.84 43.5% 8.1%

6/1/2013 4:00 -$2.69 28.0% 40.5%

10/11/2013 2:00 -$2.67 45.4% 23.5%

9/18/2013 23:00 -$2.64 57.1% 33.4%

10/9/2013 2:00 -$2.59 57.2% 37.3%

9/11/2013 0:00 -$2.54 17.9% 51.3%

American Wind Energy Association I www.awea.org | March 2014 | Page 24

Quad Cities, continued

7/19/2013 7:00 -$1.84 36.6% 42.7%

9/11/2013 6:00 -$1.76 7.7% 36.5%

7/18/2013 4:00 -$1.47 35.7% 6.8%

10/1/2013 0:00 -$1.07 62.8% 47.6%

10/11/2013 1:00 -$1.00 47.2% 26.4%

6/1/2013 0:00 -$0.91 44.3% 47.1%

8/18/2013 4:00 -$0.89 29.3% 11.8%

10/11/2013 0:00 -$0.88 47.3% 25.1%

8/13/2013 4:00 -$0.72 20.4% 24.4%

8/18/2013 5:00 -$0.59 24.7% 9.4%

6/1/2013 3:00 -$0.52 31.4% 52.1%

8/25/2013 6:00 -$0.35 55.2% 29.4%

8/18/2013 3:00 -$0.15 33.3% 15.6%

7/18/2013 3:00 -$0.07 33.9% 7.0%

Clinton Nuclear Plant

Hour Clinton

price

MISO

wind CF

PJM

wind %

of max

2/19/2013 1:00 -$75.91 78.9% 85.5%

2/19/2013 6:00 -$75.75 79.0% 77.3%

2/19/2013 2:00 -$50.00 80.7% 87.1%

2/19/2013 7:00 -$47.33 78.7% 74.6%

2/19/2013 3:00 -$42.15 80.0% 83.8%

2/19/2013 4:00 -$40.41 80.2% 81.9%

2/20/2013 0:00 -$40.20 52.4% 75.5%

2/19/2013 5:00 -$38.64 79.5% 80.4%

2/19/2013 22:00 -$33.50 60.8% 85.5%

2/19/2013 23:00 -$28.47 57.4% 82.0%

2/12/2013 14:00 -$28.00 36.5% 21.6%

2/13/2013 0:00 -$27.88 31.4% 17.1%

2/12/2013 9:00 -$27.00 39.1% 22.6%

2/12/2013 10:00 -$27.00 37.2% 26.0%

2/12/2013 12:00 -$27.00 28.5% 25.9%

2/12/2013 13:00 -$27.00 31.1% 25.2%

2/12/2013 15:00 -$27.00 38.8% 22.2%

2/12/2013 16:00 -$27.00 38.9% 21.6%

2/12/2013 17:00 -$27.00 35.2% 16.7%

2/12/2013 23:00 -$27.00 33.1% 11.5%

2/21/2013 20:00 -$24.50 60.1% 72.9%

2/12/2013 11:00 -$24.39 30.6% 25.8%

Clinton, continued

2/12/2013 18:00 -$23.26 28.7% 13.9%

2/12/2013 21:00 -$23.07 31.9% 9.8%

2/12/2013 20:00 -$23.01 27.9% 10.4%

2/21/2013 22:00 -$22.85 63.2% 76.9%

2/12/2013 8:00 -$22.72 34.3% 22.2%

2/12/2013 22:00 -$22.68 32.7% 9.7%

2/21/2013 18:00 -$22.60 55.5% 67.8%

2/12/2013 19:00 -$21.55 26.5% 11.2%

2/12/2013 7:00 -$21.21 31.2% 28.4%

2/21/2013 21:00 -$21.19 62.2% 74.8%

2/19/2013 9:00 -$20.72 76.5% 73.2%

2/18/2013 6:00 -$20.30 56.8% 68.3%

2/21/2013 19:00 -$19.26 55.9% 66.9%

2/19/2013 17:00 -$19.03 70.8% 80.8%

2/21/2013 12:00 -$19.03 35.1% 38.9%

2/13/2013 2:00 -$19.00 27.1% 14.3%

2/13/2013 3:00 -$19.00 25.3% 11.6%

2/18/2013 2:00 -$19.00 62.7% 83.8%

2/18/2013 3:00 -$19.00 63.4% 72.7%

2/18/2013 5:00 -$19.00 57.1% 67.6%

2/19/2013 14:00 -$19.00 71.3% 75.2%

2/18/2013 1:00 -$18.87 63.0% 83.2%

2/18/2013 4:00 -$18.53 61.1% 68.6%

2/20/2013 7:00 -$18.41 28.6% 45.0%

2/19/2013 11:00 -$18.17 75.1% 60.5%

2/19/2013 16:00 -$18.14 72.0% 80.5%

2/19/2013 8:00 -$18.13 77.5% 75.4%

2/19/2013 12:00 -$18.00 73.9% 64.9%

2/19/2013 13:00 -$18.00 71.9% 66.3%

2/21/2013 13:00 -$18.00 35.2% 49.2%

2/19/2013 10:00 -$17.93 76.3% 68.4%

2/19/2013 15:00 -$17.63 71.9% 79.5%

2/21/2013 0:00 -$17.16 36.3% 21.5%

2/13/2013 5:00 -$16.76 23.1% 9.7%

2/21/2013 23:00 -$16.72 61.5% 77.9%

2/13/2013 4:00 -$16.63 24.1% 9.5%

2/13/2013 1:00 -$16.23 29.5% 17.4%

2/19/2013 18:00 -$15.75 68.2% 83.5%

2/21/2013 11:00 -$15.74 35.4% 29.3%

2/13/2013 6:00 -$15.45 21.6% 9.4%

American Wind Energy Association I www.awea.org | March 2014 | Page 25

Clinton, continued

2/22/2013 0:00 -$15.07 57.4% 74.1%

2/21/2013 14:00 -$15.00 39.0% 52.4%

2/19/2013 19:00 -$14.32 63.8% 84.1%

2/19/2013 21:00 -$14.14 62.4% 86.3%

2/14/2013 0:00 -$13.11 49.9% 50.0%

2/19/2013 20:00 -$12.78 61.6% 86.1%

2/20/2013 8:00 -$12.00 24.6% 40.7%

2/21/2013 15:00 -$11.75 44.1% 39.5%

2/13/2013 7:00 -$11.65 19.5% 10.7%

2/20/2013 3:00 -$11.48 37.0% 60.6%

2/21/2013 17:00 -$11.17 56.5% 60.1%

2/21/2013 7:00 -$10.57 39.0% 21.4%

2/13/2013 22:00 -$10.24 49.9% 35.7%

2/21/2013 16:00 -$10.13 50.1% 48.7%

2/20/2013 1:00 -$9.75 45.1% 69.8%

2/20/2013 6:00 -$9.69 29.1% 49.1%

2/20/2013 23:00 -$9.43 36.6% 22.5%

2/13/2013 23:00 -$8.96 50.0% 42.9%

2/21/2013 10:00 -$8.54 37.2% 24.4%

2/22/2013 7:00 -$8.27 32.9% 29.7%

2/21/2013 8:00 -$8.23 35.7% 26.2%

9/23/2013 5:00 -$8.06 48.5% 26.3%

2/21/2013 9:00 -$7.98 36.2% 23.3%

2/20/2013 2:00 -$6.92 39.0% 66.1%

2/21/2013 6:00 -$6.79 39.7% 23.8%

2/13/2013 21:00 -$6.64 46.1% 29.5%

2/20/2013 5:00 -$6.61 33.3% 55.8%

2/22/2013 8:00 -$6.12 31.2% 25.0%

2/20/2013 22:00 -$5.62 34.7% 26.9%

2/21/2013 3:00 -$5.55 31.2% 20.7%

9/23/2013 16:00 -$4.34 50.5% 4.9%

2/20/2013 9:00 -$4.09 24.6% 38.9%

2/18/2013 7:00 -$3.68 56.2% 64.5%

9/11/2013 7:00 -$3.54 9.6% 33.4%

2/20/2013 4:00 -$2.78 34.3% 59.0%

2/21/2013 2:00 -$2.25 34.0% 21.1%

2/20/2013 11:00 -$2.04 18.8% 31.4%

2/21/2013 1:00 -$1.97 35.9% 20.2%

2/13/2013 18:00 -$1.93 29.9% 22.2%

2/13/2013 14:00 -$1.51 19.2% 18.6%

2/13/2013 9:00 -$1.50 18.3% 15.6%

9/23/2013 15:00 -$1.45 49.8% 3.0%

9/23/2013 17:00 -$1.36 52.3% 7.6%

9/23/2013 13:00 -$1.20 50.8% 1.9%

2/23/2013 0:00 -$1.12 19.7% 43.0%

2/23/2013 22:00 -$0.96 19.5% 20.3%

2/22/2013 18:00 -$0.71 26.9% 49.4%

2/22/2013 22:00 -$0.51 16.5% 42.1%

2/13/2013 8:00 -$0.36 19.1% 14.1%

2/13/2013 11:00 -$0.35 13.7% 11.5%

2/13/2013 20:00 -$0.31 39.2% 25.7%

2/21/2013 4:00 -$0.15 31.6% 19.2%

2/19/2013 0:00 -$0.06 78.9% 85.8%

American Wind Energy Association I www.awea.org | March 2014 | Page 26

Appendix 2: Scatterplots of wind output versus price

The following charts plot occurrences of negative prices at Exelon’s nuclear plants versus wind output in PJM West

and MISO.16

These charts show that many negative prices occurred when wind output was very low, and very few

when wind output was high. These charts exclude the hours associated with the three events, likely localized

transmission outages, discussed above. Because wind output was very low during those hours, if those hours were

included these charts would show even less of a positive relationship between wind output and occurrences of

negative prices.

16

MISO wind output is reported as capacity factor, PJM wind is reported as share of annual maximum output

American Wind Energy Association I www.awea.org | March 2014 | Page 27

American Wind Energy Association I www.awea.org | March 2014 | Page 28

Appendix 3: The sources of Exelon’s challenges

As recently as 2006, when gas prices and

power prices were high and trending higher,

merchant generation looked far more

attractive. In 2007, Exelon moved nearly half of its

generation from long-term contracts to selling in the

spot market, a strategy that pays dividends when gas

and power prices are high, but not when they are low.

As noted in this 2006 report from analyst Edward

Bodmer:

"Exelon’s prospective earnings are affected by the

expiration of bilateral contracts and PJM price

changes. In a presentation to investors, Exelon

explained that in 2006, out of 180,000 - 200,000

GWH supplied, 120,000 GWH is locked-up in

bilateral contracts. In 2007, 80,000 GWH of the

supply contracted to ComEd will be released from

the contracts and convert to market pricing. Since

the current bilateral contract has a price of

$35/MWH and market energy and capacity prices in

PJM are much higher, the net profits to Exelon will

increase. According to Exelon, ‘The Illinois Auction

… allow[s] it to capture the full market value of its

Midwest generation portfolio.’”

That proved not to be the case. The

following is excerpted from Exelon’s 10-K filing for the second quarter of 2012 (emphasis added):

“Economic and Market Conditions

Exelon has exposure to various market and

financial risks, including the risk of price

fluctuations in the wholesale and retail power

markets.

Wholesale power prices are a function of supply

and demand, which in turn are driven by factors

such as (1) the price of fuels, in particular, the

prices of natural gas and coal, which drive the

wholesale market prices that Generation’s power

plants can obtain for their output, (2) the rate of

expansion of subsidized low carbon generation

such as wind energy in the markets in which

Generation’s output is sold, (3) the impacts on

energy demand of factors, such as weather,

economic conditions and implementation of energy

efficiency and demand response programs, and (4)

regulatory and legislative actions, such as the U.S.

EPA’s CSAPR and the MATS. See Environmental

Matters section below for further detail on CSAPR

and the MATS.

The use of new technologies to recover natural

gas from shale deposits is increasing natural

gas supply and reserves, which places

downward pressure on natural gas prices and,

therefore, on wholesale and retail power prices,

which results in a reduction in Exelon’s

revenues.

The market price for electricity is also affected

by changes in the demand for electricity. Poor

economic conditions, milder than normal

weather, unexpected or unusual weather

patterns and the growth of energy efficiency

and demand response programs can depress

demand. The result is that higher-cost

generating resources do not run as frequently,

putting downward pressure on market prices

for electricity and/or capacity. The continued

sluggish economy in the United States has led

to a decline in demand for electricity. ComEd

and BGE are projecting load demand to remain

essentially flat in 2012 compared to 2011, while

PECO is projecting a decline of 2.0% in 2012

compared to 2011 as a result of the above drivers

in addition to reduced oil refinery load in its service

territory.

Since the third quarter of 2011, forward natural

gas prices for 2013 and 2014 have declined

significantly; reflecting an increase in supply

due to strong natural gas production (due to

shale gas development) and significantly

warmer than normal weather, as well as

generally lowered expectations for gas demand

and economic growth rates. Wholesale power

prices have likewise decreased in response in part

to the lower gas prices, and to the late December

2011 judicial stay of the U.S. EPA’s CSAPR and

various other market factors.

Exelon also has exposure to worldwide financial

markets. The ongoing European debt crisis has

contributed to the instability in global credit

markets…”