ROCKVILLE, Md. — “Clean” energy portfolio standards may be a way for states to provide financial support for ailing nuclear plants, Federal Energy Regulatory Commission officials said last week.

The comments came during FERC’s public meeting with the Nuclear Regulatory Commission on grid reliability Wednesday. Officials of the North American Electric Reliability Corp. (NERC) also took part in the 90-minute session at NRC headquarters, which included discussions on NRC’s actions to address lessons learned in the 2011 Fukushima nuclear disaster and FERC’s regulation of hydropower dams near nuclear plants.

But coming on the heels of a capacity market auction in which five Exelon Corp. nuclear generating plants in Illinois failed to clear, the financial health of nuclear power was the central topic. (See related story How Exelon Won by Losing.)

FERC Commissioner Tony Clark noted that PJM and other organized wholesale markets have been able to coexist with state renewable portfolio standards (RPS) that ensure a place for wind and solar power in the generation mix.

“So an elegant solution might be pivoting to a clean-energy standard if the concern of a state is emissions and … if we’re moving into a 111(d) world where carbon is going to be regulated,” Clark said, referring to the greenhouse gas rule released by the EPA yesterday. “These would seem to be some of the most valuable units we have.”

Arnie Quinn, director of FERC’s Division of Economics and Technical Analysis, said such a structure might overcome the jurisdictional challenges that he said have “hamstrung” regulators in restructured states.

Quinn said state regulators have expressed a desire to obtain purchase-power contracts to keep their nuclear plants open. “They look [for someone] to sign that contract and they have difficulty finding who they still have jurisdiction over,” he said. In states with RPS, load-serving entities are obligated to purchase minimum percentages of renewable sources such as wind and solar.

Fuel Security

FERC is also considering ways to bolster nuclear generators’ capacity revenues, perhaps through a “fuel security” premium.

Acting FERC Chair Cheryl LaFleur said although the wholesale markets are “fuel blind,” they also acquire resources that possess important capabilities, such as ramping, needed to keep the grid functioning. Fuel security could be such a capability to incorporate, she suggested.

In January, natural gas-fired plants had trouble obtaining fuel due to high prices and pipeline constraints. Coal-fired plants also experienced problems due to frozen coal and delayed rail shipments.

Nuclear plants need to add fuel about once every two years — about the same frequency with which FERC and NRC hold these joint meetings.

“Knowing that you’ve got a stock of fuel on site … that will be there for the duration of a weather event — it’s another thing you don’t have to” worry about, Quinn said.

Causes of Nukes’ Problems

Quinn cited data from the PJM Market Monitor showing that nuclear generators’ net energy and capacity revenues in the RTO have declined from more than $300,000/MW-year in 2010 and 2011 to $240,000 in 2013.

Quinn said the causes include excess supply, particularly from low-cost natural gas and wind, and capacity prices depressed by demand response and transmission upgrades.

“There is currently a very robust debate about the relative importance of those potential drivers,” Quinn said. “FERC staff hasn’t come up with an independent opinion on which of these drivers is more important than the others.” (See Who’s to Blame for Negative Prices?)

Quinn said that fossil fuel plant retirements resulting from the EPA’s Mercury and Air Toxics Standards and transmission expansion that makes it easier for generators to reach load may help boost prices. “But the degree to which any of these future changes will result in a full recovery of revenue levels is just uncertain at this point,” he said.

Quinn also noted that nuclear plants benefited from energy market prices in January that hit $1,000/MWh during some hours.

“In some degree the system has been designed so that’s where a lot of cost recovery occurs … If your marginal cost was down at $15 to $20 per megawatt-hour there was a lot of money there to be earned to recover some fixed costs.”

The question FERC is considering, Quinn said, is whether current energy and capacity revenues are enough to preserve the nuclear fleet or whether it requires some other payment stream.