AWEA dumps Exelon after anti-PTC campaign

UNITED STATES: Exelon became the first company member to be expelled from the American Wind Energy Association (AWEA) last month following a vote by the trade group's board of directors.

The Chicago-based company also lost its slot on AWEA's board. The move followed 18 months of vociferous attack by Exelon on AWEA's main priority — the production tax credit (PTC) support mechanism and its extension beyond 31 December.

"They were publicly leading an organised campaign," said Peter Kelley, AWEA's vice-president of communications. "We don't believe in policing differing views of our members, but they were working against us." Kelley added that Exelon executives had attended AWEA strategy sessions on the PTC.

In response, an Exelon spokesman said: "Exelon supports wind energy [but] the PTC is no longer needed and distorts competitive wholesale energy markets causing financial harm to other, more reliable clean energy sources. Allowing it to expire will level the playing field for all energy sources, so that they can compete on their respective merits."

Upping the ante

Exelon's anti-PTC campaign has intensified in recent months. Just before AWEA's decision, a senior Exelon executive, David Brown, appeared at a 10 September private briefing on Capitol Hill about the PTC.

Alongside Brown was Thomas Pyle, president of self-described free-market think-tank American Energy Alliance, and a former lobbyist for Koch Industries, whose founders have lobbied against renewables.

Upping the ante, Exelon's consultant, NorthBridge Group, has published a study arguing that wind generators can afford to sell at a loss, or a negative price, because they get the PTC. The study, Negative Electricity Prices and the Production Tax Credit: Why wind producers can pay us to take their power — and why that is a bad thing, was published on 14 September and has already been trumpeted by anti-PTC congressmen.

AWEA criticised the study, saying the major issue was lack of transmission, and ordinary customers welcomed lower costs because of wind power. AWEA did not know that the study was under way when it ejected Exelon, said Kelley. Rather, he said, the issue had been building. Indeed, in March 2011, Exelon's then-CEO John Rowe told the conservative American Enterprise Institute: "Wind can only be built if it gets a renewable or clean-energy credit." He added that all subsidies to electricity sources should be phased out, including those for nuclear and coal.

Howard Learner, of the Environmental Law & Policy Centre, a PTC advocate, said Exelon's stance has hurt its brand: "Exelon has positioned itself as a green company for many years. This is clearly a move in the opposite direction, which we hope the company will reconsider and reverse course."

Exelon, the US's second-largest regulated distributor of electricity and gas, entered wind energy in 2010 by buying John Deere Renewables for $860 million. It now has some 900MW of wind capacity.

However, its portfolio comprises 55% nuclear, 28% natural gas, 4% coal and less than 3% wind power.

Its nuclear fleet is the largest in the US and third-largest in the world, and its current CEO, Christopher Crane, is from the nuclear industry. Over the past few years, Exelon has seen the possibility of federal carbon legislation — a likely benefit to nuclear power — evaporate.

Bloomberg New Energy Finance analyst Amy Grace said the impact of lower-cost wind would hit Exelon more than some other major AWEA members because it has so many non-wind power plants in areas where wind plants are burgeoning, such as the Midwest and Texas.

Brown confirmed this when he told reporters after the Capitol Hill PTC briefing that in the Midwest, electricity prices often go negative overnight, which hurts the firm's nuclear plants, which have to be kept running continuously.

"In the Midwest at night, when prices go negative, we either have to back our generation off or pay the market to run it," said Brown.

"And nuclear plants are baseload electricity sources: they run best when they run all the time."

Exelon expects to construct 404MW of wind projects in 2012 and is applying for the PTC for the projects. Asked whether that might be seen as hypocritical, an Exelon spokesman said: "Like any company with a substantial stake in these technologies, Exelon has a fiduciary responsibility to its shareholders to maximise the benefits of the tax code, where applicable, in order to remain competitive."