The US Department of Energy (DOE) released a report late Wednesday night recommending that power markets revise how they value coal and nuclear power. The report also admits that low natural gas prices are a primary cause of recent coal plant closures.
The report has been controversial since its inception. In mid-April, Energy Secretary Rick Perry directed his team to study grid reliability and security for 60 days. Although the memo never mentioned renewables, it implicated “certain policies” that apparently unfairly threatened coal-burning plants.
That led critics to wonder whether renewable energy—critical for the mitigation of climate change—would get a fair shake in Perry’s study. Grid operators have been able to put a fair amount of renewable energy on the grid without reliability suffering, but the tone of Perry’s memo suggested that a conclusion contradicting that fact had been predetermined.
That outlook changed in June when a leaked copy of the report was seen by Bloomberg reporters. The June draft allegedly contradicted the assumptions in Perry’s April memo, saying the low price of natural gas, rather than the rise of policy supporting renewables, was the main culprit in the closure of coal plants. The draft also noted that renewable energy did not threaten the reliability of the electric grid.
The completed study is 125 pages that are somewhere in between what was expected from Perry’s memo and what was expected after reports on the leaked study were published.
What’s in it
The main takeaway from the study seems to be that coal and nuclear plant closures are responses to market pressures exacerbated by “flat demand growth, federal and state policy interventions, and the massive economic shift in the relative economics of natural gas compared to other fuels.” Although the low price of natural gas was cited as a primary factor in the closure of coal plants, the study also said that federal tax credits for wind and solar, as well as state renewable portfolio standards (RPS), were eating into “baseload” profits.
Although electricity markets correctly pay generators for reliability, the study added, more research is needed to make the grid resilient to extreme weather events and fuel price shocks. Still, the study admitted that wholesale electricity markets “have withstood a number of stresses.”
The study offered eight recommendations for the DOE, the Federal Regulatory Energy Commission (FERC), and other federal agencies. It orders FERC to use regulation to push markets to better compensate electricity generators “that are necessary to support reliable grid operations.” But the study also mentions that these regulations should be “fuel and technology neutral.” It also recommends that federal agencies expedite permitting for hydroelectric, coal, and nuclear plants.
Other recommendations include using the national laboratories to focus more on grid research and development, supporting transition and skill-development programs for electricity industry employees whose skillset is falling out of demand as the grid modernizes, and encouraging electricity and natural gas markets to work more closely. The DOE should “Encourage EPA to allow coal-fired power plants to improve efficiency and reliability without triggering new regulatory approvals and associated costs,” the study also noted. “In a regulatory environment that would allow for improvement of the existing fleet, DOE should pursue a targeted R&D portfolio aiming at increasing efficiency.”
The DOE “should continue to prioritize energy dominance,” the study also offered, referencing Trump Administration talking-points that encompass a host of fossil fuel-positive policies.
Who wrote it?
Some looked to the authors of the study to guess where the politics would fall. The principle author, Alison Silverstein, was an energy analyst who worked as a FERC adviser under President George W. Bush and who worked on smart grid funding during the Obama years. She has a reputation for being an experienced and steady hand, according to E&E News.
Critic pointed out reports from the New York Times and the pro-renewable energy watchdog group Energy and Policy Institute, which noted that one of the study’s authors was Travis Fisher, a former Federal Energy Regulatory Commission economist. Fisher has written extensively in opposition to tax credits for wind energy and in favor of repealing the Clean Power Plan as well as the Mercury and Air Toxics Standards. In 2015, Fisher authored a white paper for the fossil fuel-friendly Institute for Energy Research (IER) comparing Obama-era energy policy to terrorist attacks. He concluded that the former was a more direct threat to grid stability.
Outside the government’s opinion
In fact, US grid operators have been able to manage increased greenhouse gas-free wind and solar electricity in recent years, and studies have shown that advances in technology and forecasting would allow even more renewable energy to come online without threatening stability. Some researchers have argued that renewable energy protects the grid from fluctuations in fossil fuel supply, as well.
According to E&E News, the North American Electric Reliability Corp. (NERC) recently reported that “overall benchmarks of reliability were stronger” in the US in 2016 than in several years prior, despite record amounts of renewable energy servicing the grid.
Many experts agree that a primary element behind closures of fossil fuel-based plants is the low price of natural gas, which is driving coal out of the market while increased competition among natural gas plants is narrowing the margins among plant owners. Others suggest that a complicated and fractured electricity market, served by companies that must meet various state and federal rules, has been crippling power companies.
Critics found Perry’s study to be too supportive of fossil fuel industries. In a statement, the National Resources Defense Council said “The recommendations ignore renewable energy’s contributions to a reliable electricity system. They also include misguided proposals to gut environmental rules for coal and nuclear plants and to pay fossil resources for reliability services that DOE hasn’t demonstrated are necessary. DOE and Secretary Perry should be focusing instead on accelerating the growth of clean energy rather than creating barriers.”
Interestingly, the DOE is also soliciting input from the public on the report, although it’s not clear how long the window to comment will last.