DOE Grid Study Is Finally Published — Supports Coal, Nuclear, Hydro, Not Renewables

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After many long months of waiting and mounting concern, the US Department of Energy has finally released its internal study into the effects of renewable energy on the grid, and while the news isn’t as bad as it could have been, there’s still very little support for renewable energy.

Background

We’ve been waiting for this particular report ever since newly-minted Energy Secretary Rick Perry penned a memo, which was subsequently leaked, directing his chief of staff to conduct a 60-day review of the country’s electricity grid, with a specific view to discovering the impact of increasing levels of renewable energy into the grid. The grid’s purpose was designed around the faulty premise that increasing renewables decreases the electricity grid’s reliability and resilience.

In the wake of the leaked memo, numerous groups from across the country set out to answer the question themselves, providing the Department of Energy (DOE) with their expert analysis of the situation. In May, four national business groups — Advanced Energy Economy (AEE), American Council on Renewable Energy (ACORE), American Wind Energy Association (AWEA), and Solar Energy Industries Association (SEIA) — submitted research to Secretary Perry informing him of the value and importance of renewable energy sources, and their contribution to protecting the reliability of the electricity grid.

A month later, a report published by Analysis Group — conducted on behalf of the Advanced Energy Economy and American Wind Energy Association — concluded that there was simply no evidence that the changing mix of the United States’ electricity sector will affect system reliability. Further, the Analysis Group report concluded that it was market forces — primarily the rise of low-cost natural gas and a flat demand for electricity — that are behind the retirement of coal and nuclear plants across the US, and not federal and state policies supporting renewable energy development.

The Study

For the sake of brevity and clarity, I’m going to take a brief tour through the key results and leave the in-depth commentary of the report for others; or you can take a look at the study for youreselves. Unfortunately, there’s enough bad news in the highlights for us to get by on.

Though, to be clear, this report is not as politically contrived and anti-renewable as some of us had feared.

“This is not the highly politicized study that many had expected (or feared) when Secretary Perry issued the initial memo on April 14,” said Shayle Kann, the senior VP of GTM Research. “Instead, it’s a fairly well-evidenced overview of electricity markets as they stand today, the causes of coal and nuclear retirements to date, and the issues surrounding reliability and resiliency moving forward.”

The three key findings from the study are worth highlighting here, identified as “several critical issues to protecting the long-term reliability of the electric grid”:

1. The evolution of wholesale electricity markets, including the extent to which Federal policy interventions and the changing nature of the electricity fuel mix are challenging the original policy assumptions that shaped the creation of those markets.
2. Whether wholesale energy and capacity markets are adequately compensating attributes such as onsite fuel supply and other factors that strengthen grid resilience and, if not, the extent to which this could affect grid reliability and resilience in the future.
3. The extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants.

Of particular importance are the findings listed under the third key finding, specifically, that natural gas-fired generation remains the “biggest contributor to coal and nuclear plant retirements,” and that variable renewable energy “has negatively impacted the economics of baseload plants” further citing “Participants  on a panel of economists at a May 2017 FERC technical conference” who explained that “state-level RPS and Federal tax credits for VRE as examples of wholesale market impacts and distortions.”

While the report covered a wide variety of issues concerning grid stability (another reason why I am resorting to a birds-eye view of the report) — which is reflected in the policy recommendations proffered at the end of the report — of significant concern is the recommendation made by the Department of Energy authors that  DOE and related Federal agencies should accelerate and reduce costs for the licensing, re-licensing, and permitting of grid infrastructure such as nuclear, hydro, coal, advanced generation technologies, and transmission.

The focus on future ease-of-development for these three technologies — specifically coal and nuclear — shed a lot of light on what we can expect from the Department of Energy and the Trump Administration’s energy policies over the next few years. With regard to easing the regulatory burdens surrounding coal, the authors write that the Environmental Protection Agency should encourage “coal-fired power plants to improve efficiency and reliability without triggering new regulatory approvals and associated costs. 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.”

In other words, cut down on regulations but try and increase energy efficiency of coal plants — likely by focusing on “clean coal” (read: carbon capture and storage).

In a cover letter accompanying the report, Energy Secretary Rick Perry subtly hinted at these findings, though stopping short from specifically naming renewable energy policies as being the key problem. Specifically:

“It is apparent that in today’s competitive markets certain regulations and subsidies are having a large impact on the functioning of markets, and thereby challenging our power generation mix. It is important for policy makers to consider their intended and unintended effects. Federal and State policy makers must continue to work together in close consultation to address these important issues that have a deep impact on grid reliability and resilience.”

The Response

Unsurprisingly, the response to the report has been less than stellar. While our worst fears have been avoided, the study still leaves a lot to be desired and places far too much emphasis on coal and nuclear generation. As of writing, a number of the responses are tentative in nature, awaiting further study of the report and focusing on the fact that the report didn’t out-and-out condemn renewable energy or blame them for grid instability (which doesn’t exist).

“We are glad to see that DOE recognizes that changes in the grid are primarily the result of low-cost natural gas, not policies supporting renewable energy,” said Graham Richard, CEO of Advanced Energy Economy, a national business group.

“But this report seriously overstates the challenges associated with new energy resources. It also implies that certain power plants now losing out in the marketplace make an irreplaceable contribution to reliability and resilience, which is not the case.

“Our nation’s grid operators themselves have said they are facing no difficulty in managing an increasingly diverse set of resources, and that they will have no difficulty maintaining reliability as uncompetitive power plants inevitably retire. Distributed energy resources, energy storage, advanced grid technologies, demand response, and other advanced energy technologies are helping to make the electric power system more flexible, reliable, and resilient. When coal piles froze and coal plants failed in the Polar Vortex, it was wind power and demand response that kept the lights on.”

“While we are still reviewing the specifics of this study, it’s been proven time and again that a diversified electricity mix is good for the overall system and poses no threat to the reliability of our nation’s grid,” said Abigail Ross Hopper, president and CEO of the Solar Energy Industries Association (SEIA). “On the contrary, solar and other renewables provide significant cost savings, relieve pressure on our nation’s infrastructure and improve the grid’s overall performance.”

“We look forward to reviewing the full report in greater detail, and welcome the focus on the resilience and security of our electricity supply suggested in the report’s recommendations,” said Gregory Wetstone, American Council On Renewable Energy (ACORE), President and Chief Executive Officer.

“There is little doubt that the increasing use of renewable energy has made the nation’s electrical grid more robust and secure. In fact, experts have concluded that renewable sources were critical to maintaining electricity supply during the polar vortex, when other power sources became unavailable. Certainly, we would be concerned by any effort to use resiliency as an excuse for propping up uneconomic sources of electrical power, and denying consumers free market access to clean, cost-effective renewable energy from, for example, wind and solar power.”