US Energy Secretary Rick Perry has turned to the Federal Energy Regulatory Commission in an effort to revitalize the country’s coal and nuclear industries by essentially subsidizing their sectors based on a misguided belief that their technologies are the only way to bring stability to the country’s electricity grid.
After several long months of silence from the US Department of Energy (DOE), in August it finally released its long-awaited grid resiliency study. While not as detrimental to renewable energy as some of us had feared, it was nevertheless clearly written to be in favor of supporting coal, nuclear, and large-scale hydropower. You can read all about it from my August coverage here.
We should have known that wouldn’t be the end of it, however, and just as the third quarter of 2017 was coming to a close last Friday, Department of Energy Secretary Rick Perry dropped the other shoe, by urging the Federal Energy Regulatory Commission to enact a 30-year-old statute to help support coal and nuclear power plants compete in wholesale power markets around the country.
Secretary Perry sent a letter to FERC on September 29, formally asking the Commission to “take swift action to address threats to US electrical grid resiliency” — despite the fact that countless experts from around the country have explained, repeatedly, that there is no threat to US electrical grid resiliency. In May, four US 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 in advance of the publication of the DOE’s grid study 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.
Propping-up Coal & Nuclear
Nevertheless, Secretary Perry and the DOE has deemed a need to prop-up the country’s ailing coal and nuclear markets:
“Pursuant to his authority under Section 403 of the Department of Energy Organization Act, the Secretary urged the Commission to issue a final rule requiring its organized markets to develop and implement reforms that would fully price generation resources necessary to maintain the reliability and resiliency of our nation’s grid.”
“A reliable and resilient electrical grid is critical not only to our national and economic security, but also to the everyday lives of American families,” said Secretary Perry. “A diverse mix of power generation resources, including those with on-site reserves, is essential to the reliable delivery of electricity — particularly in times of supply stress such as recent natural disasters. My proposal will strengthen American energy security by ensuring adequate reserve resource supply and I look forward to the Commission acting swiftly on it.”
Specifically, Secretary Perry claims that regulated wholesale power markets in the United States are not adequately pricing resiliency attributes of baseload power. “There is a growing recognition that Commission-approved organized markets do not necessarily pay generators for all the attributes that they provide to the grid, including resiliency,” Secretary Perry said in his letter sent to FERC (PDF). “Because wholesale pricing in those markets does not adequately consider or accurately value those benefits, generation units that provide the benefits are often not fully compensated for them.”
Reality vs. Myth
Of course, the notion that baseload power is somehow the key to grid resiliency was reliably debunked by many of the studies and evidence provided to the DOE during the writing of its grid resiliency study. Specifically, the paper written by the American Council on Renewable Energy (ACORE), entitled Energy Fact Check – The Impact of Renewables on Electricity Markets and Reliability, made clear that not only are renewable energy sources not eroding “critical baseload resources” and that “America’s biggest grid operators and reliability coordinators are reliably integrating large amounts of renewable energy today and have said they can continue to integrate even more renewables while lowering costs for consumers,” but that “increased competition from cheap natural gas, decreased electricity demand, and rising costs for nuclear and coal generation are primarily responsible for the majority of power plant retirements.”
This would suggest, therefore, that these so-called “baseload” power plants are not as important as the DOE and Energy Secretary Perry make them out to be, and that it is natural market forces that are seeing the US electricity grid shift away from coal and nuclear, and not some nefarious scheme to make renewable energy the one electricity source to rule them all.
Nevertheless, Secretary Perry advised FERC that it should implement a new rule to protect the resiliency of the electric grid which would allow “for the recovery of costs of fuel-secure generation units that make our grid reliable and resilient.”
“The rule allows the full recovery of costs of certain eligible units physically located within the Commission-approved organized markets. Eligible units must also be able to provide essential energy and ancillary reliability services and have a 90-day fuel supply on site in the event of supply disruptions caused by emergencies, extreme weather, or natural or man-made disasters.”
If adopted by FERC, Secretary Perry and the DOE claim that their proposals will:
- Ensure the diversity and reliability of generation supply
- Boost the resilience of the grid against outages
- Maximize reserve resource capacity for times of unusually high demand, including severe weather events
Unsurprisingly, not everyone agrees.
“We worry today’s proposal would upend competitive markets that save consumers billions of dollars a year,” said Amy Farrell, Senior Vice President, Government and Public Affairs, American Wind Energy Association. “The best way to guarantee a resilient and reliable electric grid is through market-based compensation for performance, not guaranteed payments for some, based on a government-prescribed definition. We look forward to participating in the process as FERC begins to consider the proposed rule.”
“We’re concerned this proposed rulemaking uses grid resilience as an excuse to prop up plants that have not been shown to be needed, preventing consumers from buying the power they want to buy,” explained Todd Foley, ACORE Senior Vice President, Policy & Government Affairs. “On-site fuel power sources have not helped with severe weather events such as the Polar Vortex where coal piles froze, Hurricane Harvey where coal piles flooded, and the Fukushima event where the nuclear plant ceased to operate.”
“This proposed rule ignores the primary finding from Secretary Perry’s own grid study from just a month ago, which was that the grid is being managed reliably with today’s diverse energy resources,” added Graham Richard, CEO of Advanced Energy Economy, a national business group.
“Simply put, this proposed rule has something for everyone to dislike. If you’re a believer in competition and free markets, this rule would insert the federal government squarely into the middle of market decisions. If you are driven by keeping energy costs low, this rule would impose higher energy costs on consumers for no tangible benefit by forcing electricity customers to pay to keep uneconomic power plants in operation. Finally, if you are driven by innovation and technology, this rule purposefully puts a thumb on the scale for existing, century-old technology at the expense of modern advanced energy that is currently winning based on price and performance.”
It should come as no surprise, then, that within days of the Secretary’s proposal being submitted to FERC, a group of 11 energy industry associations representing the gamut of the country’s electricity sector, has filed a motion with FERC calling on the Commission “to move forward with a deliberative process that considers stakeholder input as it determines whether and how to move forward with a rulemaking.” Specifically, the energy industry associations’ motion:
- Opposes DOE’s request for an interim final rule
- Requests that any comment period should be at least 90 days given potential ramifications for consumers and billions of dollars of electric sector investments
- Requests a technical conference be held prior to the end of the comment period for stakeholders to better understand the proposal and provide meaningful input
- Notes that the other deadlines in the DOE proposal are “wholly unreasonable and insufficient” and should be extended, should FERC “decide to proceed with a rulemaking of this type at all.”
Just who is involved in this motion, and who is represented? Pretty much anyone that counts:
- Advanced Energy Economy
- American Council On Renewable Energy
- American Petroleum Institute
- American Public Power Association
- American Wind Energy Association
- Electricity Consumers Resource Council
- Electric Power Supply Association
- Interstate Natural Gas Association of America
- National Rural Electric Cooperative Association
- Natural Gas Supply Association
- Solar Energy Industries Association
We’ll do our best to keep you updated on this, as it fits distressingly nicely alongside other recent news that the US International Trade Commission will likely look to impose tariffs on solar module and cell imports — a one-two punch that could devastate the country’s renewable energy industry.