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DOE Grid Study: News...But Nothing New

by Karen Wayland, CEP Executive Director

The long-awaited U.S. Department of Energy (DOE) grid study is out, and the report largely concludes what we already knew—that economics are to blame for coal and nuclear plant closures, not policies that support renewable energy. Clean energy advocates were understandably nervous about the report, because the letter Secretary Perry wrote to his staff directing them to examine the reliability of the electric grid seemed biased in favor a particular outcome. Perry cited “regulatory burdens introduced by previous administrations” that “destroyed jobs and economic growth” and wrote that federal support for renewable energy (mandates and subsidies) created “acute and chronic problems” for baseload generation and therefore the reliability of the nation’s electricity system. Perry’s later statements implied he was having classified discussions about pre-empting state and local renewable energy policies in the name of grid security.

I said at the time that there was no way career staff at DOE could produce a report supporting the notion that federal and state renewable energy policies threaten reliability, because the evidence for that line of argument doesn’t exist. And indeed, the well-referenced final report instead concludes that renewable energy does not threaten grid reliability, something grid operators around the country already know since they successfully integrate an increasing amount of renewables into the power supply every day.

The report documents the changing resource mix that powers the country’s economy, noting that different generation technologies have come on line over time in response to “policy, fuel cost, and technology development.” In recent years, the majority of new generation capacity built in this country has been natural gas and renewables. The contribution of coal-fired generation to the electricity system has been declining both because few new coal plants are being built and because existing plants are retiring, with a “net retirement of about 12 percent of coal capacity” from 2002-2016. Over the same time period, about 5% of nuclear generating capacity was retired, with another 8 reactors slated for near-term retirement.

According to the DOE report, “the biggest contributor to coal and nuclear plant retirements has been the advantaged economics of natural gas-fired generation,” and another factor is “low growth in electricity demand.” The report then goes on to note that renewable energy has also affected the economics of conventional baseload plants, but the influx of cheap renewable energy onto the grid has actually increased the diversity of the fuel mix on the grid, contributed to grid resilience, and in many cases led to renewables being the least-cost resource that results in lower costs for consumers.

The changing nature of the country’s generation fleet has engineering, market, business model and institutional consequences, which DOE has acknowledged in multiple reports over the last few years (among them, see the two installments of the Quadrennial Energy Review). DOE’s electricity work is focused on addressing the technical and institutional issues of modernizing our grid in the face of these changes. That we will have to operate the grid differently to accommodate a cleaner but variable generation mix not only is not news, it’s not controversial, and it’s not a threat to reliability, especially if we can move beyond the outdated concept of baseload power.

The old way of thinking of baseload power is that some power plants will run close to 24 hours a day, providing the minimum amount of power required during the day, and then in response to periods of higher demand these plants ramp up and other plants come on and off during peak times. Coal, nuclear and gas plants—and sometimes hydro—traditionally served as those baseload resources. Secretary Perry’s letter ordering the grid study reflects the outdated notion that as these conventional plants retire, variable renewables won’t be able to meet electricity demand all the time and everywhere, threatening reliability and grid security. (The Secretary’s letter also implies, incorrectly, that these plants never fail and cause disruptions.)

The new DOE report devotes some space to the kinds of flexible resources (i.e., demand response, fast-ramping natural gas plants, and storage) that are available to help match generation and demand and maintain power quality when the grid is powered with more variable renewable energy. It is true that markets will have to evolve to send better price signals to bring these resources online, but that is already happening in both power markets and the associated ancillary service markets where essential reliability services like frequency and voltage regulation are procured. FERC has been holding technical workshops and opened dockets on new market mechanisms, and ERCOT in Texas has created new products for its ancillary service market to accommodate increasing amounts of wind energy on the system.

Most of the recommendations in the new DOE grid report are ones I’ve seen before and reflect activities already underway. FERC should improve energy price formation in wholesale electricity markets? Already underway. FERC should improve its valuation of essential reliability services? Also underway, and DOE has been working with the national labs to improve valuation methodologies and to get better data for years. Improved electric-gas coordination? Yes, underway in a number of venues. Support system resilience? A no-brainer, although I have some quibbles with how the report uses more of a plant-by-plant view of resilience rather than a system-wide perspective that focuses on robust transmisson and grid controls in the event that individual plants of any type go off-line.

Other recommendations are disconnected from the analytical work in the report. Prioritize energy dominance? With over 15 years of working on national energy issues, I have no idea what that means, and there’s nothing in the report that explains it. Virtually all fuel sources for this country’s electricity generation are produced in the United States, with any electricity or fuel trade occurring almost exclusively with our closest allies and neighbors, Canada and Mexico. And there’s nothing in the report that makes the case for streamlining the permitting process for new coal, nuclear and hydropower plants as the antidote for the economic issues identified as the key cause of early retirements. Federal agencies have been working for years to streamline the permitting process for new transmission, and if this administration wants to ensure system-wide resilience, keep working to reduce the approval time for new transmission infrastructure so clean, cheap utility-scale renewables can be developed and electricity flows can be balanced across bigger geographical areas.

I don’t have an issue with a new administration coming in and asking for a fresh view on problems facing the country, but the original Perry letter ordering this study was a conclusion in search of analytical backing, and the final report is analysis in search of a new problem. The report certainly didn’t identify any new issues, nor any insurmountable problems, unless you own an old fossil or nuclear generation plant that doesn’t turn a profit any more. Renewable energy and grid security shouldn’t be partisan issues, and overly emotional reactions to this report give it way too much credit. As I sit here blogging from the great state of Nevada, the real action on clean energy is happening in the states, and this report won’t give any administration the excuse to get in the way of that action. 

 

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