U.S. Study Blames Gas Prices for Shifting Grid, Urges Relief for Coal and Nuclear Operators
Low natural gas prices emerged as the primary cause of U.S. coal and nuclear plant closures, with slow demand growth, power plant regulation, and the rise of distributed renewables as secondary factors, when the U.S. Department of Energy oddly released its widely-anticipated grid reliability study at 10 PM EDT Wednesday.
“The biggest contributor to coal and nuclear plant retirements has been the advantaged economics of natural gas-fired generation,” the 187-page assessment concludes.
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Far from the “anti-renewables screed” that appeared to be taking shape after Energy Secretary Rick Perry announced the study in April, the report is “more like a Rorschach test for the future of the electric grid,” Greentech Media reports, giving different stakeholders everything from a “wonky accounting of the state of the grid” to a “progressive plan on how to transition toward a distributed, low-carbon” future.
“While markets have evolved since their introduction, they are currently functioning as designed—to ensure reliability and minimize the short-term costs of wholesale electricity,” the study finds. “The debates surrounding wholesale markets are complex and multi-faceted, but the institutions and the grid itself have historically proven flexible, strong, and able to adapt. Questions about revenue sufficiency and resilience must be addressed quickly, before the fast-moving evolution of our power system outpaces our ability to understand and manage it responsibly.”
“This is not the highly-politicized study that many had expected (or feared) when Secretary Perry issued the initial memo on April 14,” said GTM Research Senior Vice President Shayle Kann. “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.”
While Perry had initially professed concern about “diminishing diversity of our nation’s electric generation mix”, DOE concludes the country’s grid “is more diverse than ever,” Greentech notes.
“The national U.S. capacity and generation mix have become more diverse over time,” the report states. “Changes in capacity have moved the resource mix toward a greater proportion of natural gas, wind, and solar, while coal and oil capacity have decreased. Energy generation trends for these resources have tracked changes in capacity, with natural gas generation almost doubling in proportion.”
The study does recommend easier permitting for coal plants, lighter safety requirements for nuclear plants, and compensation for grid suppliers “that help keep power reliable,” the Washington Post reports. It claims renewables have a negative impact on baseload power plant economics, with state renewable portfolio standards and federal tax credits for solar and wind producing “wholesale market impacts and distortions,” Greentech states.
That means the report “puts the Trump administration’s thumb on the policy scales,” InsideClimate News notes, “recommending easing pollution regulations and changing rules for pricing of electricity, along with other steps intended to protect the beleaguered coal industry’s historical role as the foundation of the entire grid.”
For Jim Marston, vice president for clean energy at the Environmental Defense Fund, Perry’s “backward-looking grid study is no surprise from an administration determined to prop up the coal industry at taxpayers’ expense. We already know a flexible, modern system with less coal and more renewables is the most reliable, resilient, and cost-effective path forward.”
Other critics warned that Perry’s comments as he received the report showed him “prescribing conclusions for a rollback of regulations or government incentives for renewable power,” the Wall Street Journal reports, in a dispatch picked up by the Institute for Energy Economics and Financial Analysis.
“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,” Perry wrote, in a cover letter that accompanied the release. “It is important for policy-makers to consider their intended and unintended effects.”
Advanced Energy Economy CEO Graham Richard countered that the report “seriously overstates” the problem.
“What is happening in our power grid is a natural process of technology progress and market competition,” he said. “That process should be allowed to continue, not be distorted by this administration’s preference for ‘baseload’ resources over the flexible resources that are modernizing the electric power system.”
“Current rules that dispatch power plants on a least-cost basis are in the best interest of consumers and the economy and should not be tampered with lightly,” added John E. Shelk, president and CEO of the Electric Power Supply Association, which represents non-utility generators that often favour natural gas.
With utility energy mixes changing “in real time”, Greentech notes, “new, cost-effective technologies have required utilities to employ more sophisticated planning techniques to keep the grid running smoothly.” Yet “most utility leaders have embraced the shift to a cleaner, albeit more intermittent, energy system.” Edison Electric Institute President Tom Kuhn said his organization “has long advocated that our customers are best served by public policies that promote a balanced and diverse energy mix, which includes both traditional and renewable energy sources, and that also recognize the vital role 24/7 energy sources play in sustaining a secure, reliable, and resilient energy grid.”
Greentech’s coverage shows that the report continues the U.S. debate on whether coal and nuclear operators should be compensated for the grid security they ostensibly provide through baseload power.