DOE’s Grid Study: Clinging to the Past

August 24, 2017 by John Moore, Director, The Sustainable FERC Project and Miles Farmer, Clean Energy Attorney 

DOE’s long-awaited grid study grasps for any possible rationale to support outdated, expensive, and highly polluting coal plants, but fundamentally fails to come up with concrete reasons to do so. The report is disjointed, making misguided recommendations to relax environmental rules and saddle customers with extra costs that are largely unconnected to and unsupported by the report’s findings. In short, while we believe customers should pay less and get cleaner energy, Trump and the coal industry want customers to pay more and get dirtier energy.

While Secretary Perry’s letter in April requesting the study telegraphed a clear desire to paint renewables as a villain, career staff at DOE, fortunately, were able to inform him that the grid is now more reliable than ever and low natural gas prices rather than renewables policies are the biggest driver of recent coal retirements.

Customers should be worried, however, because the study searches hard for justifications to support coal. It flags several areas for future “inquiry,” most of which would increase customer costs. DOE Secretary Perry is determined to preserve prehistoric fossil fuels of our past that cause climate change instead of working to shape our power grid around a forward-thinking clean, carbon-free, reliable, and affordable power supply.

What does the study say?

The study examines retirement of ‘baseload’ (mostly large coal and nuclear plants) in detail, concluding that natural gas prices are the biggest cause of their decline. Yet, it never explains why grid operators and planners should focus on baseload generation. We aren’t surprised that DOE couldn’t muster any defense for the concept. As experts such as the Brattle Group have explained, the term ‘baseload’ is outdated and unhelpful for planning and operating today’s system.

The lack of any justifiable need to support ‘baseload’ leaves the report in search of a problem. While it concludes correctly that grid operators are successfully ensuring grid reliability, it flags ‘resilience’ as a possible rationale to support coal. The difference between ‘reliability’ and ‘resilience’ is largely unexplained, but the report suggests it relates to the ability of the grid to respond to severe weather. Even there, DOE staff helpfully note that there are no easy answers. They point out, for example, that frozen coal stockpiles can disrupt electricity delivery during extreme weather.

The report is clearly tilted against renewables. For example, in focusing mostly on a single year of incentives for renewable energy, it ignores that fossil resources have received the lion’s share of subsidies over time.

In discussing on-site fuel supply (storing gas, coal, or nuclear material at a plant location), it omits the fact that wind and solar do not depend on pipelines, railroads or other delivery infrastructure that are vulnerable to disruption. And renewable installations are typically dispersed over a wider geographic area than large fossil fuel and nuclear plants, an advantage that reduces transmissions losses and mitigates weather and demand uncertainty. (It is indisputable that “the addition of renewable energy never increases and actually always decreases the need for other power plants.”)

Also omitted is any reference to climate change, a major source of the extreme weather events that the report identifies as a threat to grid resilience. So it is ironic that DOE’s report recommends further investments in the very fossil resources causing the threats it identifies as a problem. Conspicuously absent in the final version is the leaked draft’srecommendation to “[a]dopt carbon tax or pricing scheme as an economically efficient way to recognize low-carbon resources.”

The report also glosses over the fact that some areas of the country have more power plants than we need, a major source of the depressed market prices discussed in the report. Even now, thousands of megawatts of new natural gas plants continue to be developed each year in the electricity markets. In the long run, as more coal plants retire, the oversupply will shrink and prices will rise. That might be a problem for costlier coal plants, but isn’t that how markets are supposed to work?

The recommendations sections is a grab bag of mostly bad ideas, many of which do not flow from any of the data discussed in the report. Among the red flags: urging the Environmental Protection Agency to waive Clean Air Act safeguards for some coal plants. That’s plainly against the law and would face certain defeat in court. Another recommendation: rolling back climate and clean energy policies per Trump’s “irrational” Executive Order 13783. That’s also a no-no, and irrelevant to maintaining a reliable and affordable grid. The lack of connection between the recommendations and the facts found reveals a DOE that is at war with itself.

It’s not all bad

There is some in the body of the report worth agreeing with. For example, contrary to the narrative that ‘baseload’ retirement is a problem, the report correctly notes that as we add more renewables to the grid, “flexible” output is more valuable than the more inflexible output of older baseload plants. The need for flexibility will grow as we add more wind and solar to the system, so markets should focus on valuing that attribute. Accurately, the report finds that non-generation sources of flexibility—such as responsive demand, more transmission, and energy storage—could enhance system reliability.

The report also includes some good ideas that aren’t connected to the central narrative surrounding ‘baseload.’ For example, the report urges regulators and utilities to continue to improve the often balky coordination between the electricity and natural gas markets. It’s a nerdy but important topic. As natural gas supplies more power for electricity than ever before (at least in the near term), more coordination between the markets will be critical to maintaining reliability and optimizing existing gas pipeline efficiency.

A missed opportunity

More than anything, the report is a missed opportunity to confront the changing demands of the power sector in a comprehensive and rational manner. While it raises some important topics, the report’s framing of the issues in search of support for outdated technologies results in a confused inquiry into the system of the future. Going forward, DOE should avoid dwelling in the past and instead explore the many consumer, economic, and environmental benefits from deploying more clean energy. It must also confront climate change head on, which threatens the reliability of the electricity system in addition to posing a larger existential crisis for our planet.

Written by John Moore and Miles Farmer