Monday, October 23, 2017

Perry Grid Study Seeks to Aid Coal, Nuclear Generation

By Rich Heidorn Jr.

Energy Secretary Rick Perry’s much-awaited grid study calls on the federal government to rescue traditional “baseload” power — coal and nuclear — by addressing renewables’ negative pricing and ending EPA’s New Source Review rule on coal generators.

rick perry grid study baseload power negative pricing

| Energy Information Administration (EIA) Electric Power Monthly, June 2017

The 187-page study, which was released late Wednesday night, contains little if any new data or analysis. Virtually all the trends it cites and the issues it raises have been under discussion for months or years at FERC, in state legislatures and at RTO/ISO stakeholder meetings. What is new are some of the policy recommendations, which reflect the Trump administration’s support of the coal industry and its rejection of the Obama administration’s Clean Power Plan.

The report cites Executive Order 13783, saying that while the Energy Department is not specifically named in the order, the department “should continue to prioritize energy dominance” and that it and other federal agencies “should accelerate and reduce costs” for licensing “nuclear, hydro, coal, advanced generation technologies and transmission. DOE should review regulatory burdens for siting and permitting for generation and gas and electricity transmission infrastructure and should take actions to accelerate the process and reduce costs.”

rick perry grid study baseload power negative pricing

| Monitoring Analytics, 2017 Quarterly State of the Market for PJM: January through March 2017

‘Unnecessary Burden’

As one example, it suggests ending the New Source Review rule, administered by EPA under the Clean Air Act, saying coal-fired generators should be allowed “to improve efficiency and reliability without triggering new regulatory approvals and associated costs.”

“The uncertainty stemming from [New Source Review] creates an unnecessary burden that discourages rather than encourages installation of CO2 emission control equipment and investments in efficiency because of the additional expenditures and delays associated with the permitting process,” it said.

It also says FERC should require valuation of “Essential Reliability Services,” in which it includes reliability-must-run generators and ancillary services (frequency and voltage support, and ramping capability).

Perry, who requested the study in an April 14 memo, said it was “long overdue.”

“The industry has experienced massive change in recent years, and government has failed to keep pace,” he said in his cover letter to the report. “This report examines the evolution of markets that has occurred over the last 15 years. Policymakers and regulators should be making decisions based on what the markets look like today, not what they looked like years ago.”

Perry’s memo, which set a 60-day deadline, called for the department to “explore critical issues central to protecting the long-term reliability of the electric grid,” and to analyze “market-distorting effects of federal subsidies that boost one form of energy at the expense of others.” The report arrived two months late.

Vehicle for Trump Policy?

The memo sparked concern among renewable energy advocates that the study would be a vehicle for Trump to deliver on his campaign promises to “save” the coal industry.

Their fears were heightened by the involvement in the study of Travis Fisher, a former FERC economist hired by DOE in January who had written a 2015 report for the conservative Institute for Energy Research that alleged the “single greatest threat to reliable electricity in the U.S. does not come from natural disturbances or human attacks” but federal and state government policies such as renewable subsidies and mandates.

But the politicization appeared to have been tempered by the involvement of career DOE staffers and contractor Alison Silverstein, once senior adviser to former FERC Chair Pat Wood, a Republican appointee of President George W. Bush. Silverstein is board secretary for the American Council for an Energy-Efficient Economy.

Another factor was the leak of a draft of the report in June, which contradicted Perry’s memo by concluding that low natural gas prices rather than renewable-friendly policies were the main cause of coal and nuclear plant retirements.

Changes from Leaked Draft

Joe Romm, a writer for the progressive website ThinkProgress, compared the final version with the draft and concluded that “while Trump officials clearly tried to rewrite the previously leaked staff draft to give the impression that renewable energy sources are a threat to baseload power and grid resilience, they mostly botched the job.”

The draft report found that environmental regulations and renewable energy subsidies “played minor roles compared to the long-standing drop in electricity demand relative to previous expectation and years of low electric prices driven by high natural gas availability.”

The draft also concluded that “the power system is more reliable today due to better planning, market discipline, and better operating rules and standards.”

Both of those conclusions were eliminated from the final report, Romm said.

Instead, the final report concedes that “the biggest contributor … has been the advantaged economics of natural gas-fired generation,” and that “another factor … is low growth in electricity demand.”

The report also substituted the finding that renewable subsidies had a minor impact on baseload plant retirements with the conclusion that “dispatch of VRE [variable renewable energy] has negatively impacted the economics of baseload plants” — a statement that is undermined elsewhere in the report citing data that “do not show a widespread relationship between VRE penetration and baseload retirements.”

rick perry grid study baseload power negative pricing

| Department of Energy, Staff Report to the Secretary on Electricity Markets and Reliability, August 23, 2017

While the final report notes that “recent severe weather events” have “demonstrated the need to improve system resilience,” it removes the words “climate change,” which many scientists believe is a contributor to the phenomenon.

“Perry and his staff took a perfectly solid report on the grid and added a (surprisingly light, to my eye) coating of political propaganda,” wrote columnist David Roberts on Vox. “The result is a muddy report, with findings in it to please (or enrage) every onlooker.”

Coal, Nuclear Groups Praise Report

In early reaction to the report, many groups seemed to be able to find something they liked — with the coal and nuclear lobbies most effusive. Environmentalists were dismissive, if relieved.

“We commend Secretary Perry and the Department of Energy for studying the challenges facing the electricity grid,” said Paul Bailey, CEO of the American Coalition for Clean Coal Electricity. “One of the biggest challenges is how to preserve the nation’s coal fleet so it can continue supporting a reliable and resilient electricity grid.”

“We commend Secretary Perry for his leadership in beginning this important but long overdue conversation about the future reliability and resilience of our electric power system,” said National Mining Association President Hal Quinn. “Among other findings, the report notes that ‘regulations and mandates,’ in addition to market forces, have accelerated the closure of a substantial number of baseload power plants. … As the report notes, many states and regions bear an increased risk from the destruction of traditional baseload power and the resulting diminution of grid resilience.”

Nuclear Energy Institute CEO Maria Korsnick said the study “reaffirms our view that nuclear energy is a key and necessary contributor to a clean, reliable and resilient electric grid.”

“In the 10 years since the last comprehensive grid study by our government, electricity markets have changed radically,” she continued. “Today electricity markets do not properly credit nuclear energy for the numerous benefits it delivers, forcing plants to close years before the end of their useful lives and compromising grid reliability and resiliency in the process.”

Kelly Speakes-Backman, CEO of the Energy Storage Association, said the group was “encouraged” by its initial review of the report.

“The report plainly states that advanced energy storage systems are critical to ensuring that electricity is reliable, affordable and secure,” she said. “We also agree with the key findings that better strategies are needed by markets and in resource planning to properly reward the values that energy storage systems provide to the grid, especially increased reliability and resiliency.”

Tom Kiernan, CEO of the American Wind Energy Association, said the group agrees with the department “that it makes sense to determine how a portfolio of domestic energy resources can ensure grid reliability and resilience.”

Kiernan — who noted that the U.S. wind industry is expected to “support” 147,000 jobs by 2020 — said the report “provides a number of valuable policy recommendations.”

“In particular, DOE’s recommendations to value essential reliability services, which wind provides; to minimize regulatory barriers to energy production; and to accelerate infrastructure and transmission development are prudent and will help continue America’s wind power success story,” he said.

Dissenting Voices

The Alliance to Save Energy said the discussion about the report overlooked the role of energy efficiency. “As we look at the portfolio of solutions we can’t just look at supply,” said President Kateri Callahan. “We have to remember that increasing efficiency and productivity is the fastest and cheapest way to reach our goals — and it’s also a tremendous economic opportunity. Already efficiency is the leading job creator in the clean energy sector with some 2.2 million jobs in construction, manufacturing and other fields.”

Graham Richard, CEO of Advanced Energy Economy, a group of clean-energy and technology companies, said he was pleased that the department “recognizes that changes in the grid are primarily the result of low-cost natural gas, not policies supporting renewable energy.”

But he said the 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.”

rick perry grid study baseload power negative pricing

| Department of Energy, Staff Report to the Secretary on Electricity Markets and Reliability, August 23, 2017

“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,” he added. “What is happening in our power grid is a natural process of technology progress and market competition. 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.”

Also critical was environmental group Earthjustice, which said the report “shows that science is not safe from manipulation under this administration.”

“Sound findings in the earlier draft of the report have been mysteriously excised, replaced by trumped up claims about the costs of environmental regulations,” said Earthjustice attorney Kim Smaczniak. “And this report says nothing about climate change. By willfully burying its head in the sand on climate change, the administration will make the grid more vulnerable to the next Superstorm Sandy, which left millions without electricity.”

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