On August 23, 2017, the U.S. Department of Energy (DOE) released the long-awaited study of the electricity grid. On April 14, 2017, Energy Secretary Rick Perry directed his staff to prepare a study examining the present state of the electricity system, with particular focus on whether Federal policy and other regulatory burdens are putting coal and nuclear power plants (so-called “baseload” generation) at a competitive disadvantage, thus damaging grid reliability.
Although the report (here)
blames decreasing electricity demand, increasing renewable resource penetration, and the costs of complying with environmental regulations for at least some portion of premature baseload retirements, the report ultimately concludes that inexpensive natural gas is the primary cause for early coal and nuclear plant retirements. The continued closure of traditional baseload power plants is cause for concern, according to the report—a concern that “calls for a comprehensive strategy for long-term reliability and resilience” for the U.S. electricity grid. Accordingly, the report makes eight policy recommendations regarding how regulators could address the reliability and resilience issues identified in the report.
Among these recommendations, the report suggests that the U.S. Environmental Protection Agency should ease permitting requirements for new coal-fired generation through New Source Review changes. The report also suggests that the Nuclear Regulatory Commission should speed up permitting for nuclear plants. While wind and solar energy were not identified as the major factor in early shut-downs of coal and nuclear baseload generation, the report does suggest that energy purchases at negative prices are inappropriate and result from production tax credits and power purchase agreements that encourage production regardless of demand and thereby disadvantage coal and nuclear facilities in favor of wind and solar.
The report suggests that FERC should expand its efforts to work with the RTOs/ISOs, the states, and others to improve energy price formation in organized markets. The study also suggests that present market designs “may be inadequate given potential future challenges” and that other actions may be required including properly compensating grid resilience and reliability. A few days ago, the new FERC Acting Chairman, Neil Chatterjee, suggested that actions may be needed to support coal and nuclear generation.
For more information please contact Jeff Genzer
or Matt Bly