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The Big Drumroll Ends with a Thud: DOE’s Study on the U.S. Power Grid

The Department of Energy today released its long-awaited grid-reliability study, after months of work at the agency to respond to Secretary Perry’s directive calling for the report. The tone and content of Perry’s April 14th memo suggested to many that the study would inevitably produce a set of findings that coal-fired power plants could take to the bank as proof that they need help from the federal government to stay in operation.

Now that the report is actually out, what’s surprising is that there are not many surprises. In keeping with other recent actions by the DOE, it provides little technical support for bailing out financially struggling coal-fired power plants. And that, in itself, is the main eye-opener.

The report examined the transitions underway in the electric industry and attempted to answer several questions:  What’s driving change in the mix of technologies we use to generate power?  And to what extent are these changes making the U.S. power supply less reliable?  

An earlier, leaked draft of the report clearly pointed to the many factors driving changes in the industry―ones that had been covered in countless other previous studies by experts at the Energy Department, the national labs, power grid operators, and other institutions. That draft pointed to the important role that low natural gas prices have played in putting financial pressure on existing coal and nuclear plants, and in turn on the changing technology mix in the power system. And it found that many coal plant retirements were not ‘premature’ (which the report characterized as being unduly early in light of their operational efficiency), and that renewable energy had not caused plant closures (but had exacerbated the problem). 

Many of us wondered how the credible technical material in that earlier draft might be elbowed aside in the final report to support other narratives.

But the final report actually contains similar findings, namely that:

  • Natural gas is the key driver of financial pressure on power plants, and plays a much bigger role than flat demand and renewable energy;
  • Many observed power plant retirements were appropriate and consistent with markets as they are currently functioning, and not every power plant retirement is cause for alarm;
  • The nation’s electric system is now more diverse than in the past;
  • States value things like jobs and clean energy and adopt policies to support them, which creates tensions with federally regulated electricity commodity markets;
  • Changing power systems require more flexible resources to maintain reliability, but the introduction of ‘variable’ renewable power projects doesn’t necessarily undermine reliability;
  • Extreme weather events are posing and will increasingly introduce challenges for grid operations and―in combination with the other changes underway in the system―more research will be needed to support a more modern and resilient grid;
  • More coordination is needed between the nation’s gas and electric industries.

In my own work, I have come to many of these same conclusions―in a recent National Academy of Sciences study on grid resiliency, in a recent study I co-authored on markets, reliability and the changing power system, in testimony at the Federal Energy Regulatory Commission, and elsewhere.

There are, however, several important distinctions between the DOE Grid Study and these other reports. First, although the lengthy DOE report pays considerable attention to the importance of maintaining a resilient and reliable grid in the face of extreme weather events, the words ‘climate’ or ‘climate change’ appear only once in 155 pages (in reference to President Trump’s Executive Order calling for rescission of certain energy and climate-related policies).

This omission undermines the Department’s call to provide proper compensation for certain power plants―notably, existing nuclear plants and hydroelectric facilities which, like coal-fired plants, are currently under financial stress in various wholesale markets. Without a willingness to point out that nuclear and hydro facilities produce power with zero carbon emissions, and that few wholesale markets properly compensate generators for their zero-carbon attribute, the DOE Grid Study misses an opportunity to support reasonable reforms to market rules. And it underscores the impression that this report’s goal is to support coal-fired generation, consistent with the Trump Administration’s pro-coal agenda.

In the end, most of the Grid Study’s recommendations are relatively benign, and valuable.  There’s one recommendation on “Energy Dominance” that simply commits the Energy Department to support the President’s Executive Order. And the final, omnibus recommendation on Infrastructure Development supports DOE and other federal agencies’ actions to accelerate and reduce the costs of “licensing, relicensing, and permitting of grid infrastructure such as nuclear, hydro, coal, advanced generation technologies, and transmission.”  This is hardly a new position in Washington, and understates the legal, timing and political challenges that the new Administration will face in changing regulations affecting the siting, permitting and licensing of transmission, LNG facilities, natural gas pipelines, existing and new nuclear plants, and coal-fired generating capacity.

Ironically, the report produces little beyond rhetoric for pro-coal constituencies. It recommends that the Environmental Protection Agency relax its policy on New Source Reviews for new coal plants and for major modifications to existing ones. Such changes are no doubt on EPA Administrator Pruitt’s radar screen, but they will be neither easy nor quick, and will provide little solace for existing coal-fired power plants currently facing financial pressure.

Like the DOE’s decision this week not to invoke its emergency authority to compel Ohio coal plants to remain open for reliability reasons, the new DOE Grid Study actually provides little realistic help for President Trump's coal constituency―even if the Administration says otherwise.

This is a guest blog by Dr. Susan Tierney, Senior Advisor, Analysis Group, Inc., and Vice Chair of the WRI Board of Directors.

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