Published October 31, 2017, full link here:
Matthew Kandrach, CASE President
If there is one undisputed role for the federal government, it is to protect its people as best it can. From national defense to public health, governments of every party can agree on this much. Today, a debate is simmering over a new but little-known threat — the weakened reliability of the nation’s electric power grid.
Americans are almost uniquely fortunate to have at our fingertips electricity so assured at any time day or night that even temporary disruptions cause us distress. It’s often said our electricity is so taken for granted that we believe it comes from the light switch.
But experts are beginning to say this breezy confidence is misplaced. Recent years have seen the number of power plants that have been the most reliable sources of round-the-clock electricity rapidly decline. Thanks to unanticipated market forces and shortsighted government policy, 101,000 MW of coal fired generating capacity — one fourth of the entire U.S. coal fleet — will be forced into premature retirement by 2020. Nuclear power is also on the wane.
With fuel stored on site, these plants have been the backbone of the nation’s electricity grid, able to provide power reliably, even during major disruptions. Although such incidents are infrequent, they are high impact with the risk of massive power outages.
When Houston struggled to restore power after Hurricane Harvey, nuclear power plants kept the electricity flowing for much of the storm-wracked city. Storms aren’t the only potential risk. In the frigid winter of 2014, the Polar Vortex sent temperatures in much of the Eastern United States plummeting, bringing the grid dangerously close to collapse. Baseload coal plants saved the day. “We did not just dodge a bullet,” said Nick Akins, CEO of American Electric Power. “We dodged a cannon ball.”
Experts are becoming concerned that we won’t be so lucky next time. That’s because the dwindling number of baseload plants has left the grid increasingly reliant on natural gas and intermittent fuels like wind and solar to generate on-time electricity.
While these fuel sources are valuable supplements to the grid, they cannot be relied upon to provide the secure electricity Americans expect. Neither natural gas plants nor renewable generators store fuel on site. Natural gas is delivered to power plants from long distances by pipelines that are vulnerable to disruptive events. In frigid winters, natural gas supplies are diverted from electricity generation to home heating. Wind turbines and solar panels are easily damaged by powerful storms and of course function only when the wind blows and the sun shines.
As these fuels displace baseload coal and nuclear, doubts are beginning to displace confidence in the electric grid. The U.S. Department of Energy reported this summer that while the grid is adequate today, rapid changes in the fuel mix that supports our bulk power system could present challenges in the future. The increasing reliance on natural gas and intermittent renewable fuels — a trend that is expected to accelerate — has created a far less diverse supply of fuels needed for electricity generation.
The National Electric Reliability Corporation that monitors the grid warned in May that “premature retirements of fuel secure baseload generating stations reduces resilience to fuel supply disruptions.”
Energy Secretary Perry recently proposed a modest solution. He asked the federal commission that oversees the grid to recognize the reliability value of baseload plants. Today, it does not. Utility companies operating a portion of the grid encompassing more than half of the U.S. cannot recover any costs for the always-on reliability their baseload plants provide.
For example, the “reliability cushion” is vanishing in the nation’s largest regional power authority. Shrinking baseload power capacity in the PJM energy market has left 13 states overly reliant on natural gas. Energy Ventures Analysis, a private energy consultancy, warned that over the past seven years a “dramatic shift” in the PJM away from baseload power has led to “uncertainty about grid reliability as fuel diversity is on the decline.
Status quo defenders aren’t pleased with Perry’s proposal for cost recovery. By allowing utility companies to capture the full value for coal and nuclear plants, they claim the government is interfering in the electricity market. But the power market has never been free of government intervention. Federal subsidies for renewable fuels allow wind and solar developers to undercut market prices. Most state governments even guarantee renewable fuels a fixed market share.
If government assistance for the renewable energy industry was justified to improve the grid’s environmental performance, by the same token, modest intervention to strengthen the grid’s weakened resilience is a responsible precaution to safeguard a vital national asset.
Matthew Kandrach is president of CASE – Consumer Action for a Strong Economy, a free-market oriented consumer advocacy organization.
