Draft: Wind and solar played ‘minor roles’ in plant closings

Source: Daniel Cusick, E&E News reporter • Posted: Wednesday, July 19, 2017

So much for harmful wind turbines and solar panels.

A leaked interim draft of the Department of Energy’s highly anticipated grid reliability study indicates there’s little evidence to show that a major infusion of renewable energy onto the U.S. grid is doing irreparable harm to the nation’s baseload power plants.

No author’s name appears on the “Electric Power System, Markets and Reliability” draft report bearing the logo of DOE’s Office of Electricity Delivery and Energy Reliability, a copy of which was obtained yesterday by E&E News.

Meanwhile, DOE officials made clear that the final version of the grid reliability report, due to be unveiled this month, does not include some of the interim language that was leaked to media outlets beginning last Friday (Greenwire, July 17).

Even if Energy Secretary Rick Perry releases something markedly different from the 150-plus-page “pre-decisional draft,” there’s little question that a core tenet of Perry’s hypothesis — that renewable energy is harming baseload power generation and damaging grid reliability — has been cast in doubt.

“The problems affecting baseload resources today reflect the broader challenge of how the energy industry can constructively manage change as technologies and economic relationships evolve,” reads the draft report sent to E&E News from multiple sources yesterday and on Friday. Bloomberg first reported the draft on Friday.

Dated June 26, the draft states that over the last 15 years, “most baseload power plant retirements have been the victims of overcapacity and relatively high operating costs that often reflect the advanced age of retiring plants.”

To the question of whether such plants are being forced to close by an influx of cheap renewables, the report concluded, “There is no good definition yet for the term, ‘premature retirement’.”

“Furthermore, the first tranche of fossil plant retirements occurred before the explosive growth of renewable generation over the last five years,” the draft continued. “Many of the ongoing stream of plant retirements have been driven by the combination of low natural-gas price-based electricity prices, low electric demand, environmental regulations, state policies, and competition from renewables.”

‘Under construction’

While the draft report makes clear that “costly environmental regulation and subsidized renewable generation have exacerbated and accelerated baseload plant power plant retirements,” such factors “played minor roles” compared with the long-standing decline in electricity demand relative to expectation and a decadelong glut of cheap natural gas that has transformed electricity markets.

State electricity policies and market reforms, especially in the Northeast and large states like California and Texas, are also placing new strains on old plants, the draft analysis states. That’s because the decoupling of power generation from transmission and distribution has forced older baseload plants to compete against newer, lower-cost and more flexible resources that can be ramped up and down to match market conditions.

“Although the output level of these [older baseload] plants can be changed, they are most economical when operated at near-full capacity at all times,” the draft states. Yet such attributes do not necessarily serve modern electricity markets, where the flow of electrons is managed in near real time by grid operators and regional transmission organizations that are obligated to dispatch the lowest-cost resource available to meet current demand.

Utilities and electricity consumers are also becoming more savvy about how and when to use power, as evidenced by the rapid growth of demand response programs nationwide, the draft says.

Yet for all of the draft’s conclusions, many questions and themes to be addressed by the grid study remained “under construction” as of June 27. As such, it remains unclear how much of the draft will be revised or jettisoned by the time DOE issues its final report.

Other parts of the draft read like an information clearinghouse, long in primary and secondary information but short on conclusions. One of its lengthiest sections, titled “Consequences — nuclear plant retirements,” provides an overview of the U.S. nuclear industry since 1970, replete with case studies and third-party reports about the benefits nuclear energy provides to the grid.

Nowhere in the section do authors argue for specific policies to prolong the life of the country’s 99 nuclear reactors.

Grid is ‘more diverse’

Other sections detail “consequences” for coal, gas and hydropower retirements, although in the case of hydro, the authors note that the nation’s dams, which produce roughly 7 percent of the country’s power, are not subject to the same economic and market pressures as coal and nuclear plants, even though half of the nation’s hydrodams are 50 years or older.

On coal, the draft notes that coal-fired power plants “have been the focus of more environmental regulation than any other type of generation,” including 10 major regulations promulgated by the Obama administration.

As such, coal power peaked in 2007 and has been declining ever since, the draft states, adding that “no new coal plants have been built for domestic utility energy production since 2013 because new coal plants are more expensive to build and operate per [kilowatt] or [kilowatt-hour] than gas.”

Yet the authors cite no example of a coal plant being shuttered explicitly due to competition from low-cost wind and solar generation. At the same time, the authors conclude that legacy power plant owners “are justified in questioning how high levels of variable renewable energy … could affect grid operations and the prospects for individual power plants.”

To the core question asked by Perry in his April memo requesting the study — “Has the diversity of the electric system diminished? If yes, is this a problem for baseload power?” — the draft gives a clear if not fully fleshed-out answer.

“No — the electric system is more diverse today than it was 20 years ago,” the draft states. “This diversity is a problem for baseload power, but it enhances bulk power system reliability and resilience rather than compromising it.”

The draft also challenges a belief widely shared within the electric power sector that a rise in renewable energy generation has exacerbated “negative pricing.” The condition occurs when the wholesale price of electricity is effectively driven below $0 by an oversupply of power from renewable resources, forcing baseload plants to sell power into the market at a loss.

While allowing that such events do occur, the draft concludes that “negative pricing from renewables harming baseload plants is not yet a huge issue.”

Rather, the report says, periods of “over-generation,” especially from wind farms, often coincide with minimum load production from hydro, coal and nuclear plants, “so it was their inflexible generation pattern that forced wind to bid negative.”