Leaked text disappears from grid study

Source: Hannah Northey, E&E News reporter • Posted: Tuesday, July 18, 2017

The current version of a highly anticipated grid study from the Department of Energy no longer includes draft text that pointed a finger at cheap gas and low electricity demand — not renewables — as the main drivers of recent baseload power plant closures.

An early draft of DOE’s grid study spanning more than 140 pages obtained by E&E News concludes that the nation’s grid is operating reliably and probes the closure of baseload power plants. Bloomberg first reported on the draft Friday.

The draft iterates repeatedly the connection between baseload plant closures, cheap gas and waning demand as efficiency increases, stating “baseload retirements correlate closely to the fall in natural gas prices and the flattening of customer peak demand.”

One section of the draft concludes the grid is running smoothly. “Reserve margins and resource adequacy are presently sound. The power system is more reliable today due to better planning, market discipline and the better operating rules and standards,” according to the report. “Grid operators are using technologies, standards and practices to assure that they can continue operating the grid reliably.”

Yet another portion finds that “renewables didn’t cause retirements, but they’ve exacerbated the problem,” before delving into a stream of retirements that began in the early 2000s.

But a DOE spokeswoman said the language had not undergone any adjudication from career staff at the time and the draft text is no longer in the current version of the report.

While the final version remains elusive, the draft offers insights into what factors DOE is considering.

The text notes that each closure is regional in nature and based on a set of “unique circumstances” and an owner’s assessment of whether the facility will be able to produce enough energy at high enough prices and recover costs tied to fuel, operations and capital requirements, and possible capital investments.

“Over the past decade, many power plant owners have concluded that plants with higher heat rates, limited ability to operate flexibly, and that need capital improvements to meet environmental regulations, will not be able to earn adequate revenues in wholesale electric markets that select and dispatch resources based principally on short-run marginal costs,” it says.

Driving coal retirements in 2015 were decisions surrounding U.S. EPA’s Mercury and Air Toxics Standards, for example, while regulatory concerns like relicensing and regulatory compliance schedules affected the closure of U.S. reactors, according to the study.

The draft then returns again to natural gas and low demand.

“Environmental regulatory requirements may have been the straw that broke a baseload camel’s back — particularly coal plants — but it appears that most baseload plants were already burdened by the effects of low natural gas prices, eroding customer demand, and lower capacity factors before the incremental burden of new regulations tipped the balance over to retirement,” the study says.

The report also found that fuel diversity doesn’t “in itself assure or improve grid reliability, and having fuel on-site does not assure better grid resilience,” and that the grid is “more diverse today than ever before, despite the loss of coal and nuclear generation and greater dependence on natural gas-fired combined cycle power plants.”

“While the grid capacity is changing, there’s still a significant amount of baseload generation and diversity left on the grid — plus energy efficiency and demand response, which provide more slack and speed for the system while improving reliability and resilience for the customer as well as for the bulk power system,” according to the study.