Op-Ed:Rick Perry went looking for a reason to bail out coal and came back empty

Source: By Susan Tierney, The Hill • Posted: Monday, September 11, 2017

When Energy Secretary Rick Perry ordered a study back in April to examine the “premature retirement” of “baseload” coal and nuclear plants, the writing seemed to be on the wall: presumably, the administration would use the study to claim that renewable energy is undermining the reliability of the grid, justify the rollback of incentives and environmental protections and then prop up coal.

But now the report is out, and it does not provide much support for that conclusion. The study reveals some essential facts: Cheap natural gas is the primary force driving the retirement of coal and nuclear plants. Many coal plants are retiring because they’re neither efficient nor competitive. And the nation’s power grid has become more reliable as it has become more diverse with more renewables and natural gas.

In the face of these powerful market realities, making a case for coal is difficult and attempts by the Trump administration to prop up the industry won’t find a foundation in these facts.

On the central question of reliability, the Department of Energy study found that a diverse portfolio of generation resources can provide the complex set of functions needed for reliable and resilient grid operations. For instance, wind generators, solar systems with invertors and ‘demand-response’ systems provide many of the “essential reliability” services required to keep the grid balanced.

Recent studies by The Brattle Group and Analysis Group (which I co-authored) found that the concept of “baseload” generators (as applied to coal-fired and nuclear plants that run on a near-continuous basis around the clock) is outdated. Economical gas-fired power plants are running more, and combined with more flexible resources — such as wind and solar — are capable of providing power efficiently, economically and reliably. In fact, Texas wind farms bounced back into operation by Friday last week.

Moreover, state policy makers, utilities and large and small electricity customers are turning to renewables not just for environmental reasons but also because they support local jobs and are the lowest cost option in many cases. A 2016 report from financial advisory firm Lazard shows that renewables without subsidies are now the cheapest source for new electricity generation in many regions. In fact, new wind projects are beating out fossil projects in competitive solicitations in windier parts of the country. Renewable resources will continue to gain market share as their costs drop even further.

The Energy Department report speaks extensively about the need for a more resilient grid, especially in the face of extreme weather events. One critical fact the study ignores, however, is climate change. The study consequently overlooks the most compelling reason for intervention in support of nuclear energy, which is its ability to produce electricity without carbon emissions.

Coal, on the other hand, is the dirtiest fuel used for generating electricity and has negative impacts in terms of contributing to severe weather events like Hurricane Harvey, which brought devastation to parts of Texas and Louisiana.

In his letter accompanying the grid study, Perry notes that America is fortunate to have a variety of fuel sources and that he is committed to ensuring that the U.S. has an electric power system that is technologically advanced, resilient and reliable for years to come.

Although his letter calls out ‘certain regulations and subsidies’ as affecting the power mix, Perry does not mention the principal role of natural gas that is taking market share from coal. And the report makes clear that an array of domestic energy resources — including renewables and natural gas — are contributing to the robust and increasingly modern grid that provides essential electricity services to the nation. The study points out that it is these other domestic fuels, combined with improved efficiency of electricity production and use that are putting pressure on coal.

While many of the study’s technical recommendations are sound, there is a disconnect between the body of the report and the recommendations to weaken environmental regulations for new and modified coal plants. It also encourages action at other federal agencies like the Federal Energy Regulatory Commission to expedite the permitting and approvals for energy infrastructure — something that will be hard to accomplish in the face of ever growing challenges in local communities and courtrooms.

Ironically, the report ends with weak support for the Trump administration’s pro-coal agenda, especially following upon a decision a few days earlier to not invoke the Energy Department’s emergency authorities to keep several Ohio coal plants open. That provides context for the department’s announcement (a day after the grid study was released) to offer $50 million in federal funds to help design two new advanced coal plants.

The Energy Department study points out that the combination of changes in the grid — from lower natural gas prices, lower demand and growth in renewables — have reduced wholesale electricity prices and helped to control growth in electricity costs for consumers. This is a positive story.

Our electric system is becoming cheaper, cleaner and more reliable, driven principally by market forces. The Trump administration and Congress should accelerate this transition by concentrating on some of the report’s useful recommendations — energy markets do need to properly value new technologies, more transmission lines are necessary to make our grid more resilient and increased research would help further lower the cost of energy storage and more smoothly integrate renewables.

Susan Tierney is a senior adviser at the Analysis Group private economics consulting firms, with more than 800 professionals across 13 offices in North America, Europe, and Asia. Tierney is also a former state public utility commissioner and former assistant secretary for policy at the U.S. Department of Energy.