Perry’s criticisms of clean energy are misplaced — report

Source: Daniel Cusick, E&E News reporter • Posted: Wednesday, June 21, 2017

In a clear pushback against what many believe is a Trump administration attack on clean energy, an independent consulting group today said there is no evidence that state and federal policies advancing renewables are key drivers behind the drawdown of baseload power plants.

Rather, experts from the Analysis Group found that larger market forces — particularly a glut of inexpensive natural gas combined with relatively flat demand for electric power — have been much bigger factors in decisions affecting coal and nuclear power plants.

State polices supporting the deployment of new energy technologies such as wind and solar power “contribute to reducing the profitability of less economic assets, but such factors are secondary to market fundamentals,” the authors said.

The report, commissioned by the nonprofit Advanced Energy Economy and the American Wind Energy Association, comes in advance of a new Energy Department review of what Secretary Rick Perry has termed “critical issues” facing the U.S. electric power sector.

Among those concerns, raised in a Perry memo to staff in April, is that federal and state policies supporting renewable energy development have distorted power markets and forced utilities to scale back and even abandon coal and nuclear generation long before such plants become uneconomical.

“Recently, some have raised concerns that current electric market conditions may be undermining the financial viability of certain conventional power plant technologies and thus jeopardizing electric system reliability,” the Analysis Group report states. “In addition, some point to federal and state policies supporting renewable energy as a primary cause of such impacts.”

“The evidence does not support this view,” the authors state.

Instead, they point to a combination of other factors affecting the power industry, including shifts in fuel cost and availability, state and regional market structures, power demand, and the age and condition of generation assets.

Moreover, the analysis holds that conservative critiques emphasizing the risks that renewables pose to “baseload generation” fail to consider some of the more fundamental elements of a properly functioning electricity grid.

“Given the many attributes associated with a reliable electric system, the term ‘baseload resources’ is an outdated term in today’s electric system,” the authors wrote.

Modern power markets depend on finding the right mixture of generation assets and grid-service technologies to allow for “around-the-clock” power delivery with flexibility to cycle and ramp load based on demand conditions and reliability objectives.

Most utilities and independent power providers are highly cognizant of these market shifts and must continuously evaluate how to adapt to new conditions — whether driven by changes in policy, regulation, economics, consumer preference or technological innovation.

“Over time, the mix of power plants in a system reflects these various economic and financial pressures,” the report states. “As power plants age, they become more costly to operate and maintain, while technological change often leads to the development of replacement technologies that are more efficient, more reliable, lower emitting, and/or lower cost.”

Sue Tierney, a co-author of the report and former DOE assistant secretary for policy and state regulator, said such transitions are “a natural consequence of market competition.”

“The result is a more diverse set of energy resources on the grid that is being capably managed in a way that provides reliable electric power,” she added.

Such findings challenge Perry’s recent statements about electricity markets, including from his April 14 memo ordering the DOE study. In that document, Perry said, “Baseload power is necessary to a well-functioning electric grid” and that in recent years, “grid experts have expressed concerns about the erosion of critical baseload resources.”

Perry also took aim at federal and state policies aimed at boosting renewable energy, saying they “have destroyed jobs and economic growth” and “threaten to undercut the performance of the grid well into the future.” He also decried “the market-distorting effects of federal subsidies that boost one form of energy at the expense of others.”

Renewable energy industry and advocacy groups have refuted such findings and argued that Perry’s views of baseload power are chiefly informed by fossil and nuclear power lobbyists as well as utilities that are deeply vested in those forms of power generation.

Advanced Energy Economy CEO Graham Richard said in a statement that far from eroding baseload power, energy innovation, combined with smart government policies, has created “a more diverse fuel mix, a more reliable grid, and lower electricity costs” for consumers across the nation.

Tom Kiernan, AWEA’s CEO, said, “Like DOE, we wholeheartedly agree that reliable and affordable electricity is essential.”

But, he added, the Analysis Group’s report “finds that wind and other advanced energy resources, driven by markets and technological advances, are improving electric reliability and reducing costs,” not the opposite as Perry suggested.

Both CEOs said they hope DOE will incorporate the findings of the report into the final DOE study, which is due out this week.