Perry’s grid study is coming. Here’s what we know

Source: Umair Irfan and Daniel Cusick, E&E News reporters • Posted: Tuesday, July 18, 2017

Energy Sec. Rick Perry. Photo credit: Simon Edelman/Department of Energy/Flickr

Energy Secretary Rick Perry is overseeing a grid stability study. Critics say it might politicize renewable energy sources. Simon Edelman/Department of Energy/Flickr

The U.S. energy industry is waiting on tenterhooks for the Department of Energy’s study on the impacts of renewable energy incentives on grid reliability, due out as early as this week.

Its findings may defy the premise under which the study was commissioned, according to a draft of the report first reported by Bloomberg on Friday.

The report stands to lay the foundation for the Trump administration’s domestic energy strategy, which in turn could ripple through power producers, grid operators and utilities throughout the country.

“I have committed to the President that this report will not only analyze problems but also provide concrete policy recommendations and solutions,” Energy Secretary Rick Perry wrote in an April memorandum to his chief of staff outlining the parameters of the study.

The main concern, Perry wrote, is that market rules and incentives for renewables are prematurely shutting down baseload power plants. Losing these plants hurts the reliability of the grid, because conventional generators produce a constant stream of energy, Perry said.

However, the leaked draft of the study indicates that grid stability has improved and that renewables haven’t caused harm. “The power system is more reliable today due to better planning, market discipline, and better operating rules and standards,” according to the draft obtained by Bloomberg.

With dozens of U.S. coal and nuclear plants teetering on the edge of an early grave, the Trump administration appeared to see the report as a way to identify life-prolonging strategies for conventional power sources.

But the early draft, which is still under review, signals that the issue is highly contentious at DOE and it echoes intense debates beyond Washington in regional power markets and among utilities that are dealing with renewables and baseload plants firsthand.

DOE has kept largely silent on the controversial report by not responding to critics. It also pushed the release date back several times from the initial deadline in mid-June.

An agency spokeswoman told Bloomberg that the study is “constantly evolving” and that some of the draft language is not in the final version.

DOE brought on veteran energy consultant Alison Silverstein, who served as an adviser to former Federal Energy Regulatory Commission Chairman Pat Wood III and is secretary of the American Council for an Energy-Efficient Economy, to help assemble the grid study. Even she wasn’t sure of its conclusions.

“I’m just the hired help; I don’t know what’s in it,” Silverstein said, declining to comment further.

Politicizing wind and solar?

Some have pointed to tax breaks and other incentives granted to renewable energy as key drivers behind a 15-year drawdown of U.S. coal and nuclear generation, a period that saw the shuttering of nearly 54 gigawatts of coal-fired power and 5 GW of nuclear capacity, according to the U.S. Energy Information Administration.

Travis Fisher, who is leading the study at DOE, criticized the wind energy production tax credit (PTC) in his previous post at the right-leaning Institute for Energy Research.

In a blog post he co-authored, Fisher wrote that “the PTC subsidy is so excessive that wind producers frequently pay the grid to take their electricity.”

“Despite the importance of base load generation to the reliability of the electric grid, the PTC unfairly tilts the scales in favor of intermittent, unreliable wind generation that generally fails to perform when power is most needed,” he added.

Others, including renewable energy advocates and grid managers, say the forces affecting coal and nuclear are more complex than unfair competition.

They argue that the energy sector has shifted away from large power plants and centralized utilities that only value nameplate capacity toward a diverse system with more distributed generators that prizes flexibility.

These decisions around electricity will be key to whether the United States meets global expectations on the environment, including ratcheting down greenhouse gas emissions that are the primary cause of climate change.

The renewable energy industry has moved aggressively to pre-empt DOE’s report.

Advanced Energy Economy, the American Council on Renewable Energy, the American Wind Energy Association and the Solar Energy Industries Association sent DOE their own study in May.

The report by wind and solar groups stated that renewable energy sources don’t have fuel costs, which makes them a valuable hedge against price shocks for utilities, and that flexibility, not capacity, is the most important factor for grid stability.

As for the demise of coal and nuclear power plants, the study pointed a finger at another culprit: natural gas.

“Baseload resources will undoubtedly continue to play an important — and substantial — role in our energy mix,” according to the study. “But natural gas is cheaper than coal and natural gas-fired electricity is cheaper than nuclear power. So generators using natural gas are more competitive in many parts of the country for meeting both baseload demand and peaking demand.”

A June analysis prepared by Analysis Group Inc. and commissioned by two renewable energy organizations found that shifts in fuel cost and availability, state and regional market structures, power demand, and the age and condition of generation assets played a bigger role in plant closures than wind and solar subsidies.

Moreover, the analysis found that critiques emphasizing the risks that renewables pose to baseload generation fail to consider the basic elements of a properly functioning electricity grid (Climatewire, June 20).

‘Important discussion’

Representatives of major grid transmission operators backed these points in interviews last week.

“We are always looking to balance the resources we have coming into the system in a reliable fashion, and we have better tools for doing that today than we had 10 or 15 years ago,” said Renuka Chatterjee, executive director of system operations for the Midcontinent Independent System Operator (MISO).

Such balancing includes nearly instantaneous ramping up of some generators, as well as other adjustments, to reduce congestion and keep electrons flowing steadily across the grid at market prices that are fair to both consumers and generators, Chatterjee said.

Other energy players, like Exelon Corp., the Chicago-based conglomerate that owns six regulated utilities and operates the nation’s largest nuclear fleet, with 13 plants in five states, have been sounding the alarm on the loss of baseload power.

Joe Dominguez, Exelon’s executive vice president of government and regulatory affairs and public policy, said in an interview that the company believes the DOE grid study will stimulate discussion on two core attributes of nuclear energy that are often overlooked by policymakers and regulators — grid resiliency and fuel diversity.

“We think that’s an important discussion, and one that hasn’t really occurred with respect to grid security,” Dominguez said. “What we hope [the report] doesn’t do is pit one technology against another. We need to recognize that the whole basket of resources is going to be important to powering American into the future.”

Where nuclear and coal retain a unique advantage over renewables and gas, he said, is the ability for generators to store significant quantities of fuel on site. In the case of nuclear plants, that’s enough fuel to run reactors for as long as two years.

“We’re effectively an energy island that does not depend on any outside resources to operate,” Dominguez said.

Almost all other forms of generation — whether renewable or fossil-based — are subject to circumstances beyond a plant operator’s direct control, including vagaries in weather and challenges associated with the transport of fuels by road, rail or pipeline.

And while energy storage is gaining a foothold in a number of key markets, such as California, Dominguez said such solutions remain unable to meet the operational challenges facing today’s grid, including risks from cyber and terrorist attacks.

“We are beginning to see pricing for storage that maybe in a five- or 10-year window it becomes a real component, where we can take substantial amounts of power off a solar panel during the day and release it at night. We’re not there yet,” he said.

Tomorrow, Perry and International Energy Agency Director Fatih Birol are hosting a press conference to discuss, among other things, “the role low-carbon technologies and coal-to-gas switching in power generation is playing in reducing U.S. carbon dioxide emissions.”

The results of the grid study, however, were not mentioned in the press releases announcing the conference.