Governors' Wind Energy Coalition

Energy Secretary Rick Perry has directed his department to conduct a wide-ranging study of the U.S. electric grid, with a particular emphasis on recent coal and nuclear plant closures and whether environmental policies may be driving them.

In a Friday memo, Perry asked his chief of staff to undertake a 60 day inquiry into “the extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants,” such as those fueled by coal or nuclear energy, among other grid related questions. The memo was first reported by Bloomberg News.

Yet even this seemingly dull inquiry has stirred controversy in a Trump administration in which nearly all moves that touch on energy and the environment are matters of contention.

While framed as an inquiry into policies that will ensure the resilience of the electricity grid, Perry’s focus on so-called “baseload” generation — power plants that produce a steady, controlled stream of electricity — appears to create an opposition with fast-growing wind and solar. These sources by definition are variable or “intermittent,” providing energy only when the sun is shining or the wind is blowing.

Many states have adopted policies to advance renewable energy, and federal tax incentives also further support wind energy production and solar energy investment. California, in particular, has embraced extremely ambitious clean energy policies, even as nuclear energy in the state is set to be phased out entirely.

Other states have not been so direct, but nonetheless, coal plants have been shutting down in droves even as multiple nuclear plants have also opted to wind down operations in the past five years, citing difficult market structures and competition from low-priced natural gas.

The causes of these changes are complex, but the Perry memo seems to imply that clean energy “subsidies” own part of the blame. “Analysts have thoroughly documented the market-distorting effects of federal subsidies that boost one form of energy at the expense of others,” Perry’s memo notes. “Those subsidies create acute and chronic problems for maintaining adequate baseload generation and have impacted reliable generators of all types.”

But renewable energy supporters argue back that that’s an unfair focus.

“There is no power source that doesn’t benefit from federal and state incentives, so it’s highly unlikely that coal and nuclear are becoming uncompetitive due to incentives for renewable energy,” said Abigail Ross Hopper, the president and chief executive of the Solar Energy Industries Association. “The reason they are becoming less competitive is that they cost more to build and operate.”

“Most independent studies show that low natural gas prices are overwhelmingly responsible for the market challenges facing coal and nuclear plants,” added Tom Kiernan, chief executive of the American Wind Energy Association. “This is confirmed by data from electricity market monitors, SEC disclosures by coal and nuclear plant owners, and the simple fact that the vast majority of coal and nuclear retirements are occurring in regions with the least wind generation.”

Hopper also argued that when it comes to the grid, the change has just begun.

“As solar continues to grow now, innovations such as solar and storage will, in the relatively near term, turn the baseload electricity equation on its head, and policymakers will need to account for that fact,” she said.

Perry’s memo did not mention energy storage, which as it proliferates, is expected to help integrate more renewable energy onto the grid. For instance, batteries could store some of the energy generated by large solar arrays during the day, deploying that energy at night, effectively making solar into something a lot more like a “baseload” power source.

Indeed, a study by Perry’s own National Renewable Energy Laboratory found that today’s renewable energy technologies are “more than adequate to supply 80% of total U.S. electricity generation in 2050 while meeting electricity demand on an hourly basis in every region of the country,” provided that the grid itself adopts technologies to increase flexibility.

The nuclear industry, however, was thrilled by the announcement of the study.

“Our nuclear plants produce jobs and tax revenues which the markets ignore,” said Maria Korsnick, president and chief executive of the Nuclear Energy Institute. “New York and Illinois moved to save their reactors because they too saw nuclear energy as offering a value that should not be characterized by price alone. We’re glad to see that Secretary Perry and the Trump administration see the problem as well.”

Jeffrey Holmstead, a Bush administration EPA official who now works for the Bracewell law firm, said he thought critics might be over-interpreting the Perry memo as a slam against renewables.

“I wouldn’t view this as a shot over the bow for folks who are supporting renewables,” he said. “It really is reflective of a sense that a lot of folks in the industry have that we just need to be sure that we have the resources we need, including transmission, including baseload power.”

There’s certainly no disputing that change has been happening fast in the electricity sector. It isn’t just more wind and solar on the grid, fewer coal plants and the prospects of huge battery stacks. More and more, electricity markets are purchasing the lack of electricity use as a commodity, as “demand response” options, in which companies lower their energy use at times of peak demand to reduce burdens on the grid, proliferate.

One oddity about Perry’s inquiry is that it comes even as Trump’s “skinny budget” has proposed an unspecified cut to the department’s Office of Electricity Delivery and Energy Reliability, whose key purpose is to work on making the grid resilient.

It isn’t clear which part of the Energy Department would be undertaking the study Perry has asked for.