Rick Perry’s Plan To Help Coal Could Hold Back Renewables, But It Isn’t The Only Barrier

Source: By James Rising, Energy Policy Institute at the University of Chicago • Posted: Thursday, November 2, 2017

Secretary of Energy Rick Perry on Oct. 16. (Photo by Drew Angerer/Getty Images)

Energy Secretary Rick Perry recently released a proposal aimed at saving coal from cheap renewable energy. The proposed rule would guarantee profits to power plants that maintain 90 days of fuel on site as a bulwark against the electricity grid failing. While these kinds of stockpiles once served a purpose, the proposal is a transparent subsidy to a fossil fuel industry threatened by rapidly maturing solar and wind technology.

One headline after another touts the falling costs of solar, wind power and energy storage. In fact, although both solar and wind have become competitive in many countries after accounting for subsides, health costs or climate impacts, on-shore wind is now cheap enough to compete without any of these factors. For plants entering production in 2022, on-shore wind costs $55.8 per megawatt-hour, compared with up to $100.7 per megawatt-hour for natural gas.

The Midwest and Great Plains make up the wind power house of the nation. There is enough wind power potential in Illinois alone to satisfy half of the country’s electricity demand. Indeed, over the past 15 years, we have begun to tap those resources, with large increases in wind generation in Texas, Oklahoma, Kansas and Iowa. At the same time, other states with huge potential, like Illinois, Missouri and Wisconsin, have tiny wind systems and have experienced little uptick in the past 15 years. Chicago has just three wind turbines, but 33 fossil fuel plants generating over 100 times more power.

Nationwide, the trend is clear: States that are swimming in wind potential remain dominated by non-renewable energy, and neighboring states with similar potential have widely different production. Secretary Perry’s proposal would prevent states with high potential from taking full advantage of their resources. But it’s not the only barrier to further growth. Political and regulatory realities are holding back renewables at a time when climate realities should be propelling them forward.

James Rising.  Map shading indicates the intensity of wind power potential. Pie charts show the sources of electricity for the state in 2016.

Let’s unpack the barriers.

First, a new wind farm cannot just hook itself up to the grid and start selling to consumers. To start producing electricity, generation companies need to secure a contract with a utility that will agree to sell the energy they produce. In regulated electricity markets, like the vast majority of the wind heartland, states maintain vertically integrated production systems. Without a competitive market, utilities have little incentive to innovate, unless forced by instruments like the Renewable Portfolio Standards.

To get the newly installed energy to where consumers live, renewable energy projects require high-voltage power lines. New technology can reduce the power lost transporting this energy long distances, but the United States is just starting its first development. In contrast, China already has four of these new high-voltage lines that are more than 1000 miles long and will complete four more in the next two years. Why don’t we have the infrastructure we need? As my colleague Steve Cicala pointed out in a previous post, the regulatory framework for the electricity grid remains local, hamstringing the growth of long-distance transmission.

In both cases, the entrenched power of historical coal plants is holding back our renewable future. As Kyle Meng at the University of California-Santa Barbara found, coal power plants can have a legacy that outlives them, as their invested capital encourages coal’s continued use. If only there was a policy mechanism that side-stepped utilities and freed infrastructure projects from political pressures. Well, there actually is.

New York State has been leveling the playing field for more than twenty years. There, Energy Service Companies buy electricity on wholesale markets and sell it to consumers. Utilities still deliver the electricity, but consumers can choose the cheapest provider or they can select one that focuses on clean energy. While this system of retail choice has spread to other states, if it were to be used nationally, wind power would in many areas be the cheapest choice — not just the cleanest. As New York has continued improving its system, it has focused on a dynamic market approach that is based on using more renewable energy — not less.

Many businesses have also become aware that renewable energy can support greater economic opportunities. More than 100 companies, including 30 Fortune Global 500 companies, have committed to transition to 100% renewable electricity across their global operations, under the RE100 initiative.

Challenges to the wide-spread transition to wind power remain. While newly popular “flow battery” technologypromises to drastically reduce the cost of storing power in between periods when wind is available, traditional baseload generators are still very much needed. The good news is, as the technology continues to improve, the economic signal is already pointing us toward wind as the cheapest form of energy in many parts of the country.

The low costs of wind and solar power offer a tantalizing possibility to the challenges of climate change — a technological solution. Now, we need to unleash them from the political and regulatory realities on the ground and let people and the economy choose the best option for our planet.