What can DOE actually do for the grid? Not much

Source: Umair Irfan and Benjamin Storrow, E&E News reporters • Posted: Wednesday, July 19, 2017

There’s a lot of hoopla surrounding the Department of Energy’s upcoming study on baseload power. But Rick Perry’s department has relatively little ability to shape the future of America’s electric grid.

The study, which was due out this week but is delayed, is expected to suggest that incentives for renewable energy tilt markets in a way that forces coal and nuclear power plants offline ahead of schedule, undermining the reliability of the power system. An early leaked version of the study — which is expected to change — suggested that renewables aren’t doing much to harm the grid (see related story).

The much-anticipated report will set the agenda for the Trump administration’s DOE. Perry, Trump’s Energy secretary, said in a memorandum that he wants to use the study to “provide concrete policy recommendations and solutions.”

But DOE can do little more than offer advice, according to industry observers. Control of the power grid largely rests in state capitals and at the Federal Energy Regulatory Commission.

DOE could invoke its emergency authority under the Federal Power Act (in Section 202) to keep coal and nuclear units running, but that power is narrowly defined, and its use would almost certainly be challenged in court.

“Beyond a very unlikely 202 order, all DOE can do is get on a bully pulpit and try to influence utilities, grid operators and states to do something,” said John Moore, director of the Sustainable FERC Project at the Natural Resources Defense Council.

Another possibility: The study could provide states with a basis to come to FERC and argue that regional wholesale markets are not delivering adequate and sufficient electricity supply, said Michael Gergen, an attorney specializing in energy law at Latham & Watkins LLP.

That scenario is also unlikely. FERC has long favored market designs to ensure reliability, and a series of grid operators have issued statements touting the grid’s reliability.

In perhaps the most likely scenario, DOE could use its authority under the DOE Organization Act and ask FERC to consider new market rules for the regional transmission organizations that favor the economic and operating attributes of coal and nuclear facilities, Gergen said. Even in that case, FERC would need a substantial body of evidence to justify its decision.

“I think all the action, if any, ultimately should be at FERC,” Gergen said.

Industry pushing ‘resiliency’

Conservatives and coal interests acknowledged that DOE’s authority is limited. But they argued that the study still represents an important opportunity to rebalance the country’s power grid.

Christine Harbin, vice president of external affairs at Americans for Prosperity, said that years of special treatment for renewables during the Obama administration has left many oblivious to the changes in the power sector and its impact on affordability and reliability. In addition to federal tax incentives for wind and solar, she said, many states have adopted renewable portfolio standards.

“It’s important for policymakers at state and federal level to study these issues … before they enact policies based on political reasons more than policy reasons,” Harbin said.

Coal interests are looking to the study to bolster the concept of “resiliency.” Wholesale power markets were originally designed to take into account affordability and reliability. But as more coal facilities retire and more natural gas units come online, the country has become more reliant on the spiderweb of pipelines that feed gas plants to underpin the power grid.

Damage to a pipeline during an emergency like the polar vortex could compromise the grid, coal backers said, arguing that coal facilities offer a backup to the power system because they store fuel on-site.

“I think a study like this would be a giant step toward educating utility commissioners, grid operators and stakeholders in the value of establishing resiliency criteria and making sure all areas of the country are resilient,” said Paul Bailey, president and CEO of the American Coalition for Clean Coal Electricity, an advocacy group.

A draft of the study obtained by E&E News comes to a far different conclusion. The text that was in place didn’t show that renewables were causing any problems. It cited reports from transmission grids like the Electric Reliability Council of Texas, the PJM Interconnection and the Midcontinent Independent System Operator finding that these grids can accommodate much more intermittent renewable energy without sacrificing stability.

Those findings are consistent with past reports from government agencies, grid operators, natural gas interests, renewable advocates and environmentalists (Energywire, July 18).

“The leading cause of power outages in the United States is extreme weather, including heat waves, blizzards, thunderstorms, and hurricanes,” according to the draft DOE report. “Events with severe consequences are becoming more frequent and intense, due to climate change, and have been the principal contributors to an observed increase in the frequency and duration of power outages in the United States.”

Whether the final version reflects that line remains to be seen. A DOE spokeswoman said yesterday that the report is still coming together and that some of the language in the draft didn’t make the final copy. That includes language pointing the finger at natural gas — not renewables — as the main driver of recent baseload power plant closures (Greenwire, July 17).