DOE Grid Study Exposes Policy Irony

The release late Wednesday night of the long-awaited DOE grid study brought with it some relief for renewable energy advocates. The study, requested by Energy Secretary Rick Perry, verified what the DOE, the department’s national laboratories, academic and the energy sector itself have said for several years: the decline in coal- and nuclear-fueled “baseload” power is principally attributable to the rise of cheap natural gas price.

Growing renewable energy contributions to the grid – including solar, wind and biomass, among others – are also a part of the transition, but pose no risk to the reliability and resiliency of the grid, the report notes.

While the report offers a number of recommendations, none present a scenario that the Trump administration could use to attack state and federal policies that support renewable energy.

Instead, the report notes that grid operators have long addressed reliability concerns as renewable energy penetration has deepened on the grid. For example, the nation’s power grid managed the cross-county solar eclipse flawlessly despite the drop and rise in solar output as the eclipse shadow moved across the United States. Still, the report emphasized the need to focus on resiliency, especially in light of severe weather events.

Among the report’s recommendation is a call for the Federal Energy Regulatory Commission (FERC) to accelerate efforts to improve energy price formation in wholesale power markets, and create fuel-neutral markets that adequately compensate resources for essential reliability services to the grid. Among those “ready” resources that could be targeted for compensation are additional fuels like coal stored on-site. The study said pricing mechanisms must be “fuel and technology neutral,” but the scheme offers an obvious advantage to coal.

The study also recommended lowering costs and speeding up permitting for grid infrastructure such as nuclear and coal generation, as well as allowing coal-fired power plants to improve efficiency and reliability without triggering new regulatory approvals and associated costs.

Helping legacy energy interests to the extent called for in the DOE report underscores the recent trend of coal and nuclear companies and advocates openly seeking federal and state funding help to maintain money-losing nuclear and coal power plants.

Southern Company has reportedly asked the Trump administration to speed up and even increase the disbursement of $8.3 billion in federal loan guarantees to help with two reactors being built at the Plant Vogtle facility in Georgia, the only nuclear construction project in the country. The utility company, which has seen cost overruns jack up the cost of the plant to a staggering $25 billion, is also asking Congress for an extension of tax breaks for nuclear power. (Plans for a similar extension for the doomed V.C. Summer Plant being built in South Carolina fell through in congressional budget negotiations earlier this year, shutting the $25 billion project down.)

Nuclear power generators have been successful in obtaining subsidies from state governments to keep open plants that are operating at a loss. Subsidy programs in New York and Illinois have been upheld by federal courts in recent weeks – decisions that will likely open the possibility of bailouts in other states. And in search of help for a flagging coal industry – an economic mainstay of his state – West Virginia Gov. Jim Justice is promoting to a White House that strongly supports the sector a $15-per-ton direct subsidy for coal-fired power plants that use Appalachian coal.

The merits of the requests for help aside, that they are coming from interests that have long opposed virtually any federal help for renewable energy development is, at best, paradoxical. A recent study shows that federal subsidies over the past six decades for fossil fuels and nuclear power dwarf those extended to renewable energy technologies.

Yet coal and nuclear interests continue to ask for what are essentially subsidies that are traditionally designed to overcome a technological hurdle and spark innovation that can benefit society. Coal and nuclear are established industries, and any assistance Washington could offer the two legacy energy interests would violate the free-market principles critics of renewable energy have stood on in taking a hard line on tax credits for wind, solar and other alternative energy sources.

Renewable energy stakeholders are urged to make the case with lawmakers and regulators that their focus should be on smart policy that supports new energy technologies and not on old, “mature” technology that is no longer competitive. Tax credits for solar, wind and other renewables are phasing out over the next several years as they become competitive in the marketplace. The decline in those tax credits are part of a deal made to move clean energy onto a “level” playing field. Don’t allow coal and nuclear interests to change the rules of the game just as the renewable energy sector becomes a force to be reckoned with.

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