The Federal Energy Regulatory Commission (FERC) reached the right conclusion this week in rejecting a DOE proposal to essentially subsidize money-losing coal-fueled and nuclear power plants. The five-member panel also rendered its decision forcefully, voting unanimously in finding existing market rules were not “unjust, unreasonable, unduly discriminatory or preferential” – all conditions that must be present under the law to adopt Energy Secretary Rick Perry’s plan.
Last August, Perry called on FERC to issue new rules to ensure that power generating facilities with a 90-day fuel supply – nuclear and coal – be compensated for the reliability they add to the grid, in addition to the power they supply.
Some saw the DOE proposal as a ploy to boost the financial fortunes of certain base load energy interests. At the very least, it was a misguided effort to skew the energy market, even if its intentions were to ensure U.S. energy security.
A grid reliability study ordered by Perry and delivered to him last August clearly showed that the ongoing decline in the so-called “base load” energy sources – increasing coal and nuclear plant closures – was attributable primarily to less expensive natural gas, flatlining energy demand and significant increases in net generation capacity since 2002.
And it found that the dramatic drop in the price of installing renewables like wind and solar has led to wider implementation of wind turbines and solar panels across the country.
FERC’s ruling came just after Winter Storm Grayson, charged by an Arctic air blast, brought frigid temperatures, heavy snow, punishing winds and even coastal flooding from the Northeast United States down the Eastern seaboard. Conditions last week were similar to those experienced during the 2014 Polar Vortex – an event that pushed grid operators to their limits and did cause some disruptions of service. The conditions experienced last week could not have presented a better scenario to reinforce the need cited by Perry for his resiliency price proposal hiking the rates consumers pay for nuclear and coal power.
But the grid, in fact, suffered little disruption, and operators, who learned some lessons from the 2014 storms, attributed their success to a diversity of power sources, including natural gas and renewables like wind and solar, in addition to nuclear and coal. Operators made clear they had no issues with on-site fuel supplies.
FERC did give regional grid owners and operators 60 days to offer their own positions on grid resilience, including how they define and assess it within their service areas, and whether there is any action the commission can take to help them.
It’s a smart move. It will give FERC commissioners a chance to take a truthful, holistic look at the energy market. And it will give power system operators a window for input wider than that offered during the hurried rush the DOE forced on the commission to consider its proposal. Operators now have the opportunity to fully show policy makers that they have included deeper renewable energy penetration in their grids in addressing resiliency and reliability in recent years.
It should not be lost on the Trump administration, which came to Washington touting a free-market philosophy, that much of the overwhelming opposition to the DOE proposal was based on its effort to tip the market scales in favor of coal and nuclear power. It is hoped the White House recognizes that we are at a time when homeowners and businesses are increasingly looking to purchase power from renewable sources because they are increasingly cost-competitive and part of a reliable grid. And dozens of states and hundreds of cities are pursuing renewable energy development to lower power costs and assure reliability through diversity.
FERC will learn over the next 60 days that the U.S. energy market is best served by those policies that meet its demands for low costs, reliability, resilience, flexibility and security. Innovation will continue to be a driver of the development of renewable energy technologies that will increasingly meet those demands. Initiatives to modernize the grid don’t require much action from policy makers. Let competition and market-based solutions, including renewables, define the ideal energy mix of the future. Allow power providers to deliver the lowest-cost, most reliable energy solutions to customers across the United States.