Donald Trump has made it very clear that he wants to revive the flagging US coal industry. In statements and executive orders since taking office, he has instructed virtually every agency of his government to review its procedures, with an eye toward making things easier on coal mining and coal plants.
Meanwhile…
Last month, Energy Secretary Rick Perry, as one of his first acts in his new job, initiated a review of US electricity-grid policies. The purported rationale of the review is to examine whether baseload power plants (mostly coal and nuclear) are being unfairly pushed off the grid, thus threatening grid reliability, national security, and our precious bodily fluids.
The connection between the two facts above has not been lost on observers. While the coal industry has been supportive of the review, virtually everyone else — energy analysts, Democrats in Congress, renewable energy industries, people who have paid attention — greeted it as a transparent attempt to prop up coal and nuclear power.
It would be fun to have some counter-intuitive take here, but the evidence to date demonstrates that Perry is doing exactly what Trump instructed: casting about for some justification to prop up coal. There are many reasons to think so, but, so as not to strain your patience, I will share only the top 10.
1) Perry has assumed an answer to the most important question
For decades, the US electricity system has relied on a foundation of baseload plants to provide steady, reliable power. The hottest question in energy right now is whether those plants, which are being battered on energy markets, are still necessary.
In his April 14 memo initiating the review, Perry assumes an answer: “Baseload power is necessary to a well-functioning electric grid.”
That pretty much gives away the game.
A quick refresher on terminology. Back in the old (pre-renewables) days, there were three fairly clear tiers of power plants.
Think of power demand (“load”) as spiking each day around midday, like a mountain; as demand rose, new tiers of plants were brought online.
At the bottom is “baseload,” giant power plants — typically coal and nuclear — meeting the base level of around-the-clock demand. These plants are not nimble. They are expensive and slow to ramp up and down. And because they are so huge, the initial capital investment is enormous. But once they are built and paid off, they are cheap to run constantly (absent maintenance, accidents, and unanticipated shut-downs).
Above that are the “mid-merit” plants, somewhat more expensive and somewhat more flexible. And above them, the “peaker” plants, extremely flexible, capable of ramping up and down quickly, but expensive to run. (These are typically combined-cycle natural gas plants, though there is still some oil used for peak electricity in the NE.)
That was the standard model until wind and solar came along, scrambling the whole picture. Wind and solar are not “dispatchable,” which means grid operators can’t turn them on and off at will. They offer an abundance of cheap power, but it comes and goes with the weather. They cannot be controlled; they must be accommodated.
The more wind and solar (“variable renewable energy,” or VRE) there is on the grid, the more the grid needs flexible resources that can balance out the swings in VRE — jump in when it fades, or back out quickly when it surges. For now, that mostly means natural gas plants, but it can also mean batteries and other kinds of energy storage, always-on renewables like geothermal and landfill methane, or programs that shift and control demand (“demand response”).
What it doesn’t mean, generally speaking, is baseload plants. Because they are slow and expensive to ramp up and down, baseload generally does not (and cannot) serve a flexible balancing role.
(There is an argument that nuclear plants can play a more flexible role, but we’ll put that aside for now.)
Think of VRE and its balancing resources as a kind of yin and yang, a matched set. They grow together. And as they grow, they begin eating into the part of demand that used to be met by baseload plants.
And so baseload plants have been running less often, losing money, and shutting down (as we will see in a moment). Lots of them.
The question is whether that’s a problem.
Perry is not asking the question. He’s stipulating an answer — yes, the grid needs the baseload resources that are currently shutting down — and constructing a “review” to support it.
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2) Perry is targeting renewable energy policies, which are the least of baseload’s problems
Perry’s memo doesn’t call out renewables by name, but it traces baseload’s problems to the “market-distorting effects of federal subsidies,” and as we shall see, he has put committed opponents of renewable energy subsidies in charge of the review, so the many subsidies enjoyed by fossil fuels are probably not what he’s talking about.
Insofar as Perry intends to pin the blame for baseload’s problems on renewable energy, it’s bogus. Renewable energy remains a marginal issue for baseload plants. The real villain is natural gas.
The awkward truth for fossil fuel supporters is that this is a family fight. It is cheap natural gas that has done the vast bulk of the damage to US coal and nuclear in recent years.
Cheap natural gas means that flexible natural gas plants are getting cheaper to run than their lumbering baseload competitors. Given that they are also cleaner, smaller (thus easier to finance), and faster to build and operate, there is no longer much reason to prefer baseload plants. Even existing, fully financed baseload plants are having trouble competing.
So if natural gas is pushing baseload plants out, and the loss of baseload is a problem, why isn’t Perry going after natural gas?
It’s politics. Many big energy companies own both oil and natural gas, or nuclear and natural gas. It’s all one industry. And the GOP can’t afford to offend it.
Plus, there’s just not a lot anyone can do about the price of natural gas, which is the main lever of change here.
So owners of baseload generators, and now Perry and the DOE, go after renewable energy subsidies, because renewable energy is smaller and more politically vulnerable. (Kari Lydersen of Midwest Energy News has a great piece digging into this.)
3) Perry can’t go after renewables on price, so he’s going after them on reliability — but that’s bogus too
Once VRE is built and paid off, there is no marginal cost to the energy it produces. Fuel (wind or sunlight) is free. It costs no more to run a wind turbine that’s pumping out 500MW than it does to run one that’s sitting idle.
That means, in competitive wholesale energy markets, VRE can “bid in” power at $0, lowering the average price that all generators end up receiving. (For a fuller explanation, check out this fantastic post at the Conversation from a set of scholars at the University of Texas Austin. Texas leads the nation in wind power.)
This cheaper power is fantastic for consumers. But it’s an awkward fact for coal boosters. Their whole pitch used to be about how cheap coal is. Now coal’s getting beat up on the market by natural gas and VRE both. They need a different pitch.
The new pitch is reliability. The idea is that by “artificially” driving so much VRE onto the grid through subsidies and mandates, we’re driving baseload out of business and the grid is getting less reliable.
Only … it isn’t. Perry cites no evidence that VRE is damaging reliability, because there’s none to cite. To be sure, the US grid has its problems. There are localized reliability issues, mainly connected to grid congestion. Much of the major grid infrastructure is old, at the end of its natural lifespan. But VRE is not hurting; if anything, it’s helping.
As the UT-Austin scholars note, the Texas grid is more reliable today than it was before all the wind came online. The costs of managing variability have been declining, not rising, as wind booms. Reliability has been improved through market reforms and increased flexibility — not through clinging to baseload. (Wind is pushing coal off the Texas grid.)
So Perry’s premise reduces to the prediction that, if VRE continues being added to the grid at its present rate, and baseload plants retired, the grid will eventually become less reliable — that’s what his “review” is designed to show. But there is no evidence to support this and much to the contrary, including from Perry’s own agency (see #5).
And again, if baseload plants are necessary for reliability, natural gas, not VRE, is the problem.
4) Perry has appointed a right-wing think tank operative to run his review
Most of the institutional centers of energy expertise in the country remain utterly in the dark about Perry’s review. It, ahem, “puzzles” analysts.
To run it, Perry appointed Travis Fisher, fresh from the Institute for Energy Research, a “free market think tank.” In 2014, Fisher penned an op-ed claiming that … wait for it … renewable energy policies are threatening the reliability of the grid by driving baseload plants out of business.
It’s possible that Perry genuinely thinks Travis the right-wing think tank guy will run a more thorough, scrupulous review of the grid in 60 days than the research laboratories in his agency did over two years (see No. 5).
But it’s also possible he knows exactly what answer he wants and exactly who will give it to him.
5) This review has been done
In last year’s Renewable Electricity Futures Study, the National Renewable Energy Laboratory (NREL) found that the US could accommodate up to 80 percent renewable energy using existing technology, with no loss of reliability.
What did it find is needed to balance VRE? Not baseload plants.
Increased electric system flexibility, needed to enable electricity supply and demand balance with high levels of renewable generation, can come from a portfolio of supply- and demand-side options, including flexible conventional generation, grid storage, new transmission, more responsive loads, and changes in power system operations.
Other studies have also found that the US grid can safely accommodate much more VRE, and that the key to maintaining reliability with high VRE penetrations is not big, slow baseload plants but nimble balancing resources. (For a great overview of reliability literature and how VRE can contribute to reliability, see this report from MJ Bradley & Associates.)
Perry has not indicated what he deems inadequate about his agency’s previous studies.
6) The main reason to keep nuclear is that it’s low-carbon, which Perry can’t say
Conservatives are in a bit of an awkward position in that they support subsidies for “clean coal” (coal with carbon capture and sequestration) and nuclear power, but neither is competitive on today’s energy markets. The only reason anyone might want to encourage them anyway is that they are low-carbon and could potentially help fight climate change.
But the GOP denies that climate change exists, or at least denies the need to do anything about it. It makes their support for clean coal and nuclear somewhat … unmotivated (beyond the obvious ties of money and influence, I mean).
The same is true of this grid fight. Most of the angst about energy markets (see No. 7) traces to states like New York and Illinois that are taking measures to keep existing nuclear plants open. That’s one of the things pushing coal off the grid. But the reason states are preserving nuclear capacity is not that those plants are necessary for reliability (they aren’t), but that those plants don’t emit carbon.
The only coherent reason to support nuclear power in 2017 is that it can help reduce carbon emissions (and even that is controversial). The Trump administration doesn’t want to reduce carbon emissions. So it is reduced to this nothingburger reliability argument.
7) There are real issues here and Perry’s review is only going to polarize them
There are important and complicated issues around the way wholesale energy markets interact with “around-market subsidies.” Such subsidies include tax credits and portfolio mandates for renewable energy, as well as recent nuclear bailouts in New York and Illinois (a similar nuclear bailout is now under consideration in Ohio).
Ohio’s FirstEnergy also tried to secure around-market bailouts for their coal plants, but so far it has failed.
Some utilities, upset that their big coal and nuclear plants are struggling, are even advocating for getting rid of markets altogether, returning their states to the fully regulated model. It turns out utilities only like competition when it is benefiting their bottom line.
The Federal Energy Regulatory Commission (FERC) recently held a two-day technical conference on this subject (well-covered, as always, by Utility Dive, see here and here). All the participants agreed that the current situation is problematic and that markets need more elegant ways of incorporating policy goals and ensuring resource adequacy.
But just about the only solution everyone agreed on is replacing a patchwork of clean-energy subsidies with a price on carbon. Perry’s review is … unlikely to reach a similar conclusion.
By putting a hasty, shoddy pro-baseload report on the record (with DOE’s name on it), Perry is only going to make these fights more polarized and contentious, empowering the worst utilities to protect their big plants (and their profits) at ratepayer expense. It’s going to make a long-term solution that much more difficult.
8) There’s not much Perry can do about state clean-energy policies anyway
In early April, Perry sent the energy world into a tizzy when he implied, in an onstage conversation at a BNEF energy conference, that state-level energy policies could be preempted by the feds on the grounds of national security.
Specifically, he said:
Are there issues that are so important to the national security of this country that the federal government can intervene on the regulatory side? I’ll suggest there are. Being able to have and make sure we’re able to maintain a baseload on our grid is of national security.
He added that “local entities do in fact get preempted with some of those decisions” on national security.
What is he talking about? Under what authority can DOE intervene in state policy decisions?
The best piece on this is from Julia Pyper at Greentech Media. And the answer is, not that much, at least not directly.
Section 202 of the Federal Power Act gives DOE the power to take control of power plants in a grid emergency. Similarly, the Fast Act, passed in 2015, gives FERC expanded authority in the case of a “grid security emergency” (physical or electronic attacks on the grid, unexpected grid failures, etc.). The president would have to declare a state of emergency and then DOE could take emergency measures.
Whatever you can say about a given coal or nuclear plant shutting down, it is very, very difficult to spin it as an emergency. Using either of those tools to support baseload plants would be “regulatory overreach” to make the most committed liberal bureaucrat blush.
I don’t like predicting litigation outcomes, but DOE will lose if it preempts an RPS (or other state law) under FPA sec 202 or FAST Act. https://t.co/W1FSYBbhPe
— Ari Peskoe (@AriPeskoe) May 4, 2017
To really prop up uncompetitive coal plants would require an act of Congress.
The only federal tools Congress could go after are the renewable-energy tax credits, and given that those are being sunsetted under a deal struck in Congress in late 2015, it’s unlikely they’ll get dragged up for dispute again.
Preempting state policy would require new and extremely aggressive federal energy legislation. Given the general incompetence of the GOP Congress and the certainty of a filibuster, that seems unlikely.
What a baseload-boosting DOE review might do is serve as ammunition in future cases before FERC (to which Trump is preparing to appoint some fossil fuel enthusiasts), or in state-level policy battles, or in proceedings before state public utility commissions. That’s not nothing, but it’s pretty weak tea.
(There is always the distinct possibility, given Perry’s long-established ignorance, that he just has no idea what DOE can do and initiated the review because Trump told him to.)
9) No one is fooled
A group of Democrats from the Senate Energy and Natural Resources Committee wrote a letter to Perry in early May, saying “the study, as you have framed it, appears to be intended to blame wind and solar power for the financial difficulties facing coal and nuclear electric generators and to suggest that renewable energy resources threaten the reliability of the grid.”
They scoff:
The notion that a 60 day review conducted by ideologues associated with a Koch brothers-affiliated think tank should supplant research and analysis conducted by the world’s foremost scientists and engineers would be a grave disservice to American taxpayers. It would constitute nothing short of an international embarrassment within a global research community that has long relied on U.S. technical leadership.
Charles Grassley, the Republican senator from Iowa, also sent Perry a letter, saying that the “hastily developed study … appears to pre-determine that variable, renewable resources such as wind have undermined grid reliability” and that it “will not be viewed as credible, relevant or worthy of valuable taxpayer resources.” (Iowa gets 36 percent of its electricity from wind.)
The issue, ultimately, is Trump’s “credibility problem.” Nothing he has done or said in his 70 years to date would indicate that he’s interested in a fair review of grid policies or that he feels restrained by facts or norms. The simplest explanation is the likeliest: Trump wants to save coal and he’s put Perry on the case.
10) Good-faith reviews are not done in the dark
In a letter to Perry, a group of renewable-energy industry associations says this:
In light of the importance of this inquiry, we encourage you to follow standard practice and conduct the study in an open and transparent manner. When agencies prepare reports with policy recommendations that could affect entire industries and the millions of employees that work in them, such as the proposed one, it is customary for them to seek comments on a draft prior to the study being finalized. For technical studies like the one proposed here, a technical advisory committee of affected stakeholders to vet study assumptions, scenarios, etc. is also an option.
Public input, including from energy market participants, grid operators, and regulators, would help ensure that any resulting recommendations from the study are based on the best available information.
They also provided a helpful seven-page report with links to dozens of studies on VRE integration and grid reliability.
But DOE has not consulted with these groups or other groups with energy expertise, at least to date, and there’s been no sign that public comments will be taken.
Don’t worry, though, a DOE spokesperson told E&E News, “Although this is an internal study, it is an important topic area and therefore the Department will be making it public once it is finished.”
Thanks?
There are more reasons why this bid to prop up coal is exactly what it looks like — including the absurdity of citing “fuel diversity” in defense of coal and the silly notion that grid cybersecurity is better served by baseload plants — but I have kept you too long. The top 10 will have to do.
The review is slated for June. We’ll see then exactly what Travis the right-wing think tank guy has produced, and how it compares to NREL’s two-year study. Until then, we wait and wonder.
