Energy Secretary Rick Perry wants to bail out coal and nuclear plants. He says the US energy grid is experiencing an urgent crisis — that its reliability and resilience are in immediate danger unless those power plants are saved.
There is no evidence to support this position, though Perry and his allies in the coal and nuclear industries repeat it like a mantra. Numerous credible analysts have examined the question, including Perry’s own DOE, and not one has uncovered a crisis. On the question of urgency, Perry is simply wrong, no matter how many times he repeats it. There’s no reason to rush into anything. (I wrote a longer piece on Perry’s proposal last week.)
But even if there’s no immediate crisis, the larger question remains: Is the ongoing loss of coal and nuclear plants going to impact reliability in the future?
As it happens, the authority on the issue — the North American Electric Reliability Corporation (NERC), a nonprofit established by the electricity industry to track reliability — just issued its annual Long-Term Reliability Assessment, which casts some light on the debate.
A few journos have cast the report as a direct rebuke to Perry, as though it says the grid is fine and everything is peachy. But that’s not quite right. NERC has concerns, some of which echo Perry’s. But NERC definitely doesn’t support anything like Perry’s bailout.
It is instructive to look more closely at exactly where NERC and Perry part ways — it helps expose the crony capitalism at the core of Perry’s proposal.
NERC: reliability is OK, but things are changing quickly and new thinking is needed
As I said, NERC doesn’t see any urgent reliability crisis. Its message, if it can be captured in a single sentence: Rapid changes in the electricity sector are raising new challenges and require new thinking, but with a little wisdom and foresight, “the electricity sector will continue to navigate the associated challenges in a manner that maintains reliability and resilience.”
Here’s what NERC sees happening in the North American grid:
Natural gas is the big story. It has gotten cheap and grown like gangbusters (from 280 gigawatts in 2009 to to 442 in 2016). Within five years, it’s expected to represent half or more of the generation resources in Texas and several other large power markets.
Alongside natural gas, wind and solar have also gotten cheap and grown like gangbusters, though they are growing from a much smaller base and represent a much smaller share of generation.
Meanwhile, growth in electricity demand is “at the lowest rates on record.” Demand is even expected to decline in several areas, thanks to rapidly advancing efficiency technology and the general shift of the US economy toward services.
These two trends — more competitors, stagnant demand — have formed a pincer, squeezing conventional coal and nuclear generation off the grid. In fact, demand is so low that coal and nuclear retirements have outpaced natural gas and renewables additions.
Here’s a glimpse at what was built and retired from 2011 to 2016:
This new set of resources (combined-cycle natural gas turbines, wind, and solar) is different from the old (large coal, nuclear, and gas steam-driven generation) in several important ways.
Where coal and nuclear plants store fuel on site — that’s “fuel assurance” in the lingo — natural gas plants are served by a system of pipelines, reliant on “just in time” delivery.
Where coal and nuclear plants can run around the clock, wind, and solar are variable — they come and go with the weather.
Where coal and nuclear are large and highly centralized, a growing share of grid energy resources are small-scale and distributed, in many cases behind the customer meter.
As NERC says, these changes are “altering the operational characteristics of the grid and require changes to planning and operating approaches.”
At several points, NERC echoes some of the same concerns Perry and his allies have raised. For instance, it notes the stresses to the system caused by the rapid transition and says that regulators should “recognize lead times for the generation, transmission, and natural gas infrastructure needed to maintain reliability as industry strives to meet policy goals and initiatives.”
The report highlights the increasing reliance on natural gas, which puts greater importance on the security of the natural gas pipeline system. It also notes that renewable energy is variable and requires balancing.
In other words, the report acknowledges that the sources replacing coal and nuclear plants are different and will require different thinking and strategies.
What NERC does not do is presume to tell the electricity sector exactly how to deal with those changes. In its recommendations, it uses words like “recognize,” “consider,” “focus,” “evaluate,” “monitor,” and “report.” Over and over, it returns to the central theme: Pay attention. Notice these things. Think about them.
That is ... not the approach taken by Perry and the DOE.
How to address the changing needs of the grid
The rapidly changing grid poses new challenges, and NERC is right to raise them. But what’s the best way to respond?
It’s an extremely complex topic the deeper you delve (like many topics), but thanks to Perry’s crude intervention, the choice has been somewhat clarified.
Perry wants FERC, electricity regulators, and utilities to view the evolution of the grid as a negative, a crisis, a loss that they must intervene to slow or stop. He wants them to keep old, slow, always-on generators alive in an era when the grid needs fast, flexible resources — just in case we see another of the 0.00007 percent of blackouts caused by fuel supply problems.
The only way Perry can find his way to this desired crony-capitalist outcome is by focusing on “fuel assurance” to the exclusion of all else, and by prescribing a single, blunt tool with which to address it.
He wants to respond to changes in the grid by ensuring that there will always be big piles of coal around. It is, as I said in my original piece on the proposal, a caveman approach to reliability.
It is also an extremely small-c conservative approach: resistant to market dynamism, uncomfortable with distributed rather than centralized power, suspicious of new and cutting-edge technologies, and above all, focused on the welfare of powerful incumbents. It amounts to clinging to an idealized past (a familiar theme in this administration).
But there’s another approach: FERC and the industry can lean into the future, embrace the evolution of the grid, and work to find better, more sophisticated ways to vouchsafe reliability.
There are many, many ways to address the issues raised by the evolving grid, too many to detail in one post. (This new EDF report on grid modernization is a good start.) There are ways to improve the performance and reliability of the natural gas distribution system, but beyond that a whole universe of changes, none of which involve big piles of coal.
One of the most important is finding ways to aggregate together small-scale DERs and have them provide grid services, which Alvin Chang and I touched on in our introduction to microgrids.
Power that is generated and managed locally can provide resilience benefits to areas where the grid is congested, or to essential services like hospitals and data centers. (For much more on the reliability and resilience of local energy, see the Rocky Mountain Institute’s comments on Perry’s proposal. I’ll have more to say about this in a future post.)
Another key point, which I covered in more detail in my piece on the challenge of 100 percent renewables, has to do with finding ways to balance out the swings in VRE that don’t rely on natural gas. In other words, to reach America’s stated climate goals (which involve zeroing out carbon emissions from the electricity sector by 2030 or so), the US grid rapidly needs to start doing to natural gas what it did to coal: Squeeze it out. That means finding other sources of flexibility. (See this Climate Policy Initiative report on flexibility.)
Another is reforming electricity markets so that they better value the benefits that VRE and aggregated DERs can provide the grid. In many cases, the new resources coming on the grid can provide some of the same services as the old ones, but only if rules and procedures change. (For more on that, see “A Roadmap For Finding Flexibility In Wholesale Markets” from the analysts at Energy Innovation.)
Also important will be integrating electrified transportation into the grid, which is both a challenge (more demand) and an opportunity to provide flexibility (more controllable demand).
The list could go on. Reforms are needed to ensure grid reliability and resilience in the 21st century, but the wiser path — dare I say, the more American path — is to embrace the future, to make use of the new tools and capabilities technology has brought us to create a better, more stable, more diverse grid.
As reliability expert Michael Milligan (formerly with EDF and NREL, now consulting) says in his comments on Perry’s proposal, the electricity sector — including both NERC and FERC, along with utilities and market managers — are already hard at work on a range of collaborations and analyses meant to tackle these challenges. Contrary to what Perry seems to think, the grid’s challenges are well in hand.
Perry needs his crisis
So, yes, NERC shares some of Perry’s concerns. But NERC does not prescribe the best way to address those concerns; it certainly doesn’t single out one class of power plants as a magic solution.
What NERC wants is for everyone to take a good hard look at the changes taking place on the grid and think seriously about how to maintain reliability and resilience through them. It wants careful, thorough study and analysis of modern grid needs.
That’s not what Perry wants. A dispassionate, fuel-agnostic examination of reliability options is not going to prioritize big piles of coal. It just isn’t. The longer this process takes, the more study and analysis is involved, the worse Perry’s proposal is going to look.
That’s why he has manufactured this atmosphere of crisis. That’s why he was so grudging in granting a 30-day extension to FERC, to more fully consider his proposal. In his letter to head commissioner Kevin McIntyre, he restates the falsehood that “urgent action is required” to address “serious threats to the nation’s electric grid.”
He also says that “the voluminous comments filed in the record of this proceeding provide substantial evidence of, and otherwise confirm, the threat to the nation’s electricity grid,” which is also false — the vast bulk of the comments opposed Perry’s proposal and dismissed the idea of an urgent threat.
But Perry must insist on a crisis — even as leading experts refute him, one after another — for the simple reason that crony capitalism withers in the sunlight.