By Jennifer A. Dlouhy and Jennifer Jacobs
April 17, 2017 - U.S. Energy Secretary Rick Perry is ordering a study of the U.S. electric grid, with an eye to examining whether policies that favor wind and solar energy are accelerating the retirement of coal and nuclear plants critical to ensuring steady, reliable power supplies.
The 60-day review, which Perry set in motion Friday, comes as regulators increasingly wonder how to balance electric reliability with a raft of state policies that prioritize less stable renewable energy sources.
In an April 14 memo obtained by Bloomberg News, Perry highlights concerns about the “erosion” of resources providing “baseload power” -- consistent, reliable electricity generated even when the sun isn’t shining and the winds aren’t blowing.
“We are blessed as a nation to have an abundance of domestic energy resources, such as coal, natural gas, nuclear and hydroelectric, all of which provide affordable baseload power and contribute to a stable, reliable and resilient grid,” Perry wrote in the memo to his chief of staff. But in recent years, grid experts have “highlighted the diminishing diversity of our nation’s electric generation mix and what that could mean for baseload power and grid resilience.”
President Donald Trump has already moved to dismantle Obama-era policies that discouraged coal-fired power plants -- regulations Perry said destroyed jobs and “threaten to undercut the performance of the grid well into the future.” Perry’s effort suggests that the administration may be looking for other ways to keep coal plants online.
Perry asked his chief of staff, Brian McCormack, to develop a plan for evaluating to what extent regulatory burdens, subsidies, and tax policies “are responsible for forcing the premature retirement of baseload power plants.” He also wants to know whether wholesale energy markets adequately compensate some of the attributes that coal and nuclear plants bring to the table, such as on-site fuel supply, that strengthen grid resilience.
Conservatives -- including some advising the Trump administration -- have long taken aim at subsidies for renewable power, including a recently renewed production tax credit that helps offset the cost of wind and solar installations. Even beyond federal tax policy, some states have enacted renewable power mandates that encourage their use.
Perry is no stranger to such state policies favoring renewables. As governor of Texas, Perry presided over a massive expansion in wind power, driven in part by a requirement that the state derive some electricity from renewable sources.
The grid study comes just days after the G-7 Energy Ministerial meeting in Rome , where Perry said he and international counterparts discussed the need for a diverse supply of electricity. “It impressed upon me that the United States should take heed of the policy choices our allies have made and take stock of their consequences,” Perry said.
Perry didn’t single out any country. But German households have been footing the bill for a green transition, as the country rapidly shutters nuclear plants and embraces renewable power. In the European Union, household electricity prices in Germany last year were second only to those in Denmark.
In the U.S., electric regulators already have been mulling how state policies might be affecting regional electricity markets and grid reliability. The Federal Energy Regulatory Commission plans a technical conference in May to examine the issue, with a focus on scrutinizing state and federal jurisdictional battles over electricity markets, and state programs that steer credits to renewable energy and zero-emission power.
Both New York and Illinois have approved zero-emission credits that would subsidize certain nuclear power plants and keep them running despite stiff competition from plants burning cheap natural gas.
Although those efforts are helping in a few instances, they’re seen as insufficient to stem the tide of potential nuclear plant retirements nationwide. Competitors and other critics have also challenged the policies, saying subsidies for nuclear power could artificially drive down wholesale energy capacity prices.