DOE Grid Study: Will it Make a Difference?

The highly-touted Department of Energy’s grid study is anodyne and irrelevant but worthwhile nonetheless. Commissioned by new energy secretary Rick Perry in April, the order for the study charged the Department of Energy staff to examine whether current policy was responsible for base load coal and nuclear plant retirements that jeopardize the reliability of the nation’s electric grid.

Many expected that the study would be a political screed, beginning with unwarranted assumptions and ending with foregone conclusions, aimed at candidate Donald Trump’s claim that he would reverse the Obama administration’s “war on coal.”

That isn’t what happened. Rather, the long-awaited study released this week found what virtually every analyst who has looked at the events on the ground over the last decade has concluded. Cheap natural gas, weak demand for power, and a push for renewables has doomed high-cost coal and nuclear generation.

Rick Perry

Rick Perry

 

Industry interests, particularly the National Mining Association and the Nuclear Energy Institute, have cherry-picked the report to argue that it supports major changes to the current electricity markets. The nukes said the report supports valuing atomic power for qualities that aren’t recognized in competitive markets, such as low carbon dioxide emissions and 24/7 reliability. The coal industry wrapped itself in the national security flag. West Virginia Governor Jim Justice, erstwhile Democrat and newly-minted Republican, proposed a $15/ton subsidy for Eastern coal, claiming that terrorists could blow up gas pipelines and jeopardize the grid.

Independent experts have greeted the industry spin with scorn. Ari Peskoe at Harvard’s Environmental Law Program wrote, “There is nothing new” in the DOE grid study. He noted that “DOE’s 2016 Quadrennial Energy Review (QER) already recognized these trends, and aimed to ensure that regulators and market operators had the tools to ensure reliability in the face of dramatic changes that challenge many of the industry’s long-held assumptions.”

Peskoe criticizes Perry’s cover memo unveiling the study, which focused on the Trump theme of changing rules and markets. That, focus, Peskoe said, attempts to “shoehorn old, inflexible generators into a rapidly evolving and more nimble grid.

Veteran energy economist and analyst Sue Tierney, who served as energy policy chief in the Clinton administration’s DOE, said the high-profile DOE grid study “ends with a thud.” She commented, “Now that the report is actually out, what’s surprising is that there are not many surprises. In keeping with other recent actions by the DOE, it provides little technical support for bailing out financially struggling coal-fired power plants. And that, in itself, is the main eye-opener.”

Tierney notes that the DOE study, which breaks no new ground, is notable for avoiding any references to global warming. She wrote, “This omission undermines the department’s call to provide proper compensation for certain power plants―notably, existing nuclear plants and hydroelectric facilities which, like coal-fired plants, are currently under financial stress in various wholesale markets. Without a willingness to point out that nuclear and hydro facilities produce power with zero carbon emissions, and that few wholesale markets properly compensate generators for their zero-carbon attribute, the DOE grid study misses an opportunity to support reasonable reforms to market rules. And it underscores the impression that this report’s goal is to support coal-fired generation, consistent with the Trump administration’s pro-coal agenda.”

The report is anodyne. It largely reports that conventional wisdom and breaks no new ground. It is irrelevant. The policy changes it suggests are out of the DOE’s authority and would require major action by Congress, a non-starter. But it is worthwhile, because Perry accepted the report and does appear to have exerted little political muscle to alter it. Maybe Perry is intellectually honest (unlike his boss)?