What 10 Charts from the DOE’s Grid Study Reveal About the State of U.S. Power

The Department of Energy’s (DOE’s) new grid study is based on analyses of federal government data collected between 2002 and 2017, a period it notes fostered critical developments in the nation’s power sector. Here are some of report’s most thought-provoking charts.

1. <strong> Coal, natural gas, nuclear, and all other power plant retirements between 2002 and 2016. </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.1</em> <br><br> Several factors are to blame for the recent surge in power plant retirements, including low natural gas prices, wholesale competition, low demand growth, regulation-driven cost increases, and the growth of variable renewable energy (VRE), the report says. While retirements have varied regionally, merchant generation and coal plants have been particularly hard hit. (VIEU stands for vertically integrated electric utilities.) 2. <strong> Retirements by date, location, ownership, and capacity. </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.4</em>  <br><br> Restructuring, the economic recession, new power plant regulations, and fuel economics have all prompted retirements over the years. Between 2010 and 2015, 37 GW of coal power capacity was retired. Merchant plants, meanwhile, accounted for nearly 70% of retired capacity from 2002 to 2010. The current wave of nuclear retirements has only occurred over the past five years. “The merchant vs. VIEU comparison indicates that market structure is a significant factor in power plant retirements, particularly the timing of retirements,” the report notes.  3. <strong> Net generation capacity additions and retirements. </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.2</em> <br><br>The report notes that a variety of generation technologies were installed nationwide in “waves,” largely influenced by policy, fuel costs, and technology development. Coal expansion was highest from 1950 to 1990, nuclear power was widely deployed in the 1970s and 1980s, natural gas capacity additions peaked in the early 2000s and continue through today, and VRE has grown rapidly over the last decade.  4. <strong> Generation mix and various economic and policy drivers since 1949. </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 4.16.5</em><br> <br>This chart visualizes how the mix of U.S. electricity use has moved in cycles for decades. According to the report, it shows “how the generation share of hydroelectric facilities (most built with Federal funds during the 1930s and 1940s) declined as coal and natural gas grew (helped with funding from low-cost Federal land and mineral leases); how nuclear generation grew (aided by Federal policy and funding assistance) in the 1960s; how nuclear energy displaced hydroelectricity and natural gas-fired electricity in the 1970s; and how coal, nuclear, and natural gas-fired electricity have displaced oil-fired generation since the 1980s.”  5. <strong> Operating generation capacity, additions, retirements, and announced retirements by region for all generation types, January 2002–December 2022. </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.5</em><br> <br>In 2016 and going forward, power plant retirements are and may continue to be driven by continued economic challenges in the form of market dynamics and compliance costs of regulations, as well as operational pressures from a changing resource mix. System operators are adapting to changes in various ways.  6.  <strong> Capacity additions of U.S. utility-scale natural gas–fired generation by technology type. </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.10</em><br><br> This might sound like a mistake, but it isn’t: In 2016, natural gas–fired power plants accounted for 42% of U.S. operating capacity, while coal capacity made up 25% of the mix. In 2016, however, natural gas became the nation’s leading generation source, surpassing coal, which generated about 30% of U.S. power. Gas generated 34%. Natural gas steam plants, originally built for baseload use have been more recently displaced in the dispatch merit order by more efficient combined cycle plants, which are designed for greater flexibility.  7.  <strong> The nuclear fleet. </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.13</em><br><br>
Nuclear plants generate about 20% of the nation’s power. Of the 99 active reactors, 51 are owned by vertically owned utilities, which rely on regulated cost-of-service ratemaking. About 28 nuclear plants were spun off by VIEUs to affiliates under state electric restructuring efforts in the early 2000s. The report cites an Idaho National Laboratory report as it notes that “there is an industrywide systemic economic and financial challenge to operating nuclear power plants in centrally organized markets.” The magnitude of the gap between operating revenues and operating costs is in the range of $5–$15 per MWh, it says. For a 1,000 MW nuclear unit, approximately every $5/MWh of gap represents about $40 million in annual negative cash flow. Without action to enhance revenue (such as zero-emission credit programs) in New York and Illinois, more nuclear plants will face retirement before the end of their operating licenses in the future. Notably, however, the DOE recommends pursuit of fuel-neutral pricing mechanisms and regulations. 
 8.  <strong> Variable renewable energy (VRE) penetration as a percentage of 2016 generation versus retired capacity since 2010 as a percentage of non-VRE capacity  </strong> <em>Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.28</em><br> <br>At the end of 2016, U.S. installed wind capacity surpassed that of hydro for the first time. Industry stakeholders have repeatedly expressed concerns that state-level renewable portfolio standards and federal tax credits for VREs are examples of market-distorting subsidies and mandates, because they reduce revenues for traditional baseload power plants by lowering wholesale electric prices they receive and by displacing a portion of their output. “While concerns exist about the impact of widespread deployment of renewable energy on the retirement of coal and nuclear power plants, the data do not suggest a correlation,” the report concludes. 		9.  <strong> Federal electricity production subsidies and support for fiscal year 2013 </strong> <em> Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Table 3.5</em><br> <br>While data like this hasn’t been compiled for every year, this table shows that 72% of total federal subsidies and support for power generating technologies went to renewables. 10.  <strong> EIA annual electricity sales 2000–2016 (terawatt-hours) and AEO Reference Case electricity sales projections 2017–2030  		  </strong><em> Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.31</em><br><br> 		Electricity demand and economic growth began decoupling around 2000. While a changing policy and market environment since 2000 has made it challenging to accurately forecast electricity demand, the Energy Information Administration (EIA) attributes the general decline to the cumulative impact of energy efficiency programs, standards, and codes; technology improvements in appliances, lighting, and other end-use equipment; and broader structural changes, such as a shift toward less electricity-intensive industries and slower population growth. 
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7.  The nuclear fleet. Source: Staff Report on Electricity Markets and Reliability, U.S. DOE, August 23, 2017, Figure 3.13

Nuclear plants generate about 20% of the nation’s power. Of the 99 active reactors, 51 are owned by vertically owned utilities, which rely on regulated cost-of-service ratemaking. About 28 nuclear plants were spun off by VIEUs to affiliates under state electric restructuring efforts in the early 2000s. The report cites an Idaho National Laboratory report as it notes that “there is an industrywide systemic economic and financial challenge to operating nuclear power plants in centrally organized markets.” The magnitude of the gap between operating revenues and operating costs is in the range of $5–$15 per MWh, it says. For a 1,000 MW nuclear unit, approximately every $5/MWh of gap represents about $40 million in annual negative cash flow. Without action to enhance revenue (such as zero-emission credit programs) in New York and Illinois, more nuclear plants will face retirement before the end of their operating licenses in the future. Notably, however, the DOE recommends pursuit of fuel-neutral pricing mechanisms and regulations. 

For an in-depth analysis about the DOE’s grid study, see:

DOE Grid Study Points Finger at Natural Gas

Major Power Players Issue Mixed Reactions to DOE’s Controversial Grid Study

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)