On January 8, the Federal Energy Regulatory Commission (FERC) unanimously rejected a plan to subsidize aging power plants in the name of grid resilience and energy security. The proposal, one commissioner observed, “had little, if anything, to do with resilience, and was instead aimed at subsidizing certain uncompetitive electric generation technologies.”
Unfortunately, this attempt to turn back the clock to technologies of the past refuses to die. Instead, it has returned in a new guise – as a bailout looking for a national security emergency. The irony here shouldn’t be lost. While older energies seek new subsidies that will raise energy prices and take markets backwards – even blow them up – wind and solar power have embraced a full-market transition and are competing to push U.S. wholesale energy prices lower.
Markets still matter in America’s all-of-the-above energy mix – despite the latest efforts to bail out aging power plants and forestall competition from lower-cost natural gas and renewables in today’s energy marketplace. Just ask U.S. utilities, ratepayers and taxpayers, who face an estimated $65 billion a year in higher costs if these subsidies are imposed.
FERC: No National Security Emergency on Energy
On June 12, FERC’s commissioners were unanimous again. All five testified before the Senate Energy & Natural Resources Committee and acknowledged America’s grid does not face a national security emergency. They said grid security is a serious issue but should not be used to delay orderly retirement of old, uneconomic power plants facing market competition from lower-cost gas and renewable energy, which have demonstrated their grid reliability.
Commissioner Cheryl LaFleur summed up the view of FERC and a broad coalition of U.S. energy industry experts.
“The resource turnover we’re experiencing is an expected consequence of markets and technological change, and the lower prices that result from well-functioning markets are a benefit to consumers – not a problem to be solved, unless reliability is compromised.”
Commissioner Richard Glick agreed.
“We cannot try to stop the natural evolution of this industry by claims there’s a national security emergency unless there is evidence,” he said.
None of the commissioners could cite any such evidence.
This is uncharted territory for U.S. energy policy and the market reforms at its foundation since the 1973 oil crisis. Looking ahead, we should keep in mind the primary role and record of the U.S. marketplace, which has been picking winners and losers based on performance and delivering the greatest value to U.S. customers. A few key points bear repeating.
We Should Support, Not Pre-Empt, State Energy Policy
The ball for this non-emergency is now in Energy Secretary Rick Perry’s court. He knows the value wind, gas and solar add to America’s all-of-the-above energy mix, which is generating cheaper, more reliable electricity, a stronger, more resilient grid, and a boom in economic activity and U.S. jobs that today number more than half a million for wind, gas and solar power.
He also understands that states have the lead on power policy. The federal role is to support – not pre-empt states – by helping to empower markets, encourage innovation, ensure a level playing field, eliminate barriers and red tape, and enable an environment for investment. Invoking federal powers normally reserved for times of war or national emergency to bail out uneconomic power plants would be unprecedented. It clearly isn’t justified by today’s business realities.
Listen To Where Markets Going, What They’re Delivering
If we look at the markets, what is clear is that gas and renewables have risen together because they smoothly integrate power on the grid. Fast-ramping gas plants complement low-cost wind and solar, with flexibility to meet demand. That’s why they’re the market’s choice for 90 percent of new U.S. power capacity, including by lead utilities AEP, CMS Energy, DTE, MidAmerican Energy and Xcel Energy.
Indeed, Bloomberg reports utilities are continuing their plans – bailout notwithstanding – to add more renewables and gas and retire aging power plants that no longer make economic sense. As FERC commissioners testified, old plant retirements aren’t a national emergency. It’s simply how markets work to reliably deliver the lowest-priced electricity with the latest technology. And it’s true for all technologies – repowering old turbines and towers is a growing part of the wind business.
For A More Secure Grid, Look To The Future, Not Past
What’s also clear is the U.S. energy sector takes grid resilience and reliability very seriously, especially the risk from extreme weather and cybersecurity. Studies show grid reliability has actually improved as more renewables and gas have come online. By contrast, aging power plants have outage rates that are three times higher than new generation. Older plants are also more vulnerable to grid disruption, as well as having higher energy costs, than more decentralized wind and solar and modern gas plants. So it makes little sense for U.S. power providers or customers to rely on older, less resilient and uneconomic power plants, based on security or cost.
This helps explain why global, as well as U.S., energy investors and corporate customers are putting their money where the market is, according to a recent Wall Street Journal report. Markets like the lowest-cost option for generating electricity. They also like what works, with proven resilience and reliability. For both reasons, smart money is trending towards wind and solar power, which new data from Bloomberg New Energy Finance projects will make up almost 50 percent of the world’s power generation by 2050.
Rather than looking back, a much better course is to look forward and enable what’s already working to advance grid resilience and reliability and reduce cost for consumers. The North American Electric Reliability Corporation (NERC) confirms that America’s growing reliance on wind power is improving energy diversity and flexibility, which is strengthening grid resilience as well as “year over year” measures of grid reliability. NERC’s latest report says grid resilience continues to improve as the power system shifts its resource mix, retiring older power plants and introducing more renewable energy and technology, while also fending off two Category 5 hurricanes.
More Transmission Key for Grid Resilience and Wind power, Also Pays for Itself By Lowering Electricity Bills
One of the secrets and business realities of wind power’s success is that connecting more wind turbines with transmission lines exponentially reduces its variability – as wind is always blowing somewhere across the grid. More transmission helps wind improve grid integration, lower costs and extend its reach, letting operators like Southwest Power Pool (SPP) balance load across their region and hit new highs for wind-penetration – which topped 62 percent on SPP’s 14-state grid March 31.
Building transmission is also one of the best ways to strengthen overall grid resilience and limit impact from isolated outages. Transmission linking rural wind supply to urban demand is an infrastructure investment that more than pays for itself, and could save consumers $50 billion a year on their electric bills. If the $65 billion annual expense to subsidize old power plants went instead to install 300,000 miles of power lines each year, U.S. consumers would see a net savings and more secure grid.
Longer-term, scientists in California highlighted the power of transmission in a recent study showing wind and solar can reliably supply up to 80 percent of U.S. power. The study found wind and solar have complementary generation cycles and can reach four-fifths market share with greater investment in transmission, which enables more wind and is cheaper, or with more energy storage, which costs more at current technology but could play a bigger role as prices drop. Natural gas and other fuels would supply the rest of U.S. power needs, with more of those resources freed up for energy export.
Bottom line: The U.S. marketplace is driving a remarkable energy transformation that’s delivering more reliable and secure power to U.S. customers at the lowest possible price. It’s changing our lives – for the better. We should stay that course.
Chris Brown is president, Vestas Americas and board member and past chair of the American Wind Energy Association.