Last month, Energy Secretary Rick Perry requested a review of America’s power grid. He was broadly asking how federal policy is working to protect the nation’s grid and advance reliability, resilience, affordability and energy independence.
I believe that’s the right question, and Perry’s inquiry has certainly drawn people’s attention. There’s bipartisan concern that ideology will impact the review and politics will overtake sound policy.
By any fair reading of the facts, the realities of today’s energy marketplace should carry through in an assessment I think Perry will like. In many ways, it will validate the success he led as Governor of Texas that vaulted the state to #1 as the nation’s wind energy powerhouse.
In my previous columns, I addressed Perry’s first two yardsticks of grid health: 1) The markets and U.S. electricity prices, which dropped more than 60 percent as low-cost wind grew more than five-fold, and 2) grid resilience and reliability, which improved as low-cost wind, solar and natural gas added more diversity to America’s “all-of-the-above” energy mix.
State Marketplaces Driving on Energy
In this column, I will address Secretary Perry’s third inquiry: How much have federal policies contributed to driving premature retirement of U.S. baseload power plants?
The short answer is the primary drivers on U.S. energy are the markets and the states. Secretary Perry repeatedly asserted when he was Governor Perry that federal policy has a role — not to pre-empt but support state policy — by empowering a well-functioning market, encouraging innovation and efficiency, ensuring a level playing field to compete, eliminating barriers and excess regulation, and enabling an environment for investment.
The marketplace decides winners and losers, based on price. When power plants are retired and natural gas or renewables brought online, it’s because energy customers made a choice. Free markets do that when plants go above market price. That’s what’s happened and it’s called “capitalism.”
Texas’ Model for Wind Power’s Future Across U.S.
States have shown their policy leadership by creating energy market laboratories that are yielding not just dramatic results, but important lessons for America’s energy future. Consider Texas, Secretary Perry’s (and my) home state. Over the past decade and a half — while Perry served as Governor — the state undertook a concerted campaign to develop its plentiful wind resources, and exceeded all expectations.
- Texas today is the clear U.S. wind power leader, with 20,000 MW installed capacity, more than the next three states combined.
- The state has 25,000 wind-related jobs, more than 40 wind manufacturing facilities and $40 billion in wind investment.
- Wind power thrived thanks to smart state policies that connected rural wind power supply to urban market demand with transmission lines through the Competitive Renewable Energy Zones (CREZ) initiative.
- Wind has become a primary source for Texas’ largest grid, ERCOT, which has evolved to integrate more wind into its energy mix, exceeding 50 percent in March, with improved reliability and low electricity costs.
Texans understand the power of wind. They’re not alone.
In Colorado, Xcel Energy has topped 60 percent wind. In March, SPP reached 54 percent wind across its 14-state grid, and has 75 percent wind in its sights.
Regional U.S. grids are becoming more flexible, reliable, cleaner — and cheaper — as they add more wind power, which has reduced its levelized cost of energy by 66 percent since 2009. Wind is winning as the cheapest new power source across much of the U.S., competing as a low-cost market leader with natural gas and solar.
For U.S. workers and rural America, wind is creating new jobs and much-needed economic development. Every year, the industry as a whole supports more than 30 U.S. jobs for each new wind turbine and 44 years of full-time employment over a wind turbine’s full life. By 2020, wind will support a quarter million U.S. jobs, including those in communities near wind farms and factories.
Perhaps the most significant lesson from regional grid operators is how much size matters for grid connectivity. SPP attributes its wind success to its transmission system and 550,000 square-mile footprint. “We’re able to manage wind generation more effectively,” says SPP’s Bruce Rew, “because we’ve got a huge pool of resources to draw from… even if the wind stops blowing in the upper Great Plains, we can deploy resources waiting in the Midwest and Southwest.”
Power grid operators recognize the implications and are developing more connectivity and better transmission, over larger geographic footprints, to dramatically reduce the impact of wind variability.
That’s because the wind is always blowing somewhere across America’s power grid.
Smart Money Still on Wind
Simple business realities and undeniable science are driving wind’s renewable electricity revolution. Today’s regional power pools are leveraging it, along with smart data and forecasting, to make wind power the most predictable, most reliable and lowest-cost energy in America’s “all-of-the-above” mix. The smart money is still on wind.
For federal and state policymakers, the steps forward are clear. Grid operating reforms and transmission upgrades are the lowest hanging fruit to strengthen America’s grid. Both would be worthy additions to a U.S. infrastructure initiative. It’s also rationale for the renewables’ production tax credit, which Americans strongly support, with its predictable five-year ramp-down (note that traditional energy sources remain on healthy government subsidies).
The bottom line is that federal policy has encouraged innovation and a level playing field so businesses and consumers could choose from a more diverse energy mix. We’ve come too far to try to turn back the clock by putting a price floor under increasingly uncompetitive energy sources, reverse the market’s momentum and take away low-cost energy options from U.S. businesses and consumers.
Instead of interfering with this success, federal policymakers should eliminate barriers and open larger markets so the lowest-price energy can continue winning and serving U.S. customers.
For America’s grid, wind is a winning proposition that we should advance and continue to be proud of.