In an April 14 memo circulated through the Department of Energy, Secretary Rick Perry ordered a 60-day DOE study of the electric grid examining “the extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants.” In this era of overwrought political outrage, even an innocuous, consumer-focused initiative such as this grid study can become the focus of a partisan furor. And indeed this study has.
Just three days after Perry ordered the DOE study, American Wind Energy Association (AWEA) CEO Tom Kiernan issued a memo of his own laying out an explicit plan to delegitimize the project. The memo—obtained by the Daily Caller News Foundation, posted on the open-publishing website Scribd, and subsequently deleted—catalogued a series of actions AWEA would pursue to undermine DOE’s as-of-yet unpublished study.
As Kiernan wrote on April 17:
In response, AWEA has initiated the following steps…
-Refine message, including a statement for today’s media calls and interviews (attached at bottom with details and sources), which makes these points:
- Diverse grid is more reliable: We have more fuel diversity than ever with wind’s recent additions, which has enhanced reliability and resilience (per recent studies by largest grid operator PJM, NERC, and others)
- It’s the market: Low gas prices (sustained by a winter that was 5 degrees warmer than average and record expansion of natural gas pipeline capacity) are behind coal and nuclear’s market challenges.
- Jobs: Wind already has more jobs than coal mining and is adding jobs fast, and these are long-term good jobs with benefits in rural and Rust Belt America.
-Discuss with contacts at DOE
-Find out who will do study at DOE and brief them on our analysis. (We have seen these arguments before and so have data/rebuttals etc. largely prepared, but are updating)
-Secure meeting with FERC to share AWEA analysis (as FERC may be involved in DOE analysis, would be involved in carrying out any potential proposed regulatory reforms, and FERC has its own proceedings going on related to subsidies and wholesale markets)
-Pull existing research together into tightly written blog article
-Consider our own counter study, whether by AWEA or commissioned from third party
-Prepare to debunk others’ statements or studies, for example by the Institute for Energy Research, Northbridge (which did Exelon study), et al
Today, AWEA followed through on its commitment, releasing the proposed third-party study, titled Electricity Markets, Reliability and the Evolving U.S. Power System, in conjunction with Analysis Group under the authorship of Paul Hibbard, Susan Tierney, and Katherine Franklin.
Unsurprisingly, the Analysis Group study obscures the role government policy has played at both a federal and state level in propping up wind generation at the expense of other energy sources.
Market forces are helping to change the mix of resources as the report indicates, but so are onerous regulations such as the Obama Administration’s Mercury and Air Toxics Standard (MATS) which has forced many coal-fired power plants to retire. In 2014, the Energy Information Administration (EIA) noted that 9.5 percent of the coal generating capacity would retire rather than comply with MATS, and that another 20.4 percent of the capacity would either retire or need to add expensive retrofits to comply. EIA’s Annual Energy Outlook 2014 indicated that 60 gigawatts of coal-fired capacity would be retired by 2020 and 90 percent of those would retire by 2016, which was the first year of enforcement for MATS.
Burdensome regulations, state renewable portfolio standards requiring specified amounts of renewable power to be generated, and generous federal subsidies paved the way for wind and solar power to be constructed. The production tax credit (PTC), for example, is so lucrative that wind operators sometimes accept a negative price during periods of low demand in order to wipe out the competition from coal and nuclear plants. According to the Congressional Research Service, the PTC is the largest 2016 to 2020 energy-related tax expenditure to the Treasury at $25.7 billion.
Despite natural gas prices to electric utilities declining by 24 percent between 2005 and 2016 and coal prices declining by 11 percent in the last 5 years , average retail electricity prices in the United States have risen by 26 percent and average residential electricity prices have risen by 33 percent between 2005 and 2016. This increase is largely the result of the cost of new capacity that is being added as coal-fired power plants are being prematurely retired and as retrofits are added to meet regulations such as MATS.
As the Analysis Group report notes, in 2016, wind generation represented 5.6 percent of the U.S. generation market. Germany, by contrast, gets over 10 percent of its electricity from wind generation. But this has led to grid destabilization and prompted reform of renewable energy laws. Now, in fact, the German government is planning to limit the expansion of wind capacity in the northern part of the country to avoid overburdening the grid.
Thankfully, the Trump Administration has reset our course in the United States by putting the brakes on the Clean Power Plan and the Paris Agreement. As the North American Electric Reliability Corporation’s 2016 grid reliability report notes:
The CPP is expected to promote large-scale changes to the resource mix that could have reliability implications for planning reserve margins, system voltage support, frequency response, and other issues that would need to be addressed.
AWEA and the Analysis Group study authors both understate the role policy has played in their preferred energy source’s ascent and overstate the resiliency value that that source adds to the grid. In reality, wind generation has reached its current level of market penetration only through the aid of costly government tax incentives, garnered by groups like AWEA, that ultimately serve to diminish baseload capacity and reduce our grid’s reliability.