Oct
03
2017

Lessons on America's Power Supply Formula

The utility industry, the federal government and numerous NGOs are on the ground helping our 3.4 million fellow citizens in Puerto Rico. The Salvation Army is on the front lines and collecting much-needed donations. Our concern also extends to the victims and families impacted by the terrible events in Las Vegas. 

In the wake of the hurricane trifecta of Irma, Harvey, and Maria, more Americans than usual may be thinking about power supply. Luckily, so are leading voices in Washington, D.C. and around state capitols. An already healthy debate about what sources our country uses to generate electricity, and the value of reliability, seems likely to kick into a higher gear. 

Last week, Department of Energy (DOE) Secretary Rick Perry made two significant moves drawing attention to the value of a solid, diverse domestic electric generation portfolio. Both come several weeks after DOE released a study documenting the value of an electric power generation portfolio that relies on all available resources to help ensure reliability and predictable costs.

Sec. Perry formally asked the Federal Energy Regulatory Commission to issue rules that help ensure power plants which provide essential energy and ancillary reliability services stay online longer. DOE explained the key driver for this unusual move:

“The resiliency of the nation’s electric grid is threatened by the premature retirements of power plants that can withstand fuel supply disruptions caused by natural or man-made disasters and, in those critical times, continue to provide electric energy, capacity, and essential grid reliability services.” 

Objections to the new proposed FERC rules emerged quickly. Some focused on procedure, citing DOE’s request that FERC develop rules within 60 days. Others called it a return to “command and control” or a “coup on electricity markets.”  (As far as I can tell, nobody has yet trotted out “voodoo economics.”)

DOE also announced a new, conditional loan guarantee package for continued construction of two new units at Plant Vogtle in Georgia. Once complete, the new units at Plant Vogtle will provide “enough reliable electricity to power more than 1.6 million American homes while avoiding nearly 10 million metric tons of carbon dioxide emissions annually,” according to DOE. Renewable energy advocates, including many for generation sources which have long benefited from generous federal and state tax credits, loans, and grants, responded harshly.

To paraphrase Shakespeare, in both cases, “perhaps they do protest too much.” When policy moves prompt such swift and sharp reactions, it’s incumbent on us to ask what lies beneath.

Perhaps opponents to nuclear loan guarantees don’t welcome a closer review of how well nuclear performed in Harvey, or review how much nuclear has reduced carbon emissions. Those who claim DOE’s proposed rules will distort the organized electricity markets may not want to discuss how those markets fail consumers or contemplate the current over-engineered, baroque regulatory structures. Mention the 2014 polar vortex and they’d prefer to fade away like Hamlet’s father’s ghost.

Debate will continue about both DOE policies, across congressional hearings (including three this week in the House), state regulator forums and FERC technical conferences. From where PACE sits, DOE deserves credit for seizing the moment, firing up the national conversation, and boosting the discussion on how the U.S. can ensure a winning power supply formula that evolves as new lessons, whether from man or nature, are learned.