Back to School with DOE’s New Electricity Markets Report

Energy Headlines Abroad – U.K. and Mexico
August 23, 2017
After the Storm: Lessons Learned from Harvey
August 30, 2017

The Texas coastal community, including Houston, continues to suffer the devastating effect of Hurricane Harvey. To help the relief effort, consider donating $10 to the Red Cross by texting 90999 or giving to the Salvation Army of Houston

All over Northern Virginia, it’s time to head back to school. Adults, too, have that sense of renewal and a bit of excitement. It’s also nearly time for Congress to return and handle some weighty issues such as the debt ceiling, annual appropriations, and healthcare. With those tests ahead, it seems likely that energy policy will be just an elective, rather than a required course for this semester. Even the Category 4 winds and flooding in Texas, atop one of the major U.S. energy production and delivery corridors, seem unlikely to change this dynamic.

Still, as new Commissioners and staff at the Federal Energy Regulatory Commission get settled in, and Congressional staff work diligently toward the day when energy policy goes back to the head of the class, they’ll benefit from the Department of Energy’s new Staff Report on Electricity Markets and Reliability

Many press reports took a quick look at the report, released last Wednesday evening, and summed it up as “not much new, low on controversy” or “renewables aren’t killing coal after all!” However, it deserves a closer look, and staff who assembled it should be commended. It’s easy to produce yet another jargon-filed, overlong, heavily footnoted white paper. Instead, primarily relying on Energy Information Administration (EIA) data from 2002 through 2017, DOE staff have created a readable, approachable document.

It provides many useful resources for policymakers, including lists of significant environmental regulations and maps of generation assets. It asks many questions about the U.S. electricity generation mix, where seemingly small changes often make a big difference for consumers, regulators and investors. It also highlights areas that deserve further exploration, including a comprehensive look at energy subsidies, and the need for consistent definitions and values of grid resilience.

The issue of baseload generation retirements and impacts on grid reliability and resilience is central to the report. Rather than pick sides in the “premature retirement of coal plants” debate, the report lists various definitions of retirement and perspectives that arise when stakeholders confronted the potential loss of an asset, no matter its fuel source.

Renewable Portfolio Standards and federal tax credits for renewable energy are also considered under the reliability analysis framework. The report describes how these policies, “now in 29 states and the District of Columbia, covering 55 percent of total U.S. retail electricity sales” have driven the significant growth of renewable energy but also simultaneously distort the electric power market by pushing wholesale energy prices lower than the market otherwise would have, and accelerating traditional baseload retirements.

Ultimately, DOE has done a commendable job of reframing critical electricity policy questions and gets an A for effort for its balanced, rhetoric-free report. Policymakers and stakeholders, regardless of their belief set about these issues can draw on the data and charts presented.

And if energy policy gets back to the head of the class, then it’s very useful to be reminded of the ties between energy, economic freedom and consumers. As Secretary Perry’s cover letter states:

“The core objective of electricity regulation has always been, and should continue to be, to ensure a reliable and resilient electric supply system that serves customers in an equitable manner. … We must utilize the most effective combination of energy sources with an “all of the above” approach to achieve long-term, reliable American energy security.”