Market fundamentals and competing technologies, not federal support for renewable energy, are undercutting the U.S. market for coal-fired and nuclear-generated electricity, the Boston-based Analysis Group concludes in a report released yesterday.
The report, commissioned by Advanced Energy Economy (AEE) and the American Wind Energy Association (AWEA), is a pre-emptive response to a U.S. Department of Energy study, commissioned by Energy Secretary Rick Perry, that has been widely viewed as a pretext to build a case against renewable energy.
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In April, Perry ordered his department to study whether the “market-distorting effects of federal subsidies that boost one form of energy at the expense of others”—code for support for renewable energy—put at risk “the long-term reliability of the electric grid.” The report concludes that “flat demand for electricity, low natural gas prices since the mid-2000s, and the addition of significant amounts of highly efficient new gas-fired resources since 2000” are mostly responsible for making older coal power plants less profitable where there is wholesale power supply competition.
“These market fundamentals,” the report notes, “are producing savings for consumers.”
Analysis Group addresses the premise behind Perry’s study head-on. “Recently, some have raised concerns that current electric market conditions may be undermining the financial viability of certain conventional power plant technologies (like existing coal and nuclear units) and thus jeopardizing electric system reliability,” the authors write. “In addition, some point to federal and state policies supporting renewable energy as a primary cause of such impacts. The evidence does not support this view.”
While government policies supporting renewables and other advanced energy technologies contribute to the viability challenge for older such “merchant” plants, the analysts say, “such factors are secondary to market fundamentals in causing financial pressure on plants without long-term power contracts.” Analysis Group adds that the numerous coal plant closures across the U.S. do not signify a “war on coal”, as Trump and Congressional Republicans have endlessly claimed, but only “the retirement of aging resources” and “efficient exit of uncompetitive assets” that are “natural element(s) of efficient and competitive market forces.”
Far from threatening grid reliability with the intermittency of some renewable resources, the consultants assert, “many advanced energy technologies provide reliability benefits by increasing the diversity of the system, and by providing important reliability services to the grid.”
The report goes so far as to challenge the agency’s concern for any kind of “baseload” generation at all. “Given the many attributes associated with a reliable electric system, ‘baseload resources’ is an outdated term in today’s electric system which depends upon a wide variety of resources to provide essential reliability services,” the authors conclude. Gas-fired and renewable resources together, they add, comfortably provide “both around-the-clock power and the flexibility to cycle and ramp as needed to meet bulk power system reliability objectives.”
“We wholeheartedly agree” with the DoE “that reliable and affordable electricity is essential,” observed AWEA CEO Tom Kiernan. “Analysis Group’s report finds that wind and other advanced energy resources, driven by markets and technological advances, are improving electric reliability and reducing costs. Past dependence on a few fuel sources has given way to a more diverse grid which is more robust and resilient.”
The study appears to support a boast made last week at a gathering of utility executives in Boston. “We have one of the most reliable generation fleets in the world,” Pat Vincent-Collawn, CEO of PNM Resources, told a group convened by the Edison Electric Institute. “Hopefully the [DoE] study takes into account good utility planning and will show what we’ve known for a long time, which is that we know how to plan the grid.”
