Energy securityRejection of subsidies for coal and nuclear power is a win for fact-based policymaking
Energy Secretary Rick Perry has repeatedly expressed concern over the past year about the reliability of our national electric power grid. On 28 September 2017, Perry ordered the Federal Energy Regulatory Commission (FERC) to revise wholesale electricity market rules, implicitly suggesting that the federal government would give subsidies to owners of coal and nuclear power plants, to compensate them for keeping a 90-day fuel supply on-site in the event of a disruption to the grid. On Monday, the independent five-member commission – four of whose members have been appointed by President Trump — unanimously rejected Perry’s proposal. FERC’s 5-0 decision shows that policymaking based on evidence won the day. Perry’s proposal, which critics said was aiming to prop up nuclear and coal power plants struggling in competitive electricity markets, had the potential to affect millions of electricity customers, as well as power markets and the environment. FERC deserves congratulations for putting evidence before action.
Energy Secretary Rick Perry has repeatedly expressed concern over the past year about the reliability of our national electric power grid. On 28 September 2017, Perry ordered the Federal Energy Regulatory Commission to revise wholesale electricity market rules to help ensure “… a reliable, resilient electric grid powered by an ‘all of the above’ mix of generation resources.” Perry’s proposal included an implicit subsidy to owners of coal and nuclear power plants, to compensate them for keeping a 90-day fuel supply on-site in the event of a disruption to the grid.
On 8 January, FERC issued a statement, supported by all five commissioners, terminating Perry’s proposal. The commissioners held that paying generators to store fuel on-site would only benefit some fuel types. And although coal and nuclear plants are retiring in large numbers, commissioners were not persuaded that this was due to unfair pricing in power markets.
In my view, FERC made an appropriate and well-grounded decision. The commission opted to gather more information and examine many possible approaches to improving reliability, instead of rubber-stamping a directive that had not been fully vetted. The commission’s action is a good example of the kind of evidence-based policymaking that Americans should expect from the federal government.
What makes the power system reliable?
There is no question that our electricity supply is changing rapidly. As of 2016, over one-third of U.S. electricity generation at utility-scale facilities came from natural gas, followed by coal at 30 percent and nuclear power at nearly 20 percent. Renewable sources such as wind, solar and hydropower provide nearly 15 percent, up from just 8.5 percent in 2007.
Technology advances and cost decreases for renewables, particularly solar and wind, are the key factors driving their growth. Meanwhile, coal and nuclear plants, which are less economically competitive, are retiring at high rates.
As the eastern United States emerges from a record-setting deep freeze, we all can appreciate the importance of reliable energy supplies. Indeed, 2017 was a record-breaking year for weather and climate disasters, from hail and tornadoes to three major hurricanes striking U.S. soil.
Many of these events disrupted vital power supplies. Notably, as of late December nearly half of Puerto Rico’s electricity customers – more than 600,000 people – still lacked electric power in the wake of Hurricane Maria.
