There’s an energy transition happening with major implications for how we use and produce electricity. But not everyone agrees on which direction the transition should take us. The ensuing debate reveals deeply-held views about markets, the role of government, and the place for state policies in a federal system.
UCS has regularly profiled the transition to clean energy, which is led by state choices and rapid growth in renewable energy, energy efficiency, and vehicle electrification. Wind and solar innovations have made these sources very competitive; as coal plants have grown older and new cleaner plants continue to be built, the mix of energy has changed.
What the markets say
In the electricity markets run by PJM, NYISO and ISO-New England, (covering roughly the region from Chicago to Virginia, and up to Maine), there is wide understanding that “Cheap gas is coal’s fiercest enemy.” There, the debate is how to deal with state policies that contribute revenues to nuclear plants, foremost, as well as renewables.
These grid operators—and the stakeholders with billions of dollars of revenues from their markets—have long-running efforts to refine price signals and participation rules to ensure competition. The Federal Energy Regulatory Commission (FERC) supervises these markets, and has a similar long-term commitment to seeing these markets succeed.
When it comes to environmental policies, and the notion of environmental externalities (e.g. the costs of pollution), the economists speak for these grid organizations. These markets have accepted the Regional Greenhouse Gas Initiative (RGGI), which adds a modest price on carbon allowances, and would be ready and able to include a more impactful carbon price. But the current circumstances, where states have selected various means to correct for externalities, make the market purists upset.
Some subsidies are more equal than others?
Renewable support is the law in more than 29 states—and fossil fuels receive $10s of billions of subsidies. UCS argued at FERC and in the PJM stakeholder process that market advocates lack any consistent justification for discriminating between subsidies. At best, they have said “we can live with some, but not too much, subsidy.” No comparison has been offered showing the impacts on market prices of one set of subsidies compared with another.
Others in the debate, from opposite ends of the commercial spectrum, warn that the grid operators should seek alignment with the environmental and diversity goals expressed by consumers and policy makers. Representing consumers and local government, American Municipal Power, based in Columbus, Ohio with members in 9 states from Delaware to Michigan, and electric co-operatives in NRECA, call for respect and recognition for decisions made outside the federally-supervised markets. At the same time, Exelon, owner of nuclear plants across the eastern US, aligns itself with the state support of renewable energy now that similar state policies have surfaced for existing nuclear plants.
FERC, the arbiter of this debate, expressed sincere hope that the parties will settle this themselves, so that the agency will not have to, as Exelon put it, “require states to forgo their sovereign power to make their own environmental policy as the price of admission to the federal wholesale markets.”
Review so far
Let’s try to summarize: the market folks see gas beating coal and nuclear on economics. The nuclear folks want state policies to support existing nuclear plants. States and consumer-owned utilities seek to keep federally-supervised markets from overriding democratically-decided choices.
Enter the DOE
Secretary of Energy Rick Perry, who as governor of Texas oversaw the greatest expansion of wind energy in the US, seeks to support coal with a forthcoming Department of Energy “baseload” study. From all indications, this initiative is meant to:
1) defeat the market where gas has out-competed coal;
2) trample the consumer and voter choices for renewables; and
3) reverse the trend of lower energy costs from innovation by requiring more payments to the oldest and most expensive generators.
Unfortunately, the April 14 memo from Perry ordering this study mixes flawed assertions about reliability with assumptions about economics. Organizations across the political spectrum have labored to explain that maintaining coal plants, or even the label of baseload generation, are economic concepts from another time.
When the debate continues, keep these facts in mind:
- Coal provides less than 1% of electricity in New York and the 6-state New England grid.
- The same is true in Washington, Oregon, and California.
- At times, wind and solar have generated 50 to 60 percent or more of total electricity demand in some parts of the country, including Texas, while maintaining and even improving reliability.
- In May, wind, solar, geothermal and biopower supplied a record 67 percent of electricity needs in California’s power pool, and more than 80 percent when you include hydropower.
- In 2016, wind power provided more than 30 percent of Iowa’s and South Dakota’s annual electricity generation, and more than 15 percent in nine states.
With an energy transition clearly underway, some strange debates are breaking out. Like in so many things, perhaps the only consistent way to sort out the positions and policies is to follow the money.