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Keeping uncompetitive nuclear and coal plants going – is Rick Perry’s unwise energy plan

Rick Perry’s plan to subsidize coal and nuclear plants is bonkers, By keeping uncompetitive plants open, it would blow up energy markets. VOX by The Trump administration has not typically put a premium on transparency or fealty to empirical fact. So it was somewhat puzzling when the Department of Energy released its long-awaited study of power grid reliability in August and it looked … mostly normal.

By all accounts, DOE’s experts were allowed to work on it unimpeded. Its conclusions lined up with the broad consensus in the energy field: The loss of coal plants has not diminished grid reliability; in fact, the grid is more reliable than ever. Reliability can be improved further through smart planning and a portfolio of flexible resources. Regulators should work on ways to better compensate reliability in competitive energy markets.

The summary bits of the report added a bit of political spin, but the analytic work and core conclusions were solid — and very much not in line with the administration’s position, which is that reliability is immediately threatened and coal and nuclear plants are necessary to preserve it.

Where, wondered the more cynical observers [waves], was the hackery? Where was the political interference to prop up a favored industry, the blithe disregard of expert knowledge? This is not the Trump administration we’ve come to know and … know.

Well, it turns out, we just needed a little patience. The hackery has landed. Repeat: The hackery has landed.

Unfortunately, the hackery comes obscured by a thick cloak of acronyms — it’s an NOPR from DOE about ISOs that contradicts NERC, FFS — so it takes a little unpacking.

Here’s the short summary: Perry wants utilities to pay coal and nuclear power plants for all their costs and all the power they produce, whether those plants are needed or not.

That may sound a little blunt and ridiculous to you, but don’t worry. Once you understand some of the background and the technical details, you will see that it is in fact more blunt and ridiculous than you could have imagined.

DOE has lurched, on this subject, from minimum to maximum hackery. Even in our new Trumpian world, it is astounding.

Let’s walk through it.

DOE to FERC: address a crisis we determined does not exist

Remember, the administration’s position is that, as Perry put it in his memo requesting a grid study, “regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants.”

Suffice it to say, he’s not referring to the regulations, mandates, tax, and subsidy policies that benefit coal and nuclear plants. He means renewable energy subsidies, which he says “create acute and chronic problems for maintaining adequate baseload generation and have impacted reliable generators of all types.”

Putting it more explicitly, the administration’s claim is twofold: First, that power plants with large amounts of fuel on-site — coal and nuclear, basically — are necessary to grid reliability, and second, that those plants are unfairly being driven out of business by subsidies to renewable energy.

The problem is, neither claim is true, which poses something of a dilemma for Perry, who has been put in charge of an agency filled with genuine technical experts. And sure enough, DOE’s grid study found, as many other studies before it have, that a) the loss of coal and nuclear plants has not diminished reliability, and b) it is cheap natural gas, not renewable energy subsidies, that has driven coal and nuclear out of business.

Whether through ignorance or cleverness, Perry stumbled on a different communications strategy. He seems to have realized that he didn’t need to mess with the study at all. Why bother? He could simply pretend that it supported the administration’s position. The media would he-said, she-said it for a day or two and then move on. He simply behaved as though the study had confirmed his claims.

Which brings us to last Friday, when DOE proposed a new rule for the electricity system, premised on the very suppositions its own grid study disproved. To wit:

The resiliency of the nation’s electric grid is threatened by premature retirements of power plants that can withstand major 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. These fuel-secure resources are indispensable for the reliability and resiliency of our electric grid — and therefore indispensable for our economic and national security. It is time for the Commission to issue rules to protect the American people from energy outages expected to result from the loss of this fuel-secure generation capacity.

Again, this is all wrong. Having fuel on-site does little for resilience. The plants are not indispensable. No one expects energy outages if baseload plants continue closing.

Nonetheless, based on these faulty premises, DOE issued a Notice of Proposed Rulemaking (NOPR) to the Federal Regulatory Energy Commission (FERC), suggesting that FERC adopt a rule forcing utilities in competitive energy markets to pay the full cost of plants that have 90 days’ worth of fuel on-site.

This is a deeply messed-up thing to do, on so many levels it’s difficult to know where to begin. It is the crudest imaginable intervention on coal’s behalf.

But let’s start with a quick note on the authorities involved here.

FERC will determine the fate of this monstrosity

When Congress consolidated various agencies into DOE with the Department of Energy Organization Act of 1977, it deliberately maintained a separate regulatory authority (the Federal Power Commission, renamed FERC).

A quirk of the law allows DOE to propose rules to FERC — an authority is has used only rarely, and for fairly small matters.

But FERC is independent. It is not under DOE’s authority and does not have to do what DOE proposes.

It is highly unlikely to adopt this rule as-is. (It would effectively be impossible, for reasons we’ll discuss.) But it’s also unlikely to ignore the NOPR. These are, after all, both Trump administration agencies, run by Trump appointees.

So what exactly FERC does with the NOPR — what balance of expertise and hackery it brings to bear — will determine the actual impacts of this thing.

Now, let’s go deeper into the proposal.

Competitive energy markets work fine. Perry’s rule would lob a grenade into them……..


October 6, 2017 - Posted by | business and costs, politics, USA

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