Reliability debate flares as coal, nuclear power fall
New report sees risks in relying on renewable sources and natural gas
When future policymakers go back and study the U.S. energy industry in the decade that began in 2010, one of the defining trends will be the sudden decline of coal and nuclear power.
That decline has coincided with the rapid expansion of wind, solar and other renewable energy projects and the abundance of cheap natural gas produced during the so-called shale revolution. But whether this is the start of a great new era of American energy or a disaster in the making has become the subject of great debate.
Now, add another voice to the mix. In a recent report, the research firm IHS Markit warned that the shift away from coal and nuclear is likely to leave the U.S. grid overly reliant on natural gas and renewable forms of energy and prone to more expensive and volatile electricity prices.
“Over the last three years, the problem only seems to have gotten worse,” said Lawrence Makovich, chief power strategist at IHS and the study’s lead author.
The report is funded by the U.S. Chamber of Commerce, the Edison Electric Institute and the Nuclear Energy Institute — trade groups that have a lot at stake in what the power grid becomes in the decades ahead.
At the center of the debate is the growing role of intermittent energy sources, namely wind and solar, which are taking market share from coal and nuclear power plants that operate all the time. That is not only creating challenges in managing the flow of electricity and out of the grid, but also long-term concerns about the reliability of electricity systems as profit-starved power companies shutter plants, leading to shortages.
The renewable power industry, however, challenges the idea that rising use of renewables would create such problems and raise prices.
“On the contrary, solar provides significant cost savings, relieves pressure on our nation’s infrastructure and improves the grid’s overall performance,” said Alex Hobson, a spokeswoman for the Solar Energy Industries Association,. ” The more solar we use, the more America benefits.”
The combination of increased competition, low electricity prices and rising regulatory costs have roiled traditional power generators. NRG Energy of Houston has cut hundreds of jobs as it divests some $4 billion in assets. Calpine, another Houston company, recently sold itself to a consortium of investors led by a New Jersey private equity company. Dynegy, also of Houston, is said to be in merger talks with Vistra Energy of Dallas.
In Texas, the Public Utility Commission is studying the economic threats posed to power generators and their plants and is considering changes to the state’s wholesale power markets.
In the IHS report, Makovich portrayed a confused energy market with crisscrossing and contradictory incentives for carbon-free energy that favors wind and solar through tax incentives but does not do enough to support carbon-free nuclear power.
The study comes as the Federal Energy Regulatory Commission weighs whether to take action to keep afloat a raft of nuclear plants in danger of closing in the years ahead. A report by the Department of Energy last month put the majority of the blame on the flood of cheap natural gas and recommended changes to power markets to help the coal and nuclear sectors.
“Our study is saying there is a clear economic argument behind making these additional interventions because we’re not dealing with a clear market operating without distortion,” Makovich said.
“The more solar we use, the more America benefits.” Alex Hobson, Solar Energy Industries Association james.osborne@chron.com twitter.com/osborneja