In April, Secretary of Energy Rick Perry ordered the Department of Energy (DOE) to perform a 60-day review and produce a report regarding the reliability of the energy grid and potential concerns regarding early retirement of baseload generators. Perry’s request explicitly solicited information concerning “[t]he extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants.” Perry has argued that government subsidies for intermittent generators such as solar and wind and onerous environmental regulations lead to premature retirements of coal and nuclear power plants, which will make the grid less reliable.
A leaked draft of the DOE report disagrees, however, suggesting that the grid is more reliable than ever: “The power system is more reliable today due to better planning, market discipline and better operating rules and standards.” Furthermore, the draft indicates that renewable energy such as wind and solar do not pose a significant threat to the reliability of the grid. While the draft report acknowledges that “costly environmental regulations and subsidized renewable generation” can exacerbate the decline in baseload demand, the report concludes that those factors play “minor roles” compared to lower natural gas prices and the “long-standing drop in electricity demand relative to previous expectation.”
Since the draft was leaked, a representative from the DOE has stated that the report is evolving, and some of this language is not included in the current draft. This is causing concern that the report will change in order to support Secretary Perry’s stated concerns rather than provide accurate information.
What are the potential consequences of such a shift in the report’s findings? Because energy policy is handled largely at the state level or with the Federal Energy Regulatory Commission (FERC), the DOE is unlikely to hinder state policies that favor renewable energy. Further, market factors are largely driving the increase in renewable energy and the decrease in coal, given that natural gas prices are on the decline, the costs of developing solar and wind resources have decreased dramatically in recent years and consumer demand for cleaner energy steadily rises. Finally, the idea of removing all subsidies to “even the playing field” for baseload and intermittent energy sources would be politically unpopular, given that many incentives exist for a variety of energy sources beyond renewables, including oil, gas and nuclear.
At minimum, the report will provide insight into the administration’s plans for energy policy. At most, its findings could be used to support claims that the energy grid is at risk and requires the federal government’s protection. Secretary Perry has indicated that the federal government could interfere with state policies that favor renewables over coal and nuclear generation claiming national security concerns related to grid reliability. Given President Trump’s campaign promise to reinvigorate coal and Perry’s public comments regarding the federal government’s ability to intervene with state energy policies, a heavily revised final report could be used by the administration to bolster such claims. Should the final version (expected to be released any day) diverge significantly from this draft, it will only fuel suspicions that it was commissioned with the sole purpose of justifying this administration’s plans to roll back progressive energy policies in order to boost the coal industry.