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Closure of baseload power plants does not equal less reliable grid, study says

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Closure of baseload power plants does not equal less reliable grid, study says

The reliability of the electric grid will not necessarily suffer with the increasing retirements of traditional baseload power plants, according to a new policy study from think tank R Street Institute. While dependable and dispatchable power is "essential" to grid reliability, those characteristics come not only from traditional sources like coal and nuclear plants, but also from renewable sources of power, according to the study's author, Electricity Policy Manager Devin Hartman.

Hartman pointed to what he called the "extensive political controversy" over baseload power plants under the Trump administration as a reason for conducting his analysis.

In an April 14 memo to his chief of staff, Energy Secretary Rick Perry gave the DOE 60 days to study of critical long-term grid reliability issues, citing the rising number of coal, natural gas, nuclear and hydroelectric power plant retirements and maintaining that baseload power is critical to the proper functioning of the electric grid. Perry also ordered that "regulatory burdens" and federal subsidies for renewable energy be examined.

A boon, not a threat

Perry's demand caused an outcry among Democratic and some Republican lawmakers, as well as energy-related business groups and associations. Several renewable-focused trade groups wrote a May 1 letter to Perry stating that growth in wind and solar is not a threat to grid reliability. On the same day, Democratic lawmakers on the Senate Energy and Natural Resources Committee also penned a letter to Perry, stressing their support for renewable energy and maintaining that it improves resiliency and grid reliability.

Certainly, changes in market fundamentals and some public policies have amplified financial pressures on coal, nuclear and low-efficiency natural-gas plants in recent years. The decline in demand for those types of generators and lower costs for natural-gas generation are the main reasons for the increase in coal and nuclear retirements, Hartman explained. "In particular, highly efficient natural-gas plants utilizing historically inexpensive gas are the driving force of baseload retirements," Hartman said, adding that this is especially true given that new gas generators have "complete baseload functionality."

Public policy continues to "provide the largest tail wind to the expansion of renewables," Hartman said, noting that renewables and natural gas today meet around half of domestic electricity demand, compared to 38% in 2011.

While concerns by policymakers over dispatchable and dependable power have raised some important policy questions, according to Hartman, he added that those concerns often mask "an underlying preference for certain fuel types, namely coal and nuclear."

Policies should be crafted with the goal of obtaining reliability at the lowest cost, Hartman recommended. "Utilities and competitive electricity markets should value the attributes of reliability, not how resources are classified, to ensure reliability is met at the lowest cost," Hartman said. "The effects of public policy and recent decreases in the cost of natural gas, renewable energy and use-limited resources like energy storage all will require monopoly utilities and competitive markets [to] take all attributes of reliability into account in resource planning and market design."

"Policymakers and regulators should be concerned with whether the economic paradigms driving power-plant investments are achieving system reliability at the least cost, not whether they reward a subset of politically preferred resources," he said.