Energy associations jointly oppose DOE’s grid resilience proposal

Four oil and gas trade associations and eight other energy industry groups jointly submitted comments on Oct. 23 opposing the US Department of Energy’s proposed electric grid resiliency pricing. They urged the US Federal Energy Regulatory Commission not to adopt the proposal that they said would provide financial support to otherwise uneconomic coal-fired and nuclear power plants.

Four oil and gas trade associations and eight other energy industry groups jointly submitted comments on Oct. 23 opposing the US Department of Energy’s proposed electric grid resiliency pricing. They urged the US Federal Energy Regulatory Commission not to adopt the proposal that they said would provide financial support to otherwise uneconomic coal-fired and nuclear power plants.

The American Petroleum Institute, Independent Petroleum Association of America, Interstate Natural Gas Association of America, Natural Gas Supply Association, and the other trade groups specifically said that the proposal, which US Energy Sec. Rick Perry announced on Sept. 23:

• Failed to show that providing what amounts to discriminatory compensation to certain coal and nuclear resources is actually justified by resiliency, which was not well defined and shown to be lacking.

• Did not provide substantial evidence for its claim that wholesale electric power markets do not value fuel security adequately, and that “full cost of service payments are needed” to prevent early retirement of resources with 90 days of fuel supply.

• Ignored substantial evidence that electricity systems that lack, or do not rely heavily on, coal and nuclear resources nevertheless operate reliably and resiliently, and that disruptions caused by fuel supply interruptions are virtually nonexistent.

The proposed rule would “prop up uneconomic generation that is unable to compete…and that is not otherwise needed for reliability,” making it neither just nor reasonable and consequently conflicting with FERC’s mission, the associations said.

Participants in an Oct. 24 press conference generally agreed that the proposal before FERC is more about providing financial support to coal-fired and nuclear power plants, which are having trouble competing. They also suggested that a conversation that is actually about making power systems more resilient would be appropriate.

“We believe resilience is a legitimate concern. I’ll take Sec. Perry at his word that he wanted to start a conversation. He certainly has done that,” said Martin J. Durbin, API executive vice-president and chief strategy officer. “But favoring the sources in this proposal is the wrong approach. Natural gas has gained market share because it is more affordable and reliable.”

Increased use of gas to generate electricity not only enhanced reliability of the overall system but provided significant consumer benefits, Durbin said. “We believe reliability and resilience can be achieved through market constructs. Moving forward, we need to define what resilience is, and how it can be achieved through the existing markets,” he said.

“About a third of US power this year will be generated by natural gas, and that’s projected to continue. We believe gas is a reliable asset, not one that’s vulnerable,” said NGSA Pres. Dena E. Wiggins. “If we’re going to have a reliability conversation, it should value each fuel’s attributes.”

Under the Federal Power Act, FERC first has to find that the existing structure is unjust and inappropriate, which this proposal has not shown to be the case, Wiggins said.

Additional concerns

“This proposal is trying to solve a problem that doesn’t exist,” said Malcolm Woolf, senior vice-president for police and government affairs at Advanced Energy Economy in Washington, DC. “Grid operators have testified they have ample capacity and are ready to 2018. The vast majority of electricity disruptions involve weather and transportation.”

While technology development and competitive markets have worked to keep electricity affordable and reliable, consumers would wind up paying for the coal and nuclear price supports in this proposal, Woolf said.

Determining how to make power distribution systems more resilient won’t be easy because regional conditions vary, suggested Amy Farrell, senior vice-president for government and public affairs at the American Wind Energy Association.

“Resilience following a hurricane could be significantly different than resilience during a polar vortex,” Farrell said. “The goal is to have a more dynamic electricity system that responds to various interruptions. Developing a consensus will take more than a month.”

Todd Foley, senior vice-president for policy and government affairs at the American Council on Renewable Energy, said, “FERC already has a number of tools to address market concerns. Competition and market forces actually will make sure our system is prepared to supply reliable service going forward. The proposal simply undermines this approach.”

He said, “We’re especially concerned about the proposal’s impact on investment. It would promote uncertainty in capital markets.”

Contact Nick Snow at nicks@pennwell.com.

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