Will Secretary Perry’s Plan to Subsidize Coal & Nuclear Power Improve U.S. Energy Security?

Will Secretary Perry’s Plan to Subsidize Coal & Nuclear Power Improve U.S. Energy Security?

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In early October 2017, Secretary of Energy Rick Perry proposed a rule to the Federal Energy Regulatory Commission (FERC), and gave them 60 days “to establish just and reasonable rates for wholesale electricity sales,” in order to “ensure that certain ‘reliability’ and ‘resilience’ attributes of electric generation resources are fully valued.” In essence, this proposed rule would require electricity consumers to pay for revenue short falls at coal and nuclear power plants at an estimated cost of $10.6 billion per year because their capacity to store 90 days or more of reliable fuel would be deemed instrumental to U.S. energy security.

From Secretary Perry’s perspective, U.S. energy security is dependent on the stability and consistency of base load energy production, much of which has traditionally been provided by coal and nuclear power. Base load refers to the minimum amount of electric power delivered or required over a given period of time at a steady rate. With the rise of renewable energy and cheap and abundant natural gas, traditional energy producers like coal and nuclear power are being priced out of the market, which is leading to their steady decline. Therefore, Perry believes that it is necessary to subsidize these traditional energy producers in order to ensure they are not closed, an event which the Administration believes would harm resilience and reliability in fuel supply and energy generation.

Perry is skeptical about the capacity of renewables and natural gas to take over as the primary sources of U.S. energy generation. Perry views renewable energy as an insufficient substitute for traditional energy production due to what he terms as “intermittency” issues. Intermittency refers to the natural variability of energy output from energy resources, such as renewables. Additionally, natural gas is viewed as being vulnerable to supply disruptions, if pipes shut down or storage tanks aren’t delivered on time, and subject to greater price volatility. However, under closer inspection it becomes clear that there is little benefit to U.S. energy security from the proposed rule.

The biggest problem with this proposed rule is that it doesn’t actually address the primary threats to the U.S. power grid. While supply security is important, Perry lacks any evidence to back up his claim “that a lack of long-term supply storage has led to major service outages in the U.S.” To the contrary, since 2012 only .00007% of U.S. power outages have been caused by fuel supply emergencies. Additionally, analysis by his own Department of Energy has shown that it is actually the transmission and distribution systems that are the most vulnerable parts of the U.S. energy infrastructure. The traditional framework of wired electrical grids supplied by centralized power generation is an antiquated system that is highly vulnerable to supply disruptions. Doubling down on an antiquated and highly vulnerable system will not improve U.S. energy security. If we truly want to improve the security of the country’s energy infrastructure we should invest in smart grids that have greater demand response, distributed power generation that can reduce the distance power needs to travel, and integrated networks of micro-girds that can provide redundant systems that are much more resilient.

The proposed rule is not only ineffective at addressing energy resilience, it could actually make it worse by protecting antiquated sources of energy production, hindering free market forces, and obstructing efforts to modernize the grid. The rule also ignores and distorts the proven record of renewable energy systems to provide reliable energy during and immediately following natural disasters. Unlike traditional energy generation, renewable energy doesn’t require the transportation of energy supplies. While renewable energy does suffer from local variability issues, vast networks of renewable energy-powered micro grids do have the capacity to overcome much of this disadvantage. In fact, renewable power should not be called “intermittent” because its variability is always easily predicted well in advance by weather reports. Even the U.S. military has come to the conclusion that micro-grids powered by renewable energy are far more resilient than centralized power distribution. They realize that renewable energy is less vulnerable to supply disruptions and more reliable under stress.

According to a recent report by the National Renewable Energy Laboratory, “renewable electricity generation from technologies that are commercially available today, in combination with a more flexible electric system, is more than adequate to supply 80% of total U.S. electricity generation in 2050.” We can therefore conclude that the phasing out of traditional base load energy sources will not have an adverse effect on U.S. energy security and attempts to protect these antiquated systems could cause more problems than it solves.

However, there is a potential downside to transitioning away from nuclear power. Doing so could remove significant amounts of carbon-free electricity from the grid, possibly harming efforts to mitigate climate change. Unless and until renewable energy sources are able to fully absorb the energy demand that is currently reliant on nuclear power generation it is likely that some of the transitional energy production will need to come from carbon producing power systems such as natural gas. In light of these concerns, a more cost-effective and strategically sound approach to improving U.S. energy security would focus on incentivizing energy production from zero emission sources. Such an approach would support nuclear power until renewable sources are able to fully absorb energy demand while allowing dirty technologies such as coal to phase out due to natural market forces.