Last week the Midwest and northeastern United States experienced an historic cold snap that tested our nation’s electric grid. Like last year’s solar eclipse, unprecedented wildfires in California, and extreme flooding after Hurricane Harvey, this year’s “bomb cyclone” has not created a reliability crisis. In fact, it appears based on the evidence thus far that our electricity system – built upon the markets and long-standing operator practices behind our grid – passed this test with flying colors.
That’s why today’s decision by the Federal Energy Regulatory Commission (FERC) to reject the Department of Energy’s (DOE) flawed coal and nuclear proposal is such an important win for American families, competitive markets, and the environment.
In mid-October, the DOE took the unprecedented step of asking FERC to provide guaranteed revenues and profits to uneconomic coal and nuclear plants. DOE did so with thinly veiled pretext, arguing without evidence that these plants support grid resiliency. FERC was quickly inundated with a chorus of resistance and disapproval from natural gas companies, environmental groups, consumer advocates, state attorney generals, and congressional members from both parties.
Today, FERC dismissed the DOE’s proposal, finding that it “did not satisfy…clear and fundamental legal requirements.” By finding in favor of the vast evidence provided in hundreds of comments, FERC sent a strong signal that market-undermining proposals with multi-billion dollar per year price tags are antithetical to its mission and mandate.
FERC additionally and concurrently opened a new proceeding – one not tied to the flawed DOE proposal and instead creates a forum for an informed and evidence-driven process to take place. Unlike the DOE proposal, which was founded upon vague and unsubstantiated reference to the coal and nuclear ‘resiliency’ attributes, FERC’s new proceeding asks a more fundamental and unbiased first question: How do grid operators define resiliency, and how is resiliency already being supported? These initial questions are part of a larger set of issues identifiedto ensure a “proper evaluation of grid resilience…not limited to [the DOE’s] single issue” of fuel security and “instead encompass a broader consideration of resilience issues, including wholesale electric market rules, planning consideration, and NERC standards.”
In fact, analysis has found that “no clear relationship” exists between increased reliability and coal and nuclear resources.
Definitions of resiliency do exist for FERC to draw upon, but it will be unlikely to find them in the DOE proposal, which did not identify a single one relevant to electric generation. DOE likewise didn’t identify a relationship between its undefined resiliency goals and its desire to prop up uneconomic coal and nuclear plants at enormous expense to competitive markets, customers, and our environment. Nor did DOE identify how resiliency is different from electric reliability, which is already ensured through existing market practices. In fact, analysis has found that “no clear relationship” exists between increased reliability and coal and nuclear resources. To the extent DOE is concerned with reliability, the past few days – during which more than 700 megawatts of nuclear energy were lost due to a downed power line – show we need to take a closer look at improving transmission and distribution, not propping up uneconomic generation. FERC today suggests that it will take this evidence into account in its newly instituted proceeding.
FERC’s decision to reject the DOE’s proposal and institutes its own action makes clear that flawed assumptions and processes cannot form the basis of action. By dismissing the DOE proposal, FERC avoids real and negative impacts on our electric grid and the competitive markets where energy is bought and sold, including massive cost increases, out-of-market actions, and unduly preferential treatment to politically-favored coal and nuclear resources.
More needs to be done, and engaged and committed stakeholders and experts will be crucial to identifying and advocating for a good result in the newly-opened FERC proceeding. Today, however, FERC sends a strong signal that costly actions that stifle innovation and undermine the efficiency gained through market structures is antithetical to a well-functioning electricity sector.