Ferc commissioners defend competitive markets amid coal and nuclear struggles – daily energy insider static electricity zapper

###

During a hearing of the House Energy and Commerce Committee attended by all five FERC commissioners, members repeatedly asked FERC Chairman Kevin McIntyre if the commission would act to keep the plants alive and prevent the loss of thousands of jobs while lower-cost natural gas and renewable energy generators flood the market.

“We have to look at this and ask ourselves the question whether those coal-fired generating resources are contributing grid resilience attributes in a way that cries out to be compensated at levels higher than they currently are receiving in the marketplace,” he told Rep. Larry Bucshon (R-IN). “If the answer to that question is yes then I think we have to address the very difficult question of what is it appropriate for us to do about that.”

Bucshon said all of Indiana’s coal mines and most of the state’s coal-fired electric generating plants are in his district and that 39 coal-fired plants already had retired in the state. “I’m concerned that if we don’t act soon, more coal plants will continue to retire prematurely, leaving my constituents and my state without reliable energy and many at risk of losing their jobs,” he said.

The exchange occurred as the newly reconstituted commission presented the agency’s fiscal year 2019 budget priorities to the House Energy and Commerce Subcommittee on Energy. It was the first time all five commissioners appeared in front of the oversight panel since 2015 and since they rejected a Trump administration effort to rescue the struggling plants earlier this year.

Tuesday’s hearing showed that FERC, in some ways, has become a victim of its own success. And it showed that for some members of Congress, market competition is fine in theory until it does what it is intended to do. They didn’t expect casualties as an unintended consequence.

The commissioners found themselves having to defend one of the agency’s most significant achievements, the opening up to competition of an industry that, for a century, had been walled off, its monopoly participants protected from the challenges of the market.

For two decades, FERC has carefully cultivated open and competitive wholesale power markets in the United States, an expansion that continues today. The success of those markets, achieved much like in the telecommunications industry, is driven by policy and an expansion of new technologies, which have driven down prices and increased consumer choices. It has been a feat recognized and studied by nations around the globe.

“Look seriously at the bigger picture, what we’re going to do to communities like Pleasants County, West Virginia – a 30 percent overnight loss of tax revenue,” he said. “How are they supposed to meet their education demands, their health care?”

The issue peaked in 2017 when Secretary of Energy Rick Perry asked the commission to allow a special subsidy for power plants that keep 90 days of fuel on site. He said the power prices those plants receive should reflect the reliability and resilience they provide the electric system, the full value they contribute to keeping the lights on. Closing many of those tried-and-true plants would put the nation’s electric grid at risk, he said.

In January, the commission rejected the proposal, saying there was no evidence of such risk. But the commission opened a new docket in which it has asked the nation’s regional transmission system operators if there are any steps needed to improve grid “resilience,” the ability of the system to endure and recover from disruption. The commission is still collecting comments on the subject.

States have sought to intervene on behalf of the plants, supporting subsides to help keep the plants alive. They compare their facilities to wind and solar generators, which halt when the sun goes behind the clouds or the wind stops blowing, and natural gas plants, whose fuel needs to be shipped in by pipeline.

To allow those plants to participate in the market, Powelson said, customers paid a competitive transition charge enabling the plant’s owners to recover their “stranded costs,” the investments the owners were assured they could recover as a protected monopoly but were unlikely to recover in a competitive market.

“Theoretically, your constituents are being asked to do another stranded cost for those assets,” Powelson told Kinzinger. “So, if I’m a gas operator or I’m an emerging technology in the market, I’m not getting any type of backstop for my resource. And I could be clean and efficient and resilient.”

“You’ve gone directly to one of the trickiest areas that we deal with, Congressman,” McIntyre said to Rep. John Shimkus (R-IL). “States have their valid role in making policy choices as to energy resources that are preferred by that state. And they reflect that through their legal decision making.”

As technology evolves and prices continue to fall, the market for coal and nuclear power looks even more challenging. The proliferation of energy storage, which includes utility-scale batteries, is likely to make wind and solar generators even more competitive.

Batteries will be able to store electricity produced at off-peak hours when power prices are low and the wind is blowing or the sun is shining. Those batteries can then be discharged to the grid during peak usage hours at higher prices, regardless of the wind or sun. Batteries can ease the intermittent nature of renewables, which until now has been one of their drawbacks.

“We are in the midst of dramatic transformation in the ways Americans produce and consume energy. This revolution has the potential to substantially improve our energy efficiency, reduce emissions, grow the economy and create millions of new jobs,” he said. “Storage technologies such as batteries and pumped hydro have potential to play a leading role in the transition to the electricity system of the future,” Glick said.

“As the cost of energy storage continues to decline, these resources are poised to become a bigger part of the generation mix, leading to the development of a more robust grid that can, among other things, help to accommodate the ever-increasing demand for clean renewable resources from states, corporations and residential consumers.”