Lignite Energy Council CEO: Federal grid study rights the wrongs of energy market manipulations
BISMARCK, N.D. – The term “grid resilience” has gotten lots of attention this fall due to three hurricanes, wildfires and the potential for other natural disasters. And while hurricanes aren’t typically a menace to North Dakotans, snowstorms are.
Thus, U.S. Department of Energy analysts have been looking at the nation’s electric grid and making recommendations to ensure energy reliability when customers need it most: during extreme weather conditions.
North Dakotans are no strangers to weather extremes, which range from sub-zero temperatures in the winter to scorching droughts in the summer. But we’ve come to take reliable electricity for granted – partly because our power plants are located next to coal mines.
Thanks to our near-inexhaustible fuel supply, which sits next to the plants that turn coal into electricity and send that electricity to our homes, we’re not concerned about the vagaries of weather.
But are threats looming that should give us a pause? In the short term, probably not, but over the long term, the situation could change.
Simply put, coal-based electricity was “out-of-favor” during the eight years of the Obama administration. While North Dakota’s lignite-based power plants survived intact, the same cannot be said for those power plants that drew coal supplies from long distances.
From 2010 to 2015, 37,000 megawatts of coal generation was retired. A megawatt is enough to serve 800 homes. North Dakota has about 4,000 megawatts of lignite-based capacity, so the loss of 37,000 megawatts would be the equivalent of nine states with the generation capacity of North Dakota – or, stated another way, the capacity to serve 30 million homes.
The loss of that much baseload generation has worried energy analysts, and the Trump administration is addressing their concerns.
In April, Secretary of Energy Rick Perry asked his staff to review the evolution of wholesale electricity markets, compensation for resilience in wholesale energy markets, and premature baseload power plant retirements. The result was the department’s “Staff report to the secretary on electricity markets and reliability,” often referred to as the “grid study.”
This report provided a comprehensive overview of today’s electricity markets, the principal causes of baseload generation retirements and the issues surrounding electric grid reliability and resilience.
The grid study identified low-cost and abundant natural gas as the main contributor to coal and nuclear plant retirements. It also noted other factors including relatively flat electric demand, environmental overreach and the growth of renewable (but intermittent) energy sources that are heavily subsidized by the federal government.
According to the report, renewable energy hurts the economics of baseload power plants, primarily because of “wholesale market impacts and distortions” from state renewable portfolio standards and federal tax credits for wind and solar.
Significantly, the grid study addressed those concerns by recommending that the Federal Energy Regulatory Commission look at new grid rules that value nuclear and coal-based power plants' attributes, ensuring that they get a better price for the reliability and resilience benefits they provide to the grid.
After reading the study, Perry sent a proposal to FERC on Sept. 29. In it, he recommended ensuring grid resilience, maintaining low-cost electricity and fixing many of the problems hurting 24/7 plants.
FERC then opened a comment period that closed Oct. 23. The Lignite Energy Council and many of our member companies submitted comments before the deadline.
In our comments, the council supported the DOE’s efforts to make sure baseload power generation is adequately compensated for its role in providing essential electric service in the wholesale power markets.
However, we also shared some concerns. One of them involves the requirement that power plants keep a 90-day supply of fuel on site. In North Dakota, most of our plants have a 30-day supply of coal sitting beside the power plant. Frankly, a 90-day supply seems unnecessary, considering an 800-year supply is sitting next door waiting to be mined.
The Lignite Energy Council strongly believes that coal – specifically, lignite generation – is a resilient and reliable source of electricity. We commend both the DOE and FERC for reexamining electric markets for long-term growth of the American economy.
PRESIDENT AND CEO
LIGNITE ENERGY COUNCIL