A new report has found that a changing power mix is not endangering the reliability of the nation’s power system.
Analysis Group’s investigation revealed market forces, such as the rising demand for natural gas and flat demand for electricity, are the reason some coal and nuclear power plants are retiring, not state and federal initiatives supporting renewable energy.
The report also found that this changing electricity mix poses no threat to the reliability of the nation’s power grid.
“Recently, some have raised concerns that current electric market conditions may be undermining the financial viability of certain conventional power plant technologies (like existing coal and nuclear units) and thus jeopardizing electric system reliability. In addition, some point to federal and state policies supporting renewable energy as a primary cause of such impacts,” states the Analysis Group report. “The evidence does not support this view.”
Analysis Group’s report was issued in response to Energy Secretary Rick Perry’s questions about the reliability and market rules of the U.S. power grid. On April 14, Perry launched a 60-day review of issues potentially affecting the grid.
Key findings of the Analysis Group report include:
- Market forces: Fundamental market forces – flat demand for electricity, low natural gas prices since the mid-2000s and the addition of significant amounts of highly efficient new gas-fired resources since 2000 – are primarily responsible for altering the profitability of many older, merchant generating assets in the parts of the country with organized wholesale competitive markets. These market fundamentals are producing savings for consumers.
- Lesser factors: Factors such as rapid growth in deployment of advanced energy technologies, and state policies supporting such technologies also contribute to reducing the profitability of less economic assets, but such factors are secondary to market fundamentals in causing financial pressure on merchant plants without long-term power contracts.
- Aging resources: The retirement of aging resources is a natural element of efficient and competitive market forces, and where markets are performing well, these retirements mainly represent the efficient exit of uncompetitive assets.
- Reliability benefits: Many advanced energy technologies can and do provide reliability benefits by increasing the diversity of the system and by providing important reliability services to the grid. The addition of newer, technologically advanced, and more efficient natural gas and renewable technologies is rendering the power systems in this country more, rather than less, diverse.
- “Baseload” an outdated term: Given the many attributes associated with a reliable electric system, the term “baseload resources” is an outdated term in today’s electric system which depends upon a wide variety of resources to provide essential reliability services and is seeing gas-fired resources and renewable capacity together providing both around-the-clock power and the flexibility to cycle and ramp as needed to meet and sustain bulk power system reliability objectives.
“The electricity system in the United States is stronger than it’s ever been,” said Graham Richard, CEO of AEE. “Thanks to innovation and smart policy, we have a more diverse fuel mix, a more reliable grid, and lower electricity costs. The Analysis Group report highlights how advanced energy technologies are helping to modernize the grid and how grid operators are well equipped to manage this market change. As DOE finalizes its report on reliability, we hope the Department will incorporate these key findings, which reflect the true state of the grid.”