In anticipation of the Department of Energy’s review of the nation’s power grid, stakeholder groups have recently published reports on the state of the U.S. power grid. The reports add to the debate over what mix of energy resources are needed to sustain a stable, secure and reliable supply of electricity in the United States.

An April 14, 2017 memo from Energy Secretary Rick Perry directing the Energy Department to “explore critical issues central to protecting the long-term reliability of the electric grid” has focused the debate. According to Secretary Perry, the 60-day review would assess whether federal policies have caused “the erosion of critical baseload resources.” This includes an assessment of whether reduced coal-fired power generation due “in part from regulatory burdens introduced by previous administrations” has hurt the supply of baseload power and will “undercut the performance of the grid well into the future.”

Specifically, Secretary Perry has directed the Energy Department to prepare a report that explores:

  • The evolution of wholesale electricity markets, including the extent to which federal policy interventions and the changing nature of the electricity fuel mix are challenging the original policy assumptions that shaped the creation of those markets.
  • Whether wholesale energy and capacity markets are adequately compensating attributes such as on-site fuel supply and other factors that strengthen grid resilience and, if not, the extent to which this could affect grid reliability and resilience in the future
  • The extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants.

While we await the Department’s analysis, a diverse group of stakeholders has published their own assessments. For one, the Brattle Group has published a report for the American Petroleum Institute entitled “Diversity of Reliability Attributes, A Key Component of the Modern Grid.” The report emphasizes that variable generation resources (wind and solar facilities) can create additional reliability needs for the system – and that generating assets with reliability attributes that meet these reliability needs should be appropriately valued.

A second group of researchers from the Brattle Group has published a report for the Natural Resources Defense Council entitled “Advancing Past ‘Baseload’ to a Flexible Grid: How Grid Planners and Power Markets are Better Defining System Needs to Achieve a Cost-Effective and Reliable Supply Mix.” This report focuses on why these researchers believe certain assets (coal and nuclear) have become less economical and are less essential to today’s energy mix – and concludes that “the use of the term ‘baseload” generation is no longer helpful for purposes of planning and operating today’s electricity system.

Lastly, yet a further report has been prepared, this one by the Analysis Group for the Advanced Energy Economy Institute and the American Wind Energy Association, entitled “Electricity Markets, Reliability and the Evolving U.S. Power System.” This third report concludes that fundamental market forces are driving the change in the generation mix and that the transition in the underway in the mix of resources is not harming reliability – but rather provides reliability benefits by increasing system diversity.

While these reports address broader, interstate energy markets, Texas too has initiated its own proceeding to review resource mix changes in the power market administered by the Electric Reliability Council of Texas (ERCOT). Texas, which has no capacity market and instead operates an energy-only market, faces reliability problems if scarcity is not reflected in prices correctly. Getting the real-time energy price right is an imperative, and so ERCOT uses the Operating Reserve Demand Curve (ORDC). After a few years of using ORDC, some market participants want to change it “to take account of the uncertainty accompanying high levels of intermittent resource output.” The proceeding before the Public Utility Commission of Texas, Project to Assess Price-Formation Rules in ERCOT’s Energy-Only Market, will consider the merits of such changes to the pricing and settlement rules for ERCOT at an upcoming workshop, August 10, 2017.