Industry Leaders, Experts Testify on How to Keep the Lights On

"Given that public policy aspirations cannot violate the laws of physics, we need to act carefully in transforming the power grid.” -FERC Commissioner Philip Moeller

Industry Leaders, Experts Testify on How to Keep the Lights On | POWER Magazine

FERC Commissioner Philip Moeller, who also testified today, took a different, stronger approach. “I have long-stated that I can be ‘fuel-neutral’ but I cannot be ‘reliability-neutral,’” he said. Moeller, who has often called for more analysis of reliability implications from environmental rules, said he remained concerns that “EPA’s analysis failed to analyze whether there was sufficient transfer capability to move power from areas of energy surplus to areas short of power. Given that public policy aspirations cannot violate the laws of physics, we need to act carefully in transforming the power grid.”

Within a year, Moeller noted, more coal plants are scheduled to be shuttered to comply with the Mercury and Air Toxics Standards, while nuclear plants are under increasing economic pressure to close as a result of record low capacity prices. “Yet the experience of this past winter indicates that the power grid is now already at the limit. Heading into the next several years, some regions of the nation will be more vulnerable to supply shortages than others,” he warned. “We can hope for mild winters and summers over the next several years, but hoping for mild weather is not a practical method of planning to meet economic growth and public safety.”
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PJM Executive Vice President Michael Kormos... called attention to a future marked by “more volatile wholesale prices,” especially for customers on variable rate plans. And that could be blamed on a growing dependence on natural gas, as evidenced by soaring gas prices this January that reached as high as $100 per million Btu.
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American Electric Power (AEP) president and CEO Nicholas Akins affirmed that 89% of the generation AEP has designated for retirement was called upon to meet power demand in January. “AEP has been sounding the alarm on long-term reliability for several years now and time is running out,” he said. The reason: Current capacity markets are not functioning as intended.
... “Most of the new capacity being offered is either gas or demand response. There are a host of difficulties in coordinating the gas and electric industries, and demand response continues to be paid similar capacity prices to steel-in-the-ground generation despite having rules and penalty provisions that are much less prescriptive.”
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One issue that lawmakers should consider is that “non-market interventions, such as the wind Production Tax Credit (PTC), may be leading to premature retirements of certain baseload resources,” [Thad Hill, president and CEO of independent power producer Calpine] said. The current structure of the PTC subsidizes wind resources in the energy market to the point where wind generators will pay others to take power that is otherwise unneeded, in order to maximize their benefit from the PTC, he said. “So, while the wind resources cannot generally be counted on to provide energy during extreme winter or peak summer conditions, the effect of the PTC is to take revenues from resources that can supply the market. The PTC interferes with market forces and is no longer necessary.”

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