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Perry urges FERC to adopt pricing rule benefiting coal, nuclear power

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The nation’s power grid needs a resilient grid which must be backed up by fairly priced generation resources with on-site reserves, Energy Secretary Rick Perry said Friday.

Perry formally asked the Federal Energy Regulatory Commission to issue rules requiring pricing reforms for generation resources “necessary to maintain the reliability and resiliency of our nation’s grid.” His proposal follows a recent Energy Department report which warned against a rush to renewable resources and coal-plant retirements.

“A reliable and resilient electricial grid is critical not only to our national and economic security, but also the everyday lives of American families,” Perry said in a statement. “A diverse mix of power generation resources, including those with on-site reserves, is essential to the reliable delivery of electricity—particularly in times of supply stress such as recent natural disasters.”

Such a move could be good news for coal-fired generation and nuclear power. And clean energy foes are aware that it might not be as good for them as it has been in the past decade.

“We worry today’s proposal would upend competitive markets that save consumers billions of dollars,” Amy Farrell, senior vice president of government and public affairs for the American Wind Energy Association, said in a statement. “The best way to guarantee a resilient and reliable electric grid is through market-based compensation for performance, not guaranteed payments for some, based on a government-prescribed definition.

“We look forward to participating in the process as FERC begins to consider the proposed rule,” Farrell concluded.

Conventional generators and many conservatives have argued that renewable sources have benefited from that very practice in recent years, through production tax credits and other subsidies. Some say that those regulatory advantages and environmental rulemaking has forced premature coal-fired and nuclear generation plant closures.

The DOE’s proposed rule argued that the closures are threatening the resiliency of the grid in face of a natural or manmade disaster. Power plants can withstand supply disruptions if they are fed by on-site resources (which would be coal and nuclear, primarily).

“These fuel-secure resources are indispensable for reliability and resiliency of the electric grid—and therefore indispensable for our economic and national security,” the DOE notice reads. “It is time for the Commission (FERC) to issue rules to protect the American people from energy outages expected to result from the loss of this fuel-secure generation capacity.”

The DOE resiliency report issued this summer noted coal plant retirements totaled 52 percent (or 37 GW) of capacity retirements from 2010 to 2015. Coal, natural gas and nuclear retirements will constitute 94 percent of closings from 2016 until 2020, the report added.

Wholesale power markets are not adequately pricing the resiliency attributes of fuel-secure power, the proposed rule reads.

“There is growing recognition that organized markets do not necessarily pay generators for all the attributes they provide to the grid, including resiliency,” it continued.

The previous DOE report, however, noted that it wasn’t as much renewables making coal and nuclear generation uneconomical, but rather the falling price of natural gas. It did add, though, that the intermittency of wind and solar put more pressure on baseload sources to ramp up and down, thus accelerating their aging process.

The American Petroleum Institute lauded the motivation behind proposed rule, but expressed concern that more regulation may not be the best answer.

 “We support efforts to ensure reliability, and we look forward to fully participating in the rulemaking process to come,” said API Executive Vice President and Chief Strategy Officer Marty Durbin in a statement. “However, as we review the proposal we are concerned the agency has mischaracterized the lessons learned from past weather-related events and appears to suggest that additional regulation is the answer where markets have already proven the ability to greatly benefit consumers and give our electric system the flexibility needed to meet constantly, and often rapidly, changing electricity demands.

“Markets play an important role in determining energy sources because markets reward innovation, spur efficiency, lower prices and work to benefit consumers. Over the last decade, competitive forces in natural gas markets have resulted in the shale gas boom currently providing numerous benefits to the nation, driving down prices for American consumers and further increasing the reliability and resiliency of supply.”

Perry's office will push FERC to take action on the rule within 60 days of the proposal’s publication in the Federal Register. The proposed rule notice can be read here. 

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