DOE Issues Long-Awaited Staff Report on Electricity Markets and Reliability
The U.S. Department of Energy (DOE) released on August 23, 2017 its much anticipated Staff Report on electric grid resources. Secretary of Energy Rick Perry ordered DOE staff to complete the study some months ago to examine the impact of a changing mix of generating resources on reliability and resiliency. The study’s seven policy recommendations, detailed below, lean substantially on the Federal Energy Regulatory Commission (FERC) to implement pricing policies designed to support baseload resources aimed at shoring up grid reliability and resiliency. The recommendations are consistent with FERC Chairman Neil Chatterjee's comments endorsing pricing policies supporting coal and nuclear facilities. Secretary Perry's cover memo to the Staff Report is available here. While DOE has no direct authority over FERC, the recommendations in the report will nonetheless carry substantial weight with the Administration's new FERC appointees.
The Staff Report identifies low natural gas prices as the key contributor to coal plant retirements, followed by declining electricity demand, increasing dispatch of intermittent generation (i.e., wind and solar) and regulatory compliance. Chairman Chatterjee in a separate statement indicated that the Staff Report highlights many activities that FERC already is considering, including ways to enhance capacity markets and improve price formation. It is likely that the recommendations in the Staff Report will inform FERC’s evolving policy direction as the agency’s new Commissioners settle into their roles. These issues will also entwine with matters already before FERC with regard to the interplay between state-based generation policies (including support for nuclear and carbon-free facilities) and FERC oversight of wholesale electric markets (Docket No. AD17-11).
The seven recommendations outlined in the DOE Staff Report:
Wholesale markets: FERC should expedite its efforts with states, RTO/ISOs, and other stakeholders to improve energy price formation in organized wholesale electric markets.
Valuation of Essential Reliability Services (ERS): FERC should study and make recommendations regarding efforts to require valuation of new and existing ERS by creating fuel-neutral markets and/or regulatory mechanisms that compensate grid participants for services that are necessary to support reliable grid operations.
Bulk Power System (BPS) resilience: Transmission planning entities should conduct periodic disaster preparedness exercises; NERC should consider adding resilience components to its mission statement; and RTOs and ISOs should further define criteria for resilience and examine resilience-related impacts of their resource mix.
Promote Research and Development (R&D) of next-generation grid reliability and resilience tools: DOE should focus R&D efforts to improve utility, grid operator, and consumer efforts to enhance system reliability and resilience.
Support Federal and regional approaches to electricity workforce development and transition assistance: DOE, working with other agencies, should facilitate the development of the electricity sector workforce and, whenever possible, leverage existing government, nongovernment, labor, and industry workforce groups.
Energy dominance: DOE should facilitate and work with other agencies to implement Executive Order 13783 (Promoting Energy Independence and Economic Growth).
Infrastructure development: DOE and related Federal agencies should accelerate and reduce costs for the licensing, relicensing, and permitting of grid infrastructure such as nuclear, hydro, coal, advanced generation technologies, and transmission.
Electric-gas coordination: Regulators and utilities should support increased coordination between the electric and natural gas industries; DOE and FERC should support well-functioning commodity markets for natural gas by expeditiously processing liquefied natural gas export and cross-border natural gas pipeline applications.