Neither More Renewable Energy Nor Less Coal-Fired Generation Are a Threat to Electricity Grid Reliability …
Last June, Ohio’s General Assembly passed a bill freezing Ohio’s energy efficiency and renewable portfolio mandates.
Senate Bill 310 requires the General Assembly to establish a committee to review the merits of the mandates and whether they should be permanently frozen. The freeze came at an inconvenient time for Ohio: the EPA was about to mandate substantial cuts to Ohio’s carbon emissions resulting from power generation.
The Energy Mandates Study Committee has until Sept. 30 to examine Ohio’s energy policies and to make recommendations to the General Assembly. It has begun taking testimony before this committee, including some important recent testimony from Andrew L. Ott of PJM Interconnect, the regional transmission organization that manages Ohio’s energy markets and transmission grid.
SB 310 is the result of part of a two-front war FirstEnergy has been waging on clean energy in Ohio. The second front is playing out now before the Public Utilities Commission of Ohio (PUCO) in its evaluation of FirstEnergy’s Electric Security Plan, pursuant to which FirstEnergy is asking for ratepayer subsidies for its old, inefficient generation fleet, which includes coal.
FirstEnergy management doesn’t necessarily hate clean power, it’s just trying to shore up value in its flagging subsidiary, FirstEnergy Solutions. The company’s leadership seems to think that the best way to do this is to fight energy efficiency and renewable power generation, and to obtain new subsidies for FirstEnergy’s dirty power generation.
A DOUBLE STANDARD: SUBSIDIZING OUTDATED PLANTS; UNDERMINING RENEWABLES
It remains to be seen if FirstEnergy is successful with PUCO. In the meantime, the clean-energy portfolio freeze has had its desired effect, as detailed by the Pew Charitable Trusts, which has done research showing that the freeze has had a chilling effect on investment in clean energy technologies in Ohio.
FirstEnergy’s arguments supporting these two battlefronts are fundamentally inconsistent.
On the one hand, in support of its advocacy for freezing those portfolio standards, FirstEnergy has argued that renewable power should compete in an unsubsidized way with other forms of generation on the open market. Less than a year later, however, FirstEnergy abandoned its reverence for open markets, arguing instead that ratepayers should subsidize FirstEnergy Solutions’ coal plants.
How does FirstEnergy justify this inconsistency? By arguing that grid reliability is threatened simultaneously by the loss of coal power and by the advent of intermittent power from renewable generation.
It’s a compelling argument. If you ask manufacturers what scares them more, high-priced electricity or power interruption, most will tell you the latter. And who knows better whether grid reliability is threatened by intermittent renewable power and/or coal plant closures than FirstEnergy?
This is the dilemma facing regulators. Those with the most knowledge of best practices in this case are also those with a strong pecuniary interest in the regulators’ decisions. How can we know whether FirstEnergy genuinely believes we are on the threshold of power interruption—owing to the loss of coal power and the advent of intermittent power from renewable generation—when it has such a strong interest in the adoption of policies designed to preserve value in its own assets?
Apparently members of the SB 310 Energy Study Committee understand this dilemma, since they invited testimony from Ott, a PJM executive vice president. Ott appeared before the committee in mid-March to talk about how PJM evaluates the impact of state policy directives on renewable power, and how this affects PJM’s core mission of maintaining electric system reliability.
GRID RELIABILITY IS NOT AT RISK
He said PJM fully anticipates retirements of old plants, many of which are in Ohio, and that PJM has been evaluating the “impact of potential increases in intermittent resources driven by renewable portfolio standards enacted by state authorities across PJM.”
Here’s the kicker: PJM’s conclusion is that “such resources can be integrated reliably” into the grid. PJM, in other words, already has accounted for Ohio’s renewable portfolio standards. Further, according to Ott, reduction in demand growth combined with cheap natural gas have caused wholesale energy prices to plummet and have substantially reduced carbon and other emissions from electric power production.
In short, Ohio’s policies for reducing demand and encouraging alternative generation are working by reducing both emissions and costs. As for reliability, my reading of Ott’s testimony is that PJM will let our policymakers know if and when it foresees a problem with reliability.
We dare not take FirstEnergy’s arguments lightly. Until we have energy storage and/or smart-grid technologies that reduce the impact of intermittent generation, we must be mindful of grid reliability. But Ott’s testimony suggests that FirstEnergy’s arguments before both the General Assembly and PUCO are, at least for now, self-serving. Neither the portfolio standards nor the anticipated retirement of coal plants currently threaten grid reliability in Ohio.
Andrew Thomas is executive in residence at the Energy Policy Center of the Levin College of Urban Affairs at Cleveland State University.
A version of this commentary first appeared in Crain’s Cleveland Business.
