Most people never think about electricity. We just assume when we flip the light switch or charge our laptops, power will be available. But behind the switches and outlets in our homes and places of work is a huge and complex infrastructure that helps ensure the reliability and resilience of the electric power grid.
To produce power, we have to convert another form of energy into electricity. Coal, natural gas, nuclear, wind, solar, and hydropower are the primary “fuels” used to create the electrons that are fed in the power grid. But the mix is changing rapidly. A decade ago, more than 50 percent of the electricity consumed in the United States came from coal-fired generating plants. But by 2016, natural gas had become the number one fuel accounting for 35 percent of generation with coal dropping to 30 percent, nuclear holding steady at about 20 percent, and hydro unchanged at about 8 percent. Non-hydro renewables—mainly wind and solar—have jumped from about 4 percent of supply a decade ago to 12 percent today.
Natural gas now generates more than 50 percent of our power while coal has fallen to number three as Texas has invested heavily in wind. Indeed, at more than 18,500 megawatts, Texas leads the nation in wind-powered generation capacity with wind farms now producing more electricity than the state’s four nuclear plants.
Without question, the growth of renewable energy, along with greater use of natural gas, has been a plus for the environment and is largely responsible for the dramatic drop in greenhouse gas emissions in the U.S. over the past decade. But because renewable energy is “intermittent,” its growing use poses some serious challenges to grid integrity and reliability.
Unlike wind and solar, coal and nuclear plants are “always on.” That’s why they’re called “base load” power sources. However, dozens of coal-fired generators and several nuclear plants have been decommissioned in recent years in response to cheap natural gas and sizable subsidies to renewable energy. At present, no utility in the country is planning to build a new coal plant, and no new nuclear plants have come on line for almost 30 years (though two are currently under construction).
IHS Markit, a research and consulting firm, recently concluded that the loss of diversity in the U.S. power supply, mainly due to the shutdowns of base load generation, could lead to higher electricity costs for businesses and consumers while impairing the resilience of the power grid. They further estimated that the current diversified U.S. supply portfolio lowers the total cost of electricity production by $114 billion per year and the average retail electric bill by 27 percent.
Another recent report from the U.S. Department of Energy on grid reliability found that while to date the retirement of base load capacity has not impaired the grid, this could be the case in the future unless federal and state regulators devise a method to compensate base load generators for their resiliency attributes.
Eliminating policies that cause market distortions, in particular the federal and state subsidies to wind and solar projects, would be one way to promote a diverse power generation portfolio. But because renewables have widespread political support, these subsidies are likely to remain in place for an extended period. An alternative approach would be to allow base load power plants to charge higher prices than their competitors. As stated by Neil Chatterjee, the new chairman of the Federal Energy Regulatory Commission (FERC), “Coal and nuclear need to be properly compensated to recognize the value they provide to the system…..and should be recognized as an essential part of the fuel mix.”
Because Texas operates its own grid and has limited interconnects with other power networks, we don’t have the ability to import large amounts of electricity to meet peak demand. As a consequence, grid reliability issues are perhaps more critical here than in any other state.
To keep the dynamic Texas economy prospering, the Texas Public Utility Commission should consider new rate structures that can ensure the long run financial viability of the state’s critical coal and nuclear base load generating plants.
Weinstein is associate director of the Maguire Energy Institute at Southern Methodist University.