At Secretary Perry’s direction, Department of Energy staff are preparing a study on the long-term viability of baseload power plants. The memo to staff ordering the study ignored the fundamental changes taking place in the electricity industry.
In the past, coal and nuclear were perceived to be the cheapest resources, and the prior electricity system structure relied upon large power plants without valuing flexibility. Today, low natural gas prices, declining renewables costs, flat electricity demand due to more efficient energy use, and stronger climate and public health protections are all driving an irreversible shift in the underlying economics of the electricity industry. As a result, the term “baseload”—which historically has been used to refer to coal and nuclear plants—is no longer useful.
Secretary Perry’s memo perpetuated several outdated and incorrect propositions regarding “baseload” resources, clean energy, and grid reliability. Here are three myths to look out for in evaluating the completed study:
Myth: “Baseload power is necessary to a well-functioning electric grid”
Reality: As new reports from the Brattle Group and the Analysis Group show, “baseload” is an outdated term. It does not refer to any electricity system values or services, and it is not equivalent to reliability. While the term “baseload” can have several different meanings, it historically functioned as shorthand for a category of resources that provided relatively low operating-cost electricity to meet minimum round-the-clock electricity demand levels. The term is reminiscent of a time when coal and nuclear power plants were viewed as essential for supplying power to meet customer needs and few if any viable alternatives existed.
In today’s electricity system, however, using “baseload” to describe a particular type of power plant or resource no longer serves any practical purpose. The price competition from renewable energy and natural gas is far stronger it was in the past, meaning that it no longer makes sense to default to inflexible coal and nuclear units, which can’t be quickly ramped up and down, to serve the bulk of load. Instead, as many already are doing, decision makers should focus on a framework that: (a) effectively and efficiently defines electric system and public policy needs (e.g. operational flexibility, greenhouse gas abatement) and (b) develops tools, markets, and methodologies that draw upon the broad range of available resources that can cost-effectively and reliably meet those needs. This framework rewards coal and nuclear plants only where they are truly needed, but prioritizes other resources when it is more cost-effective to do so.
Myth: Renewable energy resources like wind and solar undermine grid reliability
Reality: The record shows time and time again that wind and solar power contribute to a dependable power supply and help prevent blackouts and other grid problems. Just one of many examples: the California grid operator, which manages a grid with nation’s highest levels of solar power, confirms that solar energy can provide many grid reliability services like voltage support and frequency response, both of which are necessary to ensure a constant and stable power flow. In fact, renewable resources often can provide reliability services better than conventional natural gas or coal resources. We also know that high penetrations of renewables can be managed reliably. For example, wind energy in Texas often provides more than 30 percent or even 40 percent of the state’s daily power needs throughout the entire day. Meanwhile, numerous studies also show very high levels of renewable energy can be reliably integrated into the electricity transmission system. Research from the non-partisan National Renewable Energy Laboratory (NREL) shows that with continued innovation in grid practices, increased flexibility in our power system, and improved power management among different grid regions of the country, we will be able to power our country primarily with wind and solar power.
Myth: Wholesale power markets should discriminate in favor of “baseload” resources
Reality: “Baseload” is not equivalent to reliability or any other system needs, and for that reason resources should not be compensated solely on the basis of their status as “baseload.” Instead, grid operators and planners should focus on valuing needed services, like flexibility – the ability to ramp up or down quickly to meet changing demand. Resources like coal and nuclear are often limited in their ability to provide flexibility services.
Additionally, markets can and must reflect the value of state energy policy choices that advance new wind and solar development, rather than devaluing or excluding them. Policies such as renewable portfolio standards requiring a specific amount of renewable energy in the electricity mix reflect a sensible desire to avoid dangerous pollution and environmental impacts associated with fossil fuel extraction. In fact, fossil resources are already over-credited in the markets or receive their own subsidies (which, unlike renewables incentives, are often not justified by societal benefits).
Secretary Perry’s memo perpetuated several false narratives that ignore the underlying reality in today’s electricity markets. Our hope is that, with contributions from the knowledgeable staff at the Department of Energy, the report itself reverses course and makes a productive contribution that can reinforce the initiatives of grid planners and operators as they update their practices for a modernized, low-carbon electricity system.