How the Energy Grid Works

Fun fact: In most of the country, there’s a daily auction to sell energy into our power grids—with the least expensive sources winning. Also noteworthy: Coal’s not cheap.

Artur Nyk/Alamy Stock Photo

The Trump administration is on a mission to expand coal’s role in the electricity grid. The president and his U.S. Environmental Protection Agency administrator, Scott Pruitt, have said they’re trying to stop President Obama’s “war on coal,” but coal’s enemies aren’t President Obama or environmentalists. Coal’s biggest problems are that it’s expensive and inflexible. To understand exactly why these traits are leading to its demise, you have to understand a little bit about how our grid works.

The electricity grid is made up of many regional operating systems (for example, there’s a Western grid that crisscrosses California and parts of 13 other states). In several of these regions, the grid manager holds a daily auction in which power suppliers place bids to sell their energy the following day. The manager selects the lowest bids, adding together enough suppliers to satisfy expected demand. The final prices aren’t the actual bids of each individual supplier; rather, every supplier is paid the price of the last megawatt-hour that the manager had to buy to meet the grid’s need. This is called the “market clearing price.”

Here’s how it works in practice. Let’s say that on a Sunday, the grid manager projects that the energy requirements for Monday at 1 p.m. will be 100 megawatt-hours (MWh) of electricity. (It may be worth noting here that in real life, to make this complex prediction, the manager deploys a multimillion-dollar computer capable of processing tens of thousands of equations in seconds.) She’ll get a portion of that quota from solar and wind farms, because they cost almost nothing to operate. Renewables, however, supply just an estimated 7 percent of our electricity nationwide. So, in our hypothetical scenario, let’s assume the grid operator can get only 7 MWh from solar and wind. The remaining 93 MWh will be made up of electricity from nuclear plants and fossil fuel plants that burn coal, natural gas, and oil.

This is where coal runs into its first problem: It’s expensive. A generation ago, coal was often the cheapest energy source and therefore won these auctions easily. Things are changing. Today, natural gas is cheaper than coal, which means the auction winners, after renewables, are typically gas and nuclear. So let’s imagine that our hypothetical grid manager buys her remaining 93 MWh of electricity from those two sources. Coal is left out in the cold—quite literally, because the coal plant must power down to save money after its bid is passed over in favor of the less costly alternatives.

This isn’t the end of the story, though. The demand forecast could be wrong. Let’s imagine that Monday is unexpectedly hot, and people use more air-conditioning than the grid manager anticipated. Suddenly we need much more electricity, and we need it immediately.

So the grid manager holds another auction on Monday. This time, the prices are much higher, because the low bidders—renewables, gas, and nuclear—are already operating at full capacity. Is this an opportunity for coal plants to sell their electricity at profitable prices?

No. And this is the second problem with coal plants: They’re inflexible and slow. A coal plant is full of bricks, pipes, and water that needs to be heated to boiling in order to move the turbines that produce energy. When the plant powered down after losing the previous day’s auction (assuming that it was running in the first place), the components cooled. Now they have to be heated again before they can supply energy. That process can take anywhere between 90 minutes and 15 hours, according to NRDC’s Amanda Levin, a climate and energy advocate. It is time-consuming and costly to ramp up a coal-fired power plant to satisfy unexpected temporary demand surges, especially when there are other kinds of plants specially designed for this purpose. They’re bad for the climate and costly to run, but they can be turned on and off in just moments.

Put simply, coal has a short-term problem and a long-term problem. In the short term, it can’t compete with natural gas or nuclear in the day-ahead auctions, which means the plants have to be powered down too often to be profitable. In the long term, as renewables become cheaper, we expect to see solar and wind power provide an ever-increasing share of our electricity needs. You can’t predict with absolute precision how bright the sun will shine and how consistently the wind will blow, so technologies that can address these uncertainties will be critical. Coal simply can’t do that.

The Trump administration’s arguments for expanding coal’s role in our energy mix ignore these basic facts. EPA Administrator Pruitt, for example, has claimed, “You need solid hydrocarbons on-site that you can store, so when peak demand rises, you’ve got solid hydrocarbons to draw on.”

This idea has intuitive appeal. Coal is solid. You can see it with your eyes and hold it in your hands, which gives the illusion of reliability. But just like depending on that clunky old pickup in the backyard, our reliance on coal will only lead to higher utility bills and more pollution. It certainly won’t help us avoid power outages—in the past five years, only 0.00007 percent of major outages were caused by a lack of supply. (Downed power lines and other transmission and distribution infrastructure issues were largely to blame.) Keeping big piles of coal lying around everywhere won’t reduce power outages. It’s also worth noting that stockpiled coal doesn’t fare well under extreme weather conditions—which are increasing in frequency as a result of climate change. In a couple of recent examples, Hurricane Harvey flooded coal piles at a Texas facility, forcing it to switch to natural gas, and the 2014 polar vortex knocked coal plants out of operation when the stockpiled coal froze.

Wind and sun, plus flexible resources like energy storage, can provide a nimble, reliable, and inexpensive grid. As we strive for a low-carbon energy future, coal will find itself increasingly relegated to the back burner. stories are available for online republication by news media outlets or nonprofits under these conditions: The writer(s) must be credited with a byline; you must note prominently that the story was originally published by and link to the original; the story cannot be edited (beyond simple things such as time and place elements, style, and grammar); you can’t resell the story in any form or grant republishing rights to other outlets; you can’t republish our material wholesale or automatically—you need to select stories individually; you can't republish the photos or graphics on our site without specific permission; you should drop us a note to let us know when you’ve used one of our stories.


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