Understanding Policy Recommendations in the Department of Energy’s Grid Study
On Wednesday night, the Department of Energy released its highly anticipated and debated grid study. Back in April 2017, Energy Secretary Rick Perry issued a memorandum requesting a study to examine electricity markets and grid reliability. Beyond an evaluation of the current status of the electricity system, the April 14 memo asked staff to “provide concrete policy recommendations and solutions.” To that end, DOE staff prepared a list of eight policy recommendations. Let’s break them down:
Wholesale markets: “FERC should expedite its efforts with states, RTO/ISOs, and other stakeholders to improve energy price formation in centrally-organized wholesale electricity markets.”
Federal regulators have recently become concerned by state policy intervention in wholesale market prices. The U.S. District Court of Northern Illinois and the New York Public Service Commission, for example, have both enacted zero emissions credit programs in the last year to extend the life of aging nuclear facilities in both states. This recommendation calls for the Federal Energy Regulatory Commission to work with state policymakers to assess and accurately price true costs of energy.
Valuation of Essential Reliability Services (ERS): “Where feasible and within its statutory authority, 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.”
The notion of essential reliability services includes three key components, identified in the report: frequency (the speed at which generators produce power); ramping (the grid’s ability to handle an increase or decrease in power demand); and voltage (the amount of power running over transmission wires). This recommendation encourages FERC to derive new ways to support states and ISOs in their efforts to improve the grid’s ability to be flexible and consistent in delivering power to end users.
Bulk Power System (BPS) resilience: “DOE should support utility, grid operator, and consumer efforts to enhance system resilience.”
Infrastructure resilience refers to the grid’s ability to reduce the magnitude and/or duration of disruptive events. Events that test the grid’s reliance can be natural disasters, such as floods and wildfires, or coordinated, extensive physical or cyber-attacks. Resilience is typically achieved through hardening (physically changing infrastructure to make it less susceptible to damage) or recovery (measures to enable energy systems to continue operating despite damage). This recommendation urges the DOE to strengthen the grid against potential disruptions.
Promote Research and Development (R&D) of next-generation/21st century grid reliability and resilience tools: “DOE should focus R&D efforts to enhance utility, grid operator, and consumer efforts to enhance system reliability and resilience.”
This recommendation is straightforward- DOE should be focusing on innovation in the electric power sector. This could include R&D into new generation technologies, such as sensors and storage technology, as well as utilizing DOE national laboratories and collaborating with the National Science Foundation.
Support Federal and regional approaches to electricity workforce development and transition assistance: “In partnership with other agencies and the private sector, DOE should facilitate programs and regional approaches for electricity sector workforce development.”
As the power sector continues to evolve and diversify, jobs in energy are rapidly shifting, as well. Jobs in coal are disappearing, while jobs in the solar sector are becoming widespread. This recommendation directs the DOE to leverage existing government, nongovernment, labor, and industry workforce consortia to aid workers in this job market shift.
Energy dominance: “DOE should continue to prioritize energy dominance and implementing …Executive Order 13783 Promoting Energy Independence and Economic Growth.”
While DOE is not the main agency tasked in the Order, this recommendation calls for a review of environmental protection policies developed within the last few years, including the Clean Power Plan, and their effect on energy production, economic growth, and job creation.
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.”
This recommendation encourages the DOE to review regulatory burdens for siting and permitting for generation and gas and electricity transmission infrastructure, and to take actions to accelerate the process and reduce costs. This could include minimizing regulatory burdens for hydro projects, and to ensure the safety of existing and new nuclear facilities.
Electric-gas coordination: “Utilities, states, FERC, and DOE should support increased coordination between the electric and natural gas industries to address potential reliability and resilience concerns associated with organizational and infrastructure differences.”
While power markets operate utility by utility and state by state, natural gas pipelines and interstate transmission lines mandate that various agencies work in coordination with one another to provide power to end users. This recommendation calls for these agencies to share knowledge and expertise with one another, to ensure operation of a reliable grid.