Electricity markets are not only failing to recognize the value of existing baseload power plants – the very foundation of our reliable, resilient and affordable supply of power – they’re exacerbating the problem by not accounting for out-of-market subsidies and renewable portfolio standards that are gaming the system. We are hurtling towards a less reliable supply of electricity, and, as our supply of dispatchable power becomes less diverse, a far greater risk of fuel price spikes.
Wind and solar advocates, and even a few utilities, are claiming that by closing existing plants and replacing them with alternatives, they can actually save consumers money.
Pump the brakes.
If you’re scratching your head wondering how it can possibly be a better deal for consumers to close a well-operating, existing power plant (or plants) and then to pay to replace it, you’re not alone. If something seems to good to be true, it’s likely because it is.
Subsidies and Hidden Costs
The advertised price of electricity from wind and solar power is far from a full accounting of the numbers. The machinery at work to prop up of these sources of energy is so vast and at times so well camouflaged it can make your head spin. But let’s start with subsidies and mandates.
As an example of the scale of the taxpayer funded benefit afforded these resources, the Congressional Research Service reported that renewables received $11.4 billion in subsidies in 2016, a staggering 63 percent of total tax-related support for energy sources that accounted for just 12 percent of U.S. energy production. These subsidies are the icing on top of 29 state portfolio standards that cover 56 percent of the nation’s electricity sales. These portfolio standards – better called mandates – demand a market for the electricity generated by these sources of power regardless of their competitiveness.
Remarkably, these subsidies and mandates still don’t give us the whole picture. It’s renewables’ hidden system costs that round out the story. Integrating these intermittent sources of power onto the grid is an expensive proposition, a proposition often removed from wind and solar power’s tab and hidden in consumers’ rates.
Because solar power is of no use at night and both wind and solar are subject to the whims of the weather, they require backup sources of power to ensure a steady and reliable flow of electricity to the grid. And since demand for the electricity they generate is guaranteed through portfolio standards, electricity markets must accommodate their generation. That means traditional power plants – like coal plants – are then forced to cycle the power they produce up and down to account for the peaks and valleys of renewable power. This cycling reduces the efficiency of these plants, raising the cost of the electricity they deliver to the grid. In some cases, this means well operating, low-cost baseload power plants have to close, only to be replaced by more expensive, intermittent alternatives.
Then there’s the transmission buildout that must happen to get renewable generation to the demand centers where it’s needed. For example, getting the electricity generated by wind farms in the great plains to East Coast cities is an expensive enterprise. It’s also an expense picked up by consumers in the transmission and distribution fees they pay their utilities.
There’s no free lunch when it comes to energy. Renewable sources of power don’t fit into the system as its designed, they require an overhaul to accommodate their needs. That overhaul – whether it’s the addition of new transmission infrastructure or the reduced efficiency or loss of existing plants – is expensive.
Recall that a case study from the Energy Ventures Analysis found that it was 15 times more expensive to shut down 5,000 MW of at-risk coal capacity in the PJM market than to support ongoing operation of those plants.
If gut logic tells you it’s more expensive to rebuild the electricity grid to accommodate renewable sources of energy and to close well-operating existing plants than to keep them running, listen. Ratepayers are paying to transform an electricity system that works, into one that will be less reliable and resilient, and far more vulnerable to fuel price spikes. If that sounds like a terrible deal, it’s because it is.
- On January 16, 2019