Biggest Threat to America’s Power Grid is Bad Policy

On September 4, 1882, Thomas Edison flipped a switch and energized America’s first electric grid. This breakthrough set us on a bright new path towards a future powered by reliable and affordable electricity. Today, electricity plays a crucial and growing role in our everyday lives, yet most Americans don’t think twice about where it comes from or how it gets to us.

And for good reason—the grid is always on, and electricity prices are fairly stable. But that may change as new regulations, subsidies, and mandates take effect over the next few years. These policies threaten to undermine grid reliability and to make electricity less affordable for all Americans.

These threats make it increasingly important that the American people and our lawmakers understand how our electric grid works. That is why the Institute for Energy Research recently launched the “Story of Electricity”, an education project that explains how the power grid works and provides context for the coming policy debates. A key theme is that reliability is the most important aspect of a sound electrical grid.

To ensure reliability, grid operators need to be able to call on power plants that can run when people need electricity. Power plants that run on natural gas, nuclear, and coal, which provided 86 percent of our electricity generation last year, primarily fulfill this role. However, the Environmental Protection Agency’s (EPA) latest power plant rules threaten to shut down coal-fired generation, which alone provided 39 percent of our electricity in 2013. After coal, EPA is coming after natural gas plants as well and anti-nuclear activists are trying to close nuclear plants around the country. These closings pose a serious threat to the grid as we know it. Forcing reliable sources of energy off the grid will only increase the risk of blackouts and raise electricity prices for households across America.

But excessive regulation isn’t the only issue facing the grid. Other policies undermine our electric system by subsidizing unreliable sources of power like wind and solar, which provided around 4 percent of our electricity generation last year. Subsidizing unreliable generation while wiping out reliable sources is a huge gamble—a real-time experiment to see whether or not we can keep the lights on.

One such policy is the wind Production Tax Credit (PTC), which provides a large subsidy for wind producers (one so lucrative that wind producers can pay the grid to take unwanted electricity and still make a profit). Another set of policies designed to promote unreliable sources of power are the Renewable Portfolio Standards (RPS). RPSs have been implemented in 30 states and require that a certain percentage of electricity comes from renewable sources like wind or solar, regardless of whether it is wanted or needed.

However, none of these policies can fix the inherent problems with wind and solar power, which is intermittency and unreliability.

Wind turbines only produce energy when the wind is blowing and solar panels only produce energy when the sun is shining. But electricity is unique in that demand has to match supply, second by second, 24/7. Because the wind doesn’t always blow and the sun doesn’t always shine, these sources must be backed up by more reliable sources such as natural gas, coal, and nuclear power. However, when these reliable plants are forced to ramp up and down to account for wind or solar, grid operators struggle to match demand and reliable plants lose their valuable efficiency.

The combination of excessive regulation and subsidies is creating the perfect storm over our power grid, which could lead to skyrocketing electricity prices and even blackouts. This will not only threaten our electric grid, but our way of life.

We have come a long way in terms of electricity and technology since Thomas Edison turned on America’s first electric grid 132 years ago. Electricity now powers everything from a simple light bulb to our most advanced electronics. If we want to continue down Edison’s path towards a future with affordable and reliable electricity, we must understand our electric grid and the threats that could compromise it. Failure to do this means the future suddenly becomes much dimmer.

Fisher is an economist with the Institute for Energy Research. He previously spent seven years at the Federal Energy Regulatory Commission.

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