Last night, the Department of Energy released its highly anticipated Report to Secretary of Energy Rick Perry on Electric Security Markets and Reliability. A copy of the DOE Staff Report, along with Secretary Perry’s cover letter, can be found here:
Four months ago, Secretary Perry issued a memorandum directing a study to explore three main topics: (1) the evolution of wholesale electricity markets, including the extent to which Federal policy interventions and the changing nature of the electricity fuel mix are challenging the original policy assumptions that shaped the creation of those markets; (2) whether wholesale energy and capacity markets are adequately compensating attributes such as on-site fuel supply and other factors that strengthen grid resilience and, if not, the extent to which this could affect grid reliability and resilience in the future; and (3) the extent to which continued regulatory burdens, as well as mandates and tax and subsidy policies, are responsible for forcing the premature retirement of baseload power plants. As most are aware, the Trump Administration has a desire to preserve the coal industry (with an emphasis on the jobs it creates), and the recent spate of baseload coal generating plant retirements and litigation involving state policies has put new pressures on wholesale markets.
The results of the DOE Staff Report are perhaps a little different than what were originally expected and more importantly, telling of how FERC may advance its future policies toward market design reforms, grid resilience, resource preference, integration of variable energy resources, fossil fuel delivery and availability, changing and expanding federal and state policy objectives, and least cost vs. reliability concepts. At the same time, some of these initiatives are already underway in FERC Rulemakings issued over the last three years, all under the general auspices of the price formation and transparency improvements to organized markets. The DOE Staff Report recommends policies be created to acknowledge the importance of fossil fuel baseload and responsive peaking generation as critical to the reliability of the electric grid. It will be interesting to see whether and how the recommendations are advanced, and how the DOE Staff Report shapes FERC’s agenda over the coming months.
So, get a large cup of coffee this morning, and start reading….