DOE to Conduct Study of Electricity Markets’ Impact on Baseload Generation

Last week, Secretary of Energy Rick Perry issued a memo directing his staff to conduct a study examining electricity markets and reliability.  The memo centers around the concern of the erosion of critical baseload resources, particularly coal-fired power generation.  Secretary Perry writes that this has resulted from “regulatory burdens introduced by previous administrations that were designed to decrease coal-fired power generation” as well as “federal subsidies that boost one form of energy at the expense of others.”

As a result, Secretary Perry is directing DOE to study the “critical issues central to protecting the long-term reliability of the electric grid,” and to explore three specific topics:

  • 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;
  • 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
  • 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.

This study is to be completed 60 days from the date of the memo, or June 13, 2017.  According to the memo, yesterday the DOE Chief of Staff was to present Secretary Perry with a plan for how DOE will complete the study within the prescribed time limit, but this plan has not been made publicly available.  Secretary Perry ends his memo by noting that he has committed to the President that the report will not just analyze problems; it will also provide concrete policy recommendations and solutions.

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