Let Markets Work For Electricity Grid, Consumers

on November 03, 2017 at 10:00 AM

Sizing up points made on both sides of Energy Secretary Rick Perry’s proposal that the Federal Energy Regulatory Commission change the electricity marketplace:

  • Government intervention vs. market competition
  • Propping up certain generation facilities vs. protecting consumers.
  • Diversity in power generation for diversity’s sake vs. what’s best for grid health.

We’ll go with markets, consumers and grid health – all of which point toward electricity generation fueled by abundant, affordable, reliable natural gas. Marty Durbin, API executive vice president and chief strategy officer, during a Bipartisan Policy Center-hosted discussion of Perry’s proposed grid pricing rule:

“Natural gas, natural gas producers, the role we’ve played in power generation over the last 10 years, there’s no question natural gas has been disruptive to the existing system and the existing structure. … We’ve created efficiency and effectiveness and affordability in bringing up a clean, reliable, affordable fuel source that’s now playing a huge role in power generation.”

The BPC event focused on Perry’s request that FERC develop pricing rules that would boost certain generating facilities by rewarding them for having on-site fuel storage. Unfortunately – as former FERC Chairman James Hoecker said – Perry’s proposal is a solution searching for a problem.

The primary issue is reliable electricity service for consumers, and natural gas-fueled generation defines reliability – furnishing dispatchability, ramp rates, frequency response and other attributes that ensure the health of the modern grid. Another former FERC member, Nora Mead Brownell, also spoke at the event and argued for consumers:

“Let’s think about those people who pay the bills at the end of the day, because these are things that affect their lives. … When we’re asking for customers to pay for something, we better make sure they’re getting value. … To lose that to invest in a mature industry, in mature technologies that are not adding the value we need in terms of efficiency, resilience, whatever it is and reliability is really just a tax on customers. And if you want to tax customers to do favors for your friends then be honest about it. I don’t want to throw away the value and have hidden taxes on people who apparently don’t have a vote here.”

Former FERC Chairman Pat Wood III contested the reliability argument some have made in support of Perry’s proposal:

“The bigger issue about this reliability/resiliency (issue) is it really needs to be crisply defined. What is the problem we’re solving for, because when I think about a 90-day supply of fuel, I’m from the last continental disaster, Ground Zero in Houston, and the big story in Houston was the … largest coal plant in Texas … the coal was so wet it couldn’t get up the ramp to get into the generator. OK, that doesn’t work. Gas pipelines actually switched those units to gas for the first time since 2009.”

Durbin said the rise of natural gas as a fuel for generation – the No. 1 fuel for electricity generation in 2016 – illustrates market choices that have benefited the country and consumers, without the help of government intervention:

“If you go back into the 2000s, when natural gas prices were a lot higher than they are today, we weren’t exactly feeding much into the power markets. No action was taken [by government] to make sure that natural gas could come in so that we could diversify the portfolio. Frankly, they did the right thing by not doing any market intervention, and what did that do? They ended up spurring the innovation and the technology that brought us the shale revolution, which brought natural gas abundance, brought us an opportunity to bring prices down.”

The reality is that the proposal now before FERC is the wrong way to develop public policy and the wrong path for U.S. consumers. Durbin:

“The outpouring you’ve seen on all sides here shows that there’s a real hunger among this community to dig into this issue. I do think [DOE] would have gotten perhaps a more constructive response had it not been, ‘Here’s the answer, now let’s go figure out what we need to do.’”

It bears repeating: Markets, not government interventions, should determine energy sources. They reward innovation, encourage efficiency, work toward lower prices and benefit consumers. Let markets choose.

By Mark Green 

Originally posted October 31, 2017

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