The Latest Energy Grid Proposal Is A Futile And Awful Waste Of Taxpayer Money
Earlier this year, I worked with young conservatives across the country to found the American Conservation Coalition (ACC) because we believe being conservative and caring about conservation are compatible ideologies. Over the last several years, we have seen demand from the markets for cleaner energy — whether it is natural gas or renewables — and we believe if the playing field is leveled we will see even more investment in clean energy. Unfortunately, despite Republican control of all branches of government, an anti-market, pro-subsidy proposal is sneaking its way through the Federal Energy Regulatory Commission (FERC).
Earlier this fall, the U.S. Department of Energy filed a proposal with the FERC, the body overseeing electricity markets across the United States, which seeks to reward power plants capable of storing 90 days’ worth of fuel at any given time. The deadline for the proposal was recently extended 30 days to January 10, 2018 so that FERC commissioners could have more time to decide whether or not the proposal is in the best interest of the people. On the surface, the proposal’s stated goal of making the national grid more reliable seems noble, but in reality, the proposed rule would end up costing consumers upwards of $11 billion each year without any significant improvement to the grid.
After all, studies from the Brattle Group and even the Energy Department itself indicate no imminent or unmanageable threats to grid reliability. If the proposal to FERC seeks to minimize unreliability stemming from fuel supply problems, then a reality check may be necessary: Over the last five years, less than 0.00007 percent of all power disruptions were due to fuel supply problems. The vast majority had nothing to do with grid reliability, instead the result of harsh weather like the Hurricane Maria’s winds knocking down power lines in Puerto Rico.
That’s why, when proponents of the proposal use the 2014 Polar Vortex as an example of risks, the reality of that storm has to be revisited. Power plants that can meet the arbitrarily-defined 90 days rule are largely coal and nuclear plants. During the Polar Vortex, coal-fired facilities froze — both the plants themselves and the coal piles they had stockpiled. If the proposal’s proponents want to subsidize plants that will keep the grid reliable and use this winter storm as an example, why reward plants that were simply unusable?
What’s worse is that the reward to companies comes at a severe cost to consumers. Multiple studies indicate that the proposal would cost consumers billions of dollars each year, with high estimates around $11.2 billion per year or $288 billion over ten years. In the PJM Interconnection region, where Washington, D.C. is located as well as states beyond the Beltway and further into the Northeast and Midwest, estimates place customers’ bills increasing an average of 8 to 10 percent.
But the money in our pockets isn’t all that is lost. This proposal has the power to upend wholesale power markets in a way that hasn’t been done before, leaving behind big-picture changes that, though large and long-lasting, may not be predictable in numerical terms. A study from the PJM Interconnection’s market monitor detailed opportunity costs arising from the displacement of resources and technologies. These tools, efficiently allocated within the existing market, would now be displaced and directed towards old or uneconomic plants. The incentive to invest in new power plants, renewables, and natural gas infrastructure would be minimized, and plants that would naturally age out will continue to churn inefficient energy with the extra padding of consumers’ dollars.
None of this seems like a fair chance for American energy customers, and it certainly qualifies as one of the worst ways a government could usher in the New Year. That’s why I’m urging FERC to reject this proposal on January 10, 2018, returning to crafting rules that support new investments and infrastructure without subsidizing old power plants at the expense of the taxpayer.
Benji Backer is a sophomore at the University of Washington in Seattle and the founder of the American Conservation Coalition, a nonprofit focused on giving conservatives a voice on environmental issues.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.