February’s deep freeze in Texas, which led to rolling outages and severe economic disruptions as available power dropped by half, has spawned much discussion about the reliability of the nation’s electricity grids. The Texas state legislature and Congressional committees are holding hearings on “what went wrong” while the plaintiff’s bar is having a field day filing lawsuits against power companies on behalf of aggrieved households and businesses.

Though the focus is currently on Texas, which is unique in having its own transmission network, limited interconnects, and more installed wind capacity by far than any other state, other areas of the country have also dealt with electricity reliability problems in recent years. For example, power interruptions in California have become commonplace, with nine occurring last year—most notably the shut-off of electricity to 969,000 households during the October wildfires.

Today, 31 states have either totally or partially deregulated their electric power markets. While deregulated markets promote efficiency, lower costs, and allow retail choice, extreme weather events may impair grid reliability if adequate reserve power is not available. What is more, in deregulated states with competitive wholesale power markets, the “cheapest” fuels—natural gas, wind, and solar—are commanding a growing market share while crowding out base-load coal and nuclear plants.

The problem is that not all fuel sources are equally reliable or available, as was starkly demonstrated by the debacle in Texas. Similarly, California’s power outages last year can be largely attributed to the closure of coal and nuclear plants while the state added more than 40 gigawatts of solar and wind to its generation mix. By depriving the nation’s power grids of “always on” generation, the growth of intermittent fuels has often meant intermittent or unavailable electricity.

The remedy is to become more focused on retaining base-load electricity generation to ensure grid reliability during extreme weather events or other natural disasters. Sometime in the future, large-scale battery storage may be the solution.  In the meantime, we need cost effective alternatives.

Eliminating policies that cause market distortions, such as the huge subsidies to wind and solar projects, could be one way to sustain and promote base-load power generation. But because renewables have strong political support due to their espoused environmental benefits, subsidies are likely to remain in place for the foreseeable future. Promoted Content

A sensible alternative would be to allow existing and future base-load power plants in deregulated states to include a “capacity payment” in addition to the energy production charge. This way, a revenue stream would be maintained to help cover fixed costs even when the facility is on stand-by or operating at less than capacity.  

A number of deregulated states have already adopted capacity payments into their rate structures. For example, PJM, the nation’s largest regional transmission operator providing power to 65 million people in 13 Eastern and Midwestern states, imposes a price floor in its wholesale power market that helps keep coal and nuclear plants on the grid, thereby enhancing the system’s resiliency and reliability. Interestingly, PJM adopted the capacity charge after the 2014 “polar vortex” and the 2018 “bomb cyclone” that severely tested PJM’s ability to avoid blackouts and brownouts.

For too long we’ve taken for granted the balance, fuel security, and reliability assured by a power mix that relies heavily on base-load generation.  To keep base-load in the mix, and to encourage new investment in generation, we need a pricing system that recognizes the value of coal and nuclear facilities in providing grid security and an adequate reserve margin. Otherwise the nation’s transmission system operators will be unprepared for heat waves, deep freezes, cyber attacks, and other disruptive events.

To keep our power grids agile and reliable, nuclear, coal, natural gas, solar, and wind will all be required—at least until something better comes along.

Bernard L. Weinstein is an emeritus professor of applied economics at the University of North Texas in Denton and a fellow of Goodenough College in London. He recently retired as associate director of the Maguire Energy Institute at Southern Methodist University in Dallas. 

This article appeared on the RealClear Energy website at https://www.realclearenergy.org/articles/2021/04/05/until_something_better_comes_along_well_need_base-load_power_for_grid_reliability_771424.html