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US RE policy 'not market distorting'

Report for AWEA says low gas prices main reason for coal plant closures

US RE policy 'not market distorting' image

Market forces are the main reason for the retirement of coal and nuclear plants in the US not state and federal policies supporting renewable energy, according to a new report.

The report – ‘Electricity Markets, Reliability, and the Evolving US Power System’ – was produced by consultancy Analysis Group for the American Wind Energy Association (AWEA) and Advanced Energy Economy in response to Energy Secretary Rick Perry's concerns about the reliability of the US power system.

Perry launched a 60-day review of “critical issues” on the grid in April to analyze what he called the “market-distorting effects of federal subsidies that boost one form of energy at the expense of others”.

The report found that market forces – flat demand for electricity, low natural gas prices since the mid-2000s and the addition of large amounts of efficient new gas-fired resources since 2000 – are the main reason for altering the profitability of many older, merchant generating assets in the parts of the US with organized wholesale competitive markets.

State policies supporting new energy technologies have an impact, but are secondary to market fundamentals, the report added.

It noted that the retirement of aging resources is a natural element of efficient and competitive market forces, and where markets are performing well, these retirements mainly represent the efficient exit of uncompetitive assets.

The report said that advanced energy technologies also provide reliability benefits by increasing the diversity of the system and by providing important reliability services to the grid. 

The Analysis Group report has been submitted to the US Department of Energy as part of the review, AWEA said.

Analysis Group senior advisor Susan Tierney said: “Low natural gas prices, technology changes, and flat demand for electricity have been putting financial pressure on and leading to the retirement of older, less economic power plants.

“This is a natural consequence of market competition. The result is a more diverse set of energy resources on the grid that is being capably managed in a way that provides reliable electric power.”

AWEA chief executive Tom Kiernan said: “Analysis Group’s report finds that wind and other advanced energy resources, driven by markets and technological advances, are improving electric reliability and reducing costs.

“We think this analysis will be useful for DOE’s study, and we look forward to working with state and federal policymakers to implement market-based policies that will provide consumers with even more reliable electricity at lower cost.”

Image: Pixabay

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