Misguided policies threaten resource adequacy.
Steve Teichler is the chair of the energy, environmental and resources group at Duane Morris. Denny Hough is an associate in the Duane Morris energy group, and previously was an attorney in the office of the general counsel, energy markets section, for the Federal Energy Regulatory Commission.
Events are shaping up that could, if they converge, cause a massive disruption in the nation’s power supply.
Each leg of the energy triad is being shaped by a different government entity, largely unaware of the potential combined results of individual policy trends. Each trend negatively affects the three primary sources of thermal power in the country: coal, nuclear, and natural gas.
With respect to coal, the Environmental Protection Agency (EPA) is tightening the garrote to force most coal-fired plants into a choice between making large capital expenditures or retirement. As to nuclear units, no fuel repository exists, the full effects of Fukushima have yet to be manifest, and capital investments now rely more on fickle markets than rate-base planning. With respect to natural gas, the Federal Energy Regulatory Commission (FERC) has promulgated rules in three of the major regional transmission organization (RTO) wholesale energy markets that prevent new gas-fired facilities from participating in capacity markets until a crisis is upon us.
Any one of these trends by itself might not be particularly threatening. But taken together, they could create chaos.