So, it has come to this—Rick Perry, the man who seven years ago couldn’t remember that the Energy Department was one of the government agencies he wanted to eliminate is now essentially going to be entrusted with running the nation’s electricity grid as secretary of the very same department for the next two years.

Or, at least that is the indication from the latest memo (which can be found here) circulating around Washington in the Trump administration’s never-ending effort to rewrite the rules of capitalism, that wonderful free market enterprise the GOP has so often defended in years past. Democrats have frequently been at the receiving end of GOP barbs about the free market, with Republicans warning anyone listening that they were the only thing standing between the country and, that’s right, socialism. See Secretary Perry’s particularly relevant quote below about President Obama from 2012. Oh my, how things have changed.

I think Barack Obama is a socialist. I think he cares for his country – don’t get me wrong about that – but I think he truly misunderstands what this country was based upon, the values that America was based upon, which was free enterprise and having the ability to risk your capital and having a chance to have a return on your investment.

–Rick Perry

Anyway, the general GOP defense of the free market used to run something like this: When cheaper, better products come along, incumbent industries get hurt, some survive and evolve while others go out of business. It’s messy, but that’s what makes America great.

Well, that exact messy transition is under way now in the electric power industry, and not even a two-year grid nationalization, for that in effect is what is being considered, is going to stop it.

Renewable energy is getting cheaper almost by the day and, coupled with storage, offers the much ballyhooed “baseload” power that seems to appeal to Trump and his tag-alongs. At the same time, the administration’s own energy dominance agenda ensures that natural gas will be in plentiful supply and remain low in cost for all the existing and planned new natural gas-fired generating facilities across the country. Those facts can’t be wished away by half truths about resilience and reliability.

In the draft document now circulating, for example, there is a whole section about cybersecurity. However you feel about renewables or coal, this is an industry-wide issue and has no bearing on whether one sub-sector is better or more reliable than the other. All generation, transmission and distribution assets are subject to the same cyber threats, and we should take them seriously. But it is not germane to the current debate.

A subsequent section takes aim at the need for coal and nuclear to meet future demand growth, warning that in the U.S.’ Eastern Interconnection (essentially the entire country east of the Mississippi River), “substantial new capacity would be needed by 2020 and that the grid would be strained even with new capacity.” Well, that may have been the thinking in February 2015 when the cited study was completed (undoubtedly using 2014, or even earlier, data), but that certainly is no longer the case and relying on three-year-old demand projections borders on intentional lying and certainly falls within the realm of picking and choosing your data to prove a point.

Illustrating the dynamic nature of forecasting and, as such, the importance of using the most up-to-date information possible, in 2014 PJM (the focus for much of the coal plant closure teeth gnashing) forecast that its summer peak load that year would be just over 157,000 MW, rising steadily to 166,900 MW by 2019 (demand response would have lowered these figures, but they have been left out for simplicity). Jump forward to this year and PJM projects that the area’s summer peak will be just over 152,000 and rise to only 153,000 MW by 2022 (also without including demand response).

In another analysis, this one by the Energy Information Agency—interestingly enough also part of Secretary Perry’s empire, maybe he should have asked them for some updated information—the data geeks there projected in 2016 that electricity demand in the entire U.S. would only rise by 7.7% in the 11 years out to 2027. Now let’s see, 7.7% divided by 11 years comes to a whopping 0.7% per year. My guess is the system can handle that. I would also be willing to bet when EIA updates that report this November, the numbers will be lower; just look at the recent projections from the New York and New England transmission operators. The long and short of it is, demand forecasts have very short shelf lives and using four-plus-year-old data is simply wrong.

Humorously that section is titled “Less generation diversity leads to higher consumer costs.” Perhaps the author didn’t know that the nation’s electric system actually is much more diverse today than it ever has been, with natural gas accounting for about 31 percent of total generation, coal 29-30 percent, nuclear 20 percent and renewables rapidly closing in on 20 percent. If less diversity meant higher costs, then why was no one complaining in the early 2000s when coal generated 50 percent of the nation’s electricity?

Beyond the questionable data is the real question, how the hell is this going to work?

• The day before the memo was published, two Midwest utilities announced the closure of three coal-fired plants with about 2,300 megawatts of generating capacity. Long in the works, the coal piles are gone and the employees have been reassigned or laid off; could Secretary Perry order the plants back online?
• What about a utility that wants to close its coal plants, like DTE Energy, which announced its intent in 2017 to transition to a coal-free generation fleet by 2040? Can the secretary order an independent company with its own business mode, one that does not include coal by choice, to throw those plans in the shredder?
• Who pays? Well, clearly that will be consumers, but how will that be rolled into everyone’s bills? And for how long? Once given life, taxes (for that is what this is) are almost impossible to kill.
• If one of the coal piles at the supposedly fuel secure coal plants freezes will they be penalized for lack of performance? (This would be the appropriate time to insert a climate change reference, but I’ll defer.)
• What happens if one of the coal or nuclear plants trips offline for a long period of time for mechanical problems or some other reasons? Clearly that has and will continue to happen, but how will it be accounted for? Will gas and renewable generation get a bonus for stepping in and covering that lost capacity?
• And, my favorite, how will all this play out in Texas, which runs its own electricity sector largely as an independent entity free from many federal controls? Generation executives there may like Perry, but I do not think they will take kindly to being told by Washington bureaucrats what plants they can run, and which ones they can’t.

This whole stupid semi-nationalization plan is only supposed to last two years, until DOE completes yet another study on resilience and reliability. But what happens then when they still can’t come up with a way to keep capitalism’s creative destruction in check?

–Dennis Wamsted

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