America’s electricity grid is the engine that runs our economy, powers our lives, and helps ensure our safety. There is perhaps nothing more essential to America’s success — or taken more for granted — than the reliable flow of electricity to our families and businesses.
From powering our homes, to providing safely lit streets at night, and connecting us through smart phones and the internet, our quality of life and economic prosperity depend on affordable, reliable, and resilient electricity.
Yet, during the 2014 Polar Vortex, when temperatures plunged across the country, millions of Americans, including Philadelphians, were closer to losing that power supply than they would ever want to know. Grid operators struggled to meet electricity demand because gas resources were used for home heating. The loss of generation capacity could have been catastrophic. Fortunately, base-load plants with onsite fuel storage, many of which were scheduled to close, provided the electric power needed to meet emergency demand and serve customers at a critical time.
Our electricity is produced from a diverse mix of sources, including solar arrays, wind turbines, natural gas-fired generators, hydroelectric dams, cleaner-burning coal facilities, and zero-emission nuclear plants. Under this “all of the above” approach, we have a valuable diversity of generation supply readily available to make our electric system stronger.
But some electricity markets have become distorted from years of government regulation, subsidies, and preferential treatment of some generation sources. As a result, the market is not properly valuing the resiliency benefits that base-load generation assets provide, forcing premature retirements. In fact, much of the reliable and resilient base-load generation that prevented widespread disruptions during the 2014 Polar Vortex has since been retired. This worsening trend is threatening the long-term resilience of our electricity supply, particularly in times of unusually high demand or crisis.
Unless steps are taken to address the market flaws that are undervaluing the benefits of certain base-load generation, we are increasing our risk of disruptions when we can least afford them.
Faced with these facts, and supported by a recent Department of Energy study, on Oct. 5 I directed the Federal Energy Regulatory Commission (FERC) to address electricity market price distortions by ensuring that generation with onsite fuel supplies, which provide reliability and resiliency of the grid, are properly valued.
In a speech before the Philadelphia Chamber of Commerce several days later, I explained my action. What followed was a vigorous period of public comment, which has now concluded.
FERC has been studying these issues for years, but the problem remains. My proposal was intended to jump-start a long-overdue conversation and, more important, spur it into action. I am confident that FERC, as it considers my proposal, will adopt a final rule that addresses price formation in the electric markets to ensure the resiliency of our grid.
The time to act is now. Some critics have balked, calling for more time and irresponsibly suggesting my proposal would “blow up” the “free market” for electricity. These critics ignore that our electric wholesale markets are not free, but highly regulated, with many distorting incentives and subsidies. As a result, the electricity markets have become unbalanced and need to be corrected.
My proposal addresses these price distortions to ensure that the grid remains reliable and resilient.
Washington has been stacking the deck against coal and nuclear power for years despite their benefits to the grid. President Trump’s clear direction is to unleash every energy sector to make America energy-dominant. He has nominated people for government service who share that vision and are willing to address the regulatory burdens and government overreach that have limited our growth potential. We came to Washington to help deliver on that goal to rebalance, retake, and rebuild our great country.
Appropriately, the White House has declared November Critical Infrastructure Security and Resilience Month — a time to “recommit ourselves to keeping America’s infrastructure strong, prosperous, and resilient.” What better time could there be for FERC to act?
But regardless of the month, I will do everything in my power to keep our diverse generation mix in place and have already taken steps to expand opportunities in natural gas, solar, wind, and hydro. At the same time, we must ensure that the FERC-approved electricity markets value generation resiliency properly.
There has been enough talk. America’s economic and national security depends on our electric grid. And the president’s “all-of-the-above” energy strategy will ensure the reliability and resiliency of our grid by preserving the diversity and abundance of our fuel supply.
Rick Perry is the U.S. secretary of energy. @SecretaryPerry