October 26, 2017

Brattle Economists’ Analysis of DOE’s Proposed Rule on Grid Resilience Shows High Costs with Few Benefits

Brattle Principals Metin Celebi, Judy Chang, Marc Chupka, Sam Newell, and Ira Shavel authored a report that supported comments a diverse coalition of energy companies submitted to the Federal Energy Regulatory Commission (FERC) in response to Secretary of Energy Rick Perry’s Notice of Proposed Rulemaking (DOE NOPR). The NOPR would place eligible coal and nuclear units under cost-of-service tariffs within regional transmission organizations (RTOs) and independent system operators (ISOs) with energy and capacity markets.

The report which was filed with the comment on October 23, 2017, noted that:

  • There is no evidence demonstrating that RTOs/ISOs need to subsidize resources with 90 days of on-site fuel in order to maintain reliable service during severe weather events or otherwise.
  • The proposed rule focuses on regions with the highest share of coal and nuclear generation (PJM and MISO) while ignoring the regions with very little such generation, which makes little sense if such resources were actually critical for reliability and resilience.
  • Based on 2016 conditions, the Brattle report estimates that the cost of out-of-market payments for providing all eligible resources with ongoing costs and a return on investment would likely range from $3.7 billion to $11.2 billion per year.
  • The report discusses how the proposed rule would undermine the principles and benefits of competitive wholesale markets.

The Brattle report, “Evaluation of the DOE’s Proposed Grid Resiliency Pricing Rule,” is available for download below.

Associated Experts
Metin 087
Principal
+1.617.864.7900
Dr. Celebi provides expertise in electricity markets and the analysis of environmental and climate policy. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Chang for web
Principal
+1.617.864.7900
Judy Chang is an energy economist and policy expert with a background in electrical engineering. She has 20 years of experience in advising clients in transmission, resource, and strategic planning. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Chupka 090
Principal
+1.202.955.5050
Mr. Chupka is an economist with more than 30 years of public and private sector experience analyzing energy markets and regulation while assisting energy clients and counsel in a broad span of commercial analysis, regulatory proceedings, and litigation support. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Newell 090
Principal
+1.617.864.7900
Dr. Newell is an expert in electricity wholesale markets, the transmission system, and RTO rules. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4
Shavel 087
Principal
+1.202.955.5050
Dr. Shavel is an energy economist specializing in the economics and operations of the U.S. electric power system, generation and transmission investment, and environmental strategy. More icon f02782c24cccaf6d90e1da53920c42f20e5a8955f54ac2ca5727ec7dc89987b4