Brattle Economists’ Analysis of DOE’s Proposed Rule on Grid Resilience Shows High Costs with Few Benefits
Prepared for NextEra Energy, Inc.
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.