WASHINGTON, September 27, 2017 - A new study titled “Ensuring Resilient and Efficient Electricity Generation: The Value of the Current Diverse U.S. Power Supply Portfolio” argues that policy that promotes renewables could send consumer electricity prices soaring. The research, conducted by IHS Markit, concludes that some subsidies for zero-carbon wind and solar generation may have the unintended consequence of causing carbon emissions to increase as nuclear plants are forced to close.
“It is easy to take the cost-effective diversity of the current U.S. electric supply portfolio for granted,” said Lawrence Makovich, IHS Markit chief power strategist and the study’s lead author. “But a comparison of the two cases in our analysis shows that increasing exposure to the challenge of managing the misalignment of intermittent generation with consumer demands – plus the price volatility and deliverability constraints of natural gas – reduces benefits to households and reduces the competitive position of U.S. businesses in the global marketplace.”
The study found that the less diverse portfolio could result in no reduction in the level of carbon emissions from the electricity sector. This is because policies like incentives and rebates that support the deployment of solar and wind are driving wholesale electricity prices so far down that nuclear plants are being forced to retire even though they do not produce carbon dioxide.
The study compares actual industry performance with diverse fuel sources of recent years (2014 to 2016) to that of a less efficient, less diverse portfolio over the same time period. The study says that actions to preserve the benefits of a diverse power supply range from reforming market rules along with either eliminating or phasing out the root causes of market distortions or implementing market interventions to offset those same distortions.
Matt Crozat, senior director of policy development at the Nuclear Energy Institute (NEI), commended the study, agreeing that market distortions can create the wrong incentives, which must be urgently addressed and corrected.
“As this insightful new study notes, public policies can create unintended market distortions by suppressing the power prices for all of the generators operating in those markets,” Crozat said. “If plants close, this ultimately results in higher emissions, higher prices and less reliability. New York and Illinois have already acted to prevent such closures and we urge other states and jurisdictions to act before it is too late.”
NEI, along with the Edison Electric Institute and the Global Energy Institute at the U.S. Chamber of Commerce, funded the study.
Legislators in Illinois passed the Future Energy Jobs Bill last December to ensure continued operation of nuclear power plants in that state. In August 2016, New York Public Service Commission adopted a Clean Energy Standard that recognizing the economic and environmental benefits of commercial nuclear energy in that state.
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