Agency Right: Coal Competitors Have Unfair Advantage
West Virginia has long been a coal state. And there are understandable reasons why many in the state view the rise of alternative sources of power with concern. The loss of much of the nation’s coal fleet has at times been met with frustration and confusion. Are renewable sources of power really getting cheap enough to win in the marketplace? And is coal losing a fair fight?
The Federal Energy Regulatory Commission, which regulates sale of electricity in the U.S., just provided an answer. Coal hasn’t been losing on a level playing field. Instead, it has been disadvantaged in a game rigged by a number of states. And the growing loss of America’s coal industry is now presenting real concerns for the future affordability and reliability of the nation’s electric grid.
In recent years, a steady influx of large-scale subsidies for renewable energy systems, along with a spate of federal regulation, contributed to the early retirement of 40 percent of the nation’s coal-fired power plants. At the same time, Americans have been told that wind and solar are now cost-competitive with natural gas and coal. But rarely mentioned is the fact that it’s actually taxpayer-funded subsidies that are making this possible.
State subsides and mandates for renewables have now turned America’s electricity markets upside down. Some states are pushing ever-increasing wind and solar quotas onto the grid. And that has led to a loss of baseload coal plants-and their replacement with less reliable alternatives.
FERC recently decided to address the undue influence of these state subsidies. It expanded something called the Minimum Offer Price Rule (MOPR). And it did so in the largest electricity market in the nation-PJM Interconnection, which serves 65 million customers in 13 states, including West Virginia and Ohio.
FERC acted because it recognizes that the same subsidies that helped to lift wind and solar power have gone over the top. These subsidies have preferentially aided wind and solar while chipping away at needed baseload power, and led America’s electricity markets to what FERC sees as a precariously unbalanced position.
Driving all of this are “renewable portfolio standards” adopted by 29 states and the District of Columbia. These mandates require that a certain percentage of each state’s electricity generation must come from renewable energy sources. And that means taxpayer money is used to reduce the price of electricity produced by wind and solar. As these subsidies have grown larger, they’ve pushed many baseload coal plants out of the marketplace. And while renewable advocates consider that a victory, there are now troubling implications for the future of reliable, on-demand electricity.
Part of the problem is that wind and solar installations only generate electricity during ideal weather conditions. There’s also the proliferation of natural gas power plants dependent on continuous fuel delivery across thousands of miles of pipelines. All of this has forced a shift away from coal plants — which store months of fuel on site-to power sources dependent on weather or just-in-time fuel delivery.
Critics of FERC’s decision see it as a roadblock to wind and solar, or an obstacle to emissions reductions. But realistically, FERC’s order aims to achieve a more level playing field for America’s power sector. If wind and solar power are indeed growing cheaper, they should be able to compete on their own merits. Making them truly, legitimately cheaper should be the logical path forward, but not through continued market manipulation.
Conversely, enabling less reliable and more expensive power will hardly ensure future grid safety. FERC’s decision can help to restore market competition and produce the best results for America’s consumers. And that could help West Virginia and Ohio to enjoy more secure electricity.
Matthew Kandrach is the president of Consumer Action for a Strong Economy (CASE), a free-market oriented consumer advocacy organization, headquartered in Arlington, Virginia.