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Energy Experts Agree: US Must Diversify Electricity Sources

Jan. 22, 2014—Experts from the country’s leading energy groups have urged the country to avoid an energy strategy that focuses solely on natural gas to generate the nation’s electricity.

“We are increasingly dependent on natural gas,” said David Owens, executive vice president of business operations at the Edison Electric Institute. “I believe that we have to focus on a diversity of our fuel resources. I’m very troubled when I see the perception that we can do it all with natural gas and renewables, because we can’t.”

Speaking last week at the U.S. Energy Association’s State of the Energy Industry Forum, Owens referenced the recent “polar vortex,” which saw temperatures plunge to record lows across much of the country.

“Just look at the cold spell we had a few weeks ago and I think the value of diversity becomes crystal clear,” Owens said. “We had to take coal plants and oil plants … out of mothballs in order to make sure that we could keep the lights on.”

Nuclear energy facilities that ran at nearly 100 percent capacity throughout the spell of arctic weather earlier this month helped carry the record-breaking demand for electricity, Nuclear Energy Institute President and CEO Marvin Fertel pointed out.

“What the polar vortex showed us was the importance of reliability in the electricity system,” Fertel said, adding that this reliability is being put at risk by overdependence on too few sources of energy.

During a panel discussion, Tom Kimbis, vice president for executive affairs and general counsel at the Solar Energy Industries Association, said he “couldn’t agree more” that a mix of fuel sources is needed over the long term.

“Anybody who thinks we’re not going to be using coal, natural gas or nuclear in the coming decades doesn’t have a firm grasp of … what utilities have to do to keep the lights on,” Kimbis said.      

The experts on the panel also agreed that fuel diversity can better be preserved by ensuring that markets send the right signals, especially on building a new generation of facilities that can use a diverse range of fuels.

“The current competitive market is not structured in a way to do the two most important things it should be doing—incentivizing new resources and valuing diversity,” said David Mohre, the National Rural Electric Cooperative Association’s executive director. “We’ve been saying that to our friends at FERC [the Federal Energy Regulatory Commission] for 10 years now—you cannot incent long-term resources with short-term markets.”

Because producing electricity is a “very expensive business” with high capital costs, companies need certainty before making key investment decisions, Mohre said. 

Fertel concurred, adding that markets also need to do a better job of recognizing the value of grid stability.

“We actually think there are potential weaknesses because of policies at the state and federal levels and because of market imperfections in our competitive markets,” Fertel said. “Nuclear brings a lot of value, [but] most of it is never monetized.” 

EEI’s Owens added that regulatory uncertainty has the potential to negatively affect electricity portfolio choices.  

“We have to have clear regulatory policies that preserve the value of the diversity of our resources,” Owens said. Evolving rules on issues such as water cooling structures, coal ash and climate change introduce policy uncertainties, he added.     

Fertel noted that the premature shutdown of nuclear power plants in Germany and California has led to increased carbon emissions and higher prices for electricity customers.  

“In California, greenhouse gas emissions from power plants increased by 35 percent in 2012, in large part due to the early closure of the San Onofre nuclear power plant,” Fertel said. “In Germany ... dependence on fossil fuels is rising along with consumer electricity prices.”

Owens said that as the grid moves to increasing reliance on distributed generation and intermittent resources such as solar and wind power, a stable grid backed by a diverse fuel supply will become more important.   

“All of these technologies, particularly renewables … have to depend on a grid that is able to integrate all of those resources,” he said. “If reliability, affordability and fuel diversity are the criteria, then I think that’s where you should start.”

A copy of Fertel’s remarks as prepared for the USEA forum is available on NEI’s website.