Marketed by its champions as the answer to America’s economic woes and energy-driven inflation, the Inflation Reduction Act (IRA) is anything but. Its market destabilizing subsidies, additional taxes and support for further regulatory overreach could devastate the nation’s remaining coal fleet and consequently the reliability and affordability of the nation’s supply of power. American consumers are likely to pay far more for a power supply that is startlingly less reliable.
Even before the IRA became law, the nation’s grid reliability experts and operators were sounding the alarm over the speed of the energy transition and the lack of guardrails to maintain reliability. John Moura, the director of reliability assessment and performance analysis at the North American Electricity Reliability Corporation (NERC), recently said, “there’s clear, objective, conclusive data indicating that the pace of our great transformation is a bit out of sync with the underlying realities and the physics of the system.”
The IRA is now poised to supercharge some of the very dynamics already pushing the grid to the brink. Expansion of tax credits for intermittent electricity generation will only exacerbate the market distortions that have forced essential, fuel-secure, dispatchable coal generation off the grid in favor of capacity and enabling infrastructure that doesn’t yet exist and won’t for years.
We must see the tenuous state of our energy supply and promised solutions as they are and not as we hope them to be. Grid-scale energy storage remains in its infancy. Expansion of the nation’s electricity transmission system to move renewable power to where it’s needed is not materializing at the speed and scale that matches the loss of our existing dispatchable generation.
The U.S. natural gas system is also now stretched precariously thin, lacking the pipeline capacity in key regions to shoulder additional demand, especially in periods of biting cold or scorching heat.
On top of these realities, add accelerating electric vehicle uptake. Power demand – once flat – is already beginning to soar in some regions of the country. The National Renewable Energy Laboratory projects that electrification of our energy systems means the U.S. must double its generating capacity by 2050. This is the energy future we must plan for.
To hedge against the uncertainty and challenges of what’s ahead, the U.S. should be building on the shoulders of our existing generating capacity and energy infrastructure.
NERC has been clear about some of the changes needed to head off this unfolding reliability crisis. Electricity markets must be reformed to ensure existing, dispatchable generation can be maintained even as intermittent capacity is added to the grid. According to NERC, ensuring reliability must include developing policies that “maintain a sustainable and diverse generation mix.”
Policymakers have demonstrated the capacity to address market failures, providing robust support to the existing nuclear fleet. Now they must step up to the plate to address the grid reliability crisis. A two-pronged approach is needed.
First, Congress must work with the Biden administration to provide regulatory relief to the existing coal fleet. The U.S. Environmental Protection Agency (EPA) is pursuing a suite of regulations designed to accelerate coal plant closures. From the Coal Combustion Residuals Rule to the Cross-State Air Pollution Rule (CSAPR), the effect will be dozens of near-immediate retirements. In recent comments, utilities and even some labor unions noted to EPA that by the agency’s own calculations the CSAPR proposal alone would result in more power plant retirements than any previous EPA regulation.
The nation’s grid regulators and grid operators have warned EPA that these plans pose a dire threat to reliability. Yet, EPA is showing no signs of course correction, denying requests for extensions or providing conditional approvals that cannot be met. EPA has taken the steering wheel in setting the nation’s energy policy and Congress must now take it back.
In addition, Congress must also move swiftly to establish reliability incentives. Markets are failing to value the reliability and resilience attributes provided by fuel-secure, baseload generation. While regional grid authorities are scrambling to address their own market failures and provide new incentives to ensure fuel security and resource adequacy, it’s past time for federal action. A patchwork approach to addressing the reliability crisis won’t get the job done. Rapidly eroding conditions in one market will destabilize neighboring markets. Regional problems are quickly becoming nationally endemic.
Congress has a narrow window to recognize the scale and urgency of the grid reliability crisis and to act to ensure the coal fleet can maintain its role as a reliability backstop. The IRA, coupled with EPA’s dangerous regulatory agenda, is poised to make an alarming situation far worse. We must maintain the foundation of our reliable supply of power as we work to build the grid of tomorrow. Getting to our energy future can’t mean sacrificing the reliability of the nation’s supply of power along the way.