What happens when the coal and nuclear plants close?

Updated 2:11 pm, Tuesday, September 19, 2017

When future policy makers go back and study the U.S. energy industry in the 2010s, one of the defining trends will be the sudden decline of coal and nuclear plants.

Whether this is the beginning of a great new era of American energy or a disaster in the making is the subject of much debate.

And now add another voice to the mix, as the research firm IHS Markit warned in a report released Tuesday that the shift away from coal and nuclear is likely to leave the U.S. grid overly reliant on natural gas and renewable forms of energy and prone to more expensive and volatile electricity prices than we currently enjoy.

“Over the last three years, the problem only seems to have gotten worse,” said Lawrence Makovich, chief power strategist at IHS and the study’s lead author.

The report is funded by the trade groups U.S. Chamber of Commerce, the Edison Electric Institute and the Nuclear Energy Institute – groups that have a lot at stake in what the power grid becomes in the decades ahead.

What Makovich sees is a confused energy market with criss-crossing and contradictory incentives for carbon-free energy that favors wind and solar energy through tax incentives but does not do enough to incentivise carbon-free nuclear.

The study comes as the Federal Energy Regulatory Commission weighs whether to take action to keep afloat a raft of nuclear plants in danger of closing in the years ahead. A report by the Department of Energy last month put the majority of the blame on the flood of cheap natural gas due to the fracking boom and recommended changes to the power market to help the coal and nuclear sectors.

“Our study is saying there is a clear economic argument behind making these additional  interventions because we’re not dealing with a clear market operating without distortion,” Makovich said. “You have favored technologies.”

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