Heritage Foundation: RTOs Don’t Work // German Utility Quashes Swedish Nuclear // EIA: US Renewables Subsidies Have Doubled
Welcome to Grid Brief! Here’s what we’re looking at today: former power market boosters raise doubts about RTOs, Germany’s Uniper opts out of Swedish nuclear, the EIA reports large growth in renewable energy subsidies, and more.
Heritage Foundation: RTOs Don’t Work
Once the vanguard of electricity restructuring in America, the Heritage Foundation has deep reservation about the success of America’s power markets.
In its most recent Mandate for Leadership, Heritage’s lengthy policy guide for Republican leaders, former commissioner of the Federal Energy Regulatory Commission Bernard McNamee calls for the President to have FERC “re-examine the premise of RTOs.”
“RTOs no longer seem to work for the benefit of the American people,” McNamee writes. “Marginal price auctions for energy are not ensuring the reliability of the grid and are not passing the full economic benefits of subsidized renewables on to customers. FERC needs to re-examine the RTOs under its jurisdiction to make sure that they procure reliable and affordable electricity for the benefit of the American people.”
McNamee argues that FERC should direct Regional Transmission Organizations (i.e., power market operators) to establish reliability pricing that for firm, dispatchable generators or “require intermittent resources to procure backup power for times when they are not available to operate.” He also argued for slashing green subsidies.
While his recommendations are in line with recent comments made by current commissioners Mark Christie and James Danly, McNamee’s position represents a remarkable historical about face for the organization. Along with Enron and environmental organizations like the Natural Resources Defense Council, Heritage was a major power market booster. Often, its vision was more radical than what circumstances had on tap.
It appears the results of restructuring have proven less salutary than its former advocates imagined.
German Utility Quashes Swedish Nuclear
Sweden hoped to build out its nuclear capacity, but German utility Uniper has ended that dream.
“Uniper currently operates Sweden’s largest nuclear power reactor Oskarshamn-3, and has partial stakes in Ringhals and Forsmark,” reports Oilprice.com. “But Uniper isn’t interested in spending on additional nuclear power beyond its existing plants. It instead intends to focus on natural gas and renewables, according to Bloomberg, in line with its home country’s recent mothballing of its last remaining nuclear reactor.”
Uniper CEO Michael Lewis said the company’s nuclear reactors are “a key part in making Uniper sustainable, both financially and environmentally. We intend to keep those plants.” But, he added, they “will not invest in any further nuclear power.”
Vattenfell AB, Sweden’s state-owned utility, is considering small modular reactors. But the country hoped for larger, traditional plants as well.
True to its word, Uniper is sinking more money into its green, non-nuclear energy commitments. The recently nationalized utility announced that it will invest $8.8 billion in green energy projects by 2030.
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EIA: US Renewables Subsidies Have Doubled
American subsidies for renewable energy providers doubled between 2016 and 2022, comprising almost half of all federal energy-related support in that period.
According to the Energy Information Administration's Federal Financial Interventions and Subsidies in Energy report, renewable subsidies saw a significant increase, rising to $15.6 billion in fiscal year 2022 from $7.4 billion in fiscal year 2016.
In recent years, the majority of these subsidies took the form of tax incentives, and solar applications received the largest portion of these subsidies. The growth of the solar industry played a significant role in this development.
Meanwhile, natural gas subsidies have become a net cost.
“Natural gas and petroleum-related tax expenditures increased to $2.1 billion in FY 2022 to reverse a trend from an estimated revenue inflow (versus a positive tax expenditure) of $1.1 billion in FY 2016 and FY 2017,” reports the EIA. “Combined, these tax provisions had been, in aggregate, the largest energy-related, revenue-generating tax provisions to the government in any of the fiscal years covered in this report.”
Blackouts plague Iraq. “The electricity cut on Friday was caused by the failure of a major power line, local media report. The capital, Baghdad, and southern provinces have been particularly badly affected. Protesters have taken to the streets against the outages - anger over power cuts has previously fuelled mass street demonstrations,” reports the BBC. “Earlier this week Electricity Minister Majed Mahdi Hantoosh submitted his resignation as political pressure built over repeated power cuts across the country. Iraq's electricity ministry has cited a number of causes for the prolonged cuts. They included terrorist attacks on electricity lines, shortages of fuel for power stations, and the suspension of energy supplies from neighbouring Iran.”
The Department of Energy is shelling out for solar and batteries in Puerto Rico. “The U.S. Department of Energy on Monday opened applications for $450 million to bring solar and battery storage systems to low-income households in Puerto Rico, and announced another $7.4 million in formula grants to bolster grid resilience on the island,” reports Utility Dive. “The solar+storage funding represents roughly half of $1 billion included in the Fiscal Year 2023 Consolidated Appropriations Act to help the island’s vulnerable households and communities. A second round of funding from the Puerto Rico Energy Resilience Fund, or PR-ERF, will be announced at a later date. The federal government is working to improve the island’s fragile grid but the current rate of blackouts is ‘unacceptable,’ Secretary of Energy Jennifer Granholm said Monday.”
Mountain Valley Pipeline owner sticks to 2023 timeline. “Equitrans Midstream stuck to its target for bringing the long-delayed 304-mile, 2 Bcf/d Mountain Valley Pipeline into service by the end of 2023, maintaining a more aggressive timeline than a recent estimate from its biggest customer,” reports S&P Global. “The pipeline developer said Aug. 1 it anticipated ‘four to five months' worth of construction’ remaining on the estimated $6.6 billion project that will add an outlet for Appalachian Basin production. That work is already underway, after the US Supreme Court on July 27 lifted two stay orders from a lower court holding up work on the project, Equitrans executives said. The developer told the US Federal Energy Regulatory Commission shortly after the Supreme Court order that it was resuming work following FERC's June 28 order authorizing all construction.”
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