Staff Report to the Secretary on Electricity Markets and Reliability

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Staff Report to the Secretary on Electricity Markets and Reliability Staff Report to the Secretary on Electricity Markets and Reliability August 2017 Staff Report on Electricity Markets and Reliability U.S. Department of Energy Table of Contents Table of Contents ................................................................................................................................ List of Figures ...................................................................................................................................... List of Tables ....................................................................................................................................... 1 Introduction ...............................................................................................................................1 2 Findings of This Study ............................................................................................................... 10 3 Power Plant Retirements .......................................................................................................... 15 3.1 Coal Plant Retirements ............................................................................................................... 20 3.2 Natural Gas Plant Retirements ................................................................................................... 24 3.3 Nuclear Plant Retirements .......................................................................................................... 27 3.4 Hydropower Retirements and Repowering ................................................................................ 34 3.5 Falling Natural Gas Prices ............................................................................................................ 35 3.6 Environmental Regulations ......................................................................................................... 39 3.7 Growing VRE Deployment ........................................................................................................... 47 3.8 Flattening Electricity Demand ..................................................................................................... 54 3.9 Power Plant Retirements Looking Forward ................................................................................ 57 4 Reliability and Resilience .......................................................................................................... 61 4.1 Assessing Challenges to Reliability .............................................................................................. 63 4.2 Diversity, Fuel Assurance, and Onsite Storage ........................................................................... 89 4.3 High-Risk Events and System Resilience ..................................................................................... 97 4.4 Enhancing Reliability and Resilience ........................................................................................... 99 4.5 Reliability and Resilience Looking Forward ............................................................................... 100 5 Wholesale Electricity Markets ................................................................................................. 102 5.1 Evolution of U.S. Wholesale Electricity Markets ....................................................................... 102 5.2 Wholesale Electricity Markets Today ........................................................................................ 104 5.3 Challenges in Wholesale Electricity Markets ............................................................................ 107 5.4 Wholesale Electricity Markets Looking Forward ...................................................................... 118 6 Affordability ........................................................................................................................... 119 6.1 Affordability of Generation Portfolios ...................................................................................... 119 6.2 The Wholesale-Retail Disconnect ............................................................................................. 120 6.3 Affordability Looking Forward .................................................................................................. 124 7 Policy Recommendations ........................................................................................................ 126 8 Areas for Further Research ..................................................................................................... 128 Appendix A: National and Regional Profiles ................................................................................... 130 Appendix B: VRE Integration Studies .............................................................................................. 151 Appendix C: Power Plant Cycling ................................................................................................... 154 Staff Report on Electricity Markets and Reliability U.S. Department of Energy List of Figures Figure 1.1. Regions Used in This Study ......................................................................................................... 4 Figure 1.2. Schematic of Typical Daily Load Curve Showing Base Load ........................................................ 6 Figure 3.1. Location of Coal, Natural Gas, Nuclear, and All Other Retirements, 2002–2016, ................... 15 Figure 3.2. Net Generation Capacity Additions and Retirements ............................................................... 16 Figure 3.3. Retirements of Coal, Natural Gas, Nuclear, and Other Generating Units, 2002–2022 ............ 18 Figure 3.4. Retirements by Date, Location, Ownership, and Capacity ....................................................... 18 Figure 3.5. Operating Generation Capacity, Additions, Retirements, and Announced Retirements by Region for All Generation Types, January 2002–December 2022 .............................................................. 20 Figure 3.6. Location of the Existing Coal Fleet ............................................................................................ 21 Figure 3.7. Location of Coal Retirements, 2002–2016 ................................................................................ 21 Figure 3.8. U.S. Utility-Scale Coal-Fired Electric Generating Capacity Additions by Coal Type and Initial Operating Year .......................................................................................................................................... 22 Figure 3.9. Location of the Existing Natural Gas Fleet ................................................................................ 25 Figure 3.10. Capacity Additions of U.S. Utility-Scale Natural Gas-Fired Electricity Generation by Technology Type and Initial Operating Year ............................................................................................... 26 Figure 3.11. Natural Gas Fleet Capacity Factors ......................................................................................... 26 Figure 3.12. Location of Natural Gas Retirements ...................................................................................... 27 Figure 3.13. Location of the Existing Nuclear Fleet .................................................................................... 28 Figure 3.14. Location of Nuclear Power Plant Retirements: Closed, Announced, and Averted ................ 30 Figure 3.15. Nuclear Plant Retirements Compared to NRC Plant Operating License Terms .................... 33 Figure 3.16. Hydropower Plants in the United States by Capacity and Average Annual Runoff ................ 34 Figure 3.17. Conventional and Shale Natural Gas Production, 2007–2016 ................................................ 36 Figure 3.18. Wholesale Day-Ahead Electricity Prices vs. Henry Hub Natural Gas Price (Monthly Average) .................................................................................................................................................................... 37 Figure 3.19. Total Annual U.S. Natural Gas Generation, 1950–2016 ......................................................... 38 Figure 3.20. Heat Rates for Coal, Nuclear, and Natural Gas, 2002–2016 ................................................... 39 Figure 3.21. PJM Merit-Order Dispatch: Various Control Technologies ..................................................... 42 Figure 3.22. Changes in U.S. Coal Capacity, December 2014–April 2016 ................................................... 44 Figure 3.23. Average Coal Plant Capacity Factors, 2008–2014 ................................................................... 45 Figure 3.24. Projected and Actual Coal Retirements, 2008–2018 .............................................................. 46 Staff Report on Electricity Markets and Reliability U.S. Department of Energy Figure 3.25. VRE Generation by Fuel as Percentage of Total U.S. Generation, 2002–2016 ....................... 48 Figure 3.26. Cumulative U.S. Utility-Scale Wind and Hydroelectric Generation Capacity, 1915–December 2016 ............................................................................................................................................................ 48 Figure 3.27. Relationship between the PTC and Annual Wind Capacity Additions .................................... 50 Figure 3.28. VRE Penetration as a Percentage of 2016 Generation versus Retired Capacity since 2010 as a Percentage of Non-VRE Capacity ...............................................................................................................
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