Blame Game

“Government is like a baby. An alimentary canal with an appetite at one end and no sense of responsibility at the other.”, Ronald Reagan

The utility industry challenges discussed in the previous commentary, Reliability Roulette, have already begun to manifest themselves in service interruptions, first in California and most recently in Texas. In both cases, the blame game began immediately, based largely on impressions, limited information and CYA. The stage is already being set for more of the same.

The renewable energy industries assert that there are large backlogs of renewable energy projects currently being delayed by regulatory approvals, financial uncertainty and issues with transmission access. While these issues are not new, they have become more visible and more contentious with the establishment of the Administration wish to transition the electric industry to net zero emissions by 2035. While government is demanding this massive change in the electric utility industry’s supply portfolio, it accepts no responsibility for the impediments it places in the industry’s path.

The renewable energy industries are taking much the same position as the government regarding the required transition. Generators seeking to sell power to the electric grid have historically constructed their facilities in relatively close proximity to utility transmission facilities and provided the facilities necessary to make the grid connection. However, renewable generators frequently do not have the flexibility to locate facilities with convenient access to the grid. They currently take the position that it is the responsibility of the grid operators to extend the grid to their facilities. This has the added benefit of transferring the investment required to connect to the grid from the renewable generator to the grid operator, reducing the overall investment in the renewable generating facility and lowering the cost of the power generated.

The addition of intermittent, non-dispatchable generation to the transmission grid in growing quantities and the consequent displacement of dispatchable generating capacity produces the need to store excess renewable power, when available, to meet customer demand when intermittent power is not available in sufficient quantity. The renewable energy industries are taking the position that the construction and operation of grid-scale energy storage facilities, required only by the intermittency of their generation, is nonetheless the responsibility of the grid operators. This further reduces the apparent cost of the renewable generation, while transferring intermittency related costs to the grid operators.

As increased renewable generation replaces dispatchable generation, it produces a dead weight loss of the investment in the dispatchable facilities while creating a demand for increased grid-scale storage. Remaining dispatchable generators are operated less frequently, increasing the cost of the power they provide.

This situation positions the renewable energy industries, which rely on federal and state subsidies, incentives and generation preferences, to tout their low cost while blaming government for regulatory delays and the grid operators for problems with grid access, grid adequacy and grid-scale storage adequacy as well as the rising cost of electricity despite the lower cost of their renewable electricity.

Of course, any similarity to the baby described by former President Reagan above is purely coincidental.