There’s a Price to be Paid for Less Reliable Electricity | U.S. Chamber of Commerce
Sep 20, 2017 - 4:00pm

There’s a Price to be Paid for Less Reliable Electricity


Senior Director, Policy for the Global Energy Institute

Imagine a place where your light switch doesn’t always work, your air conditioning isn’t always available, and you can’t always cook in your oven.  And, to add insult to injury, you are paying more for your electricity than you do today.

Unfortunately, America could be closer to that kind of place than many think if we fail to appreciate the diverse balance of electricity generation resources that keep our lights on, our economy humming, and people cool in the summer and warm in the winter. 

In addition to more frequent power outages, the erosion of our current electricity resource mix–which includes meaningful contributions from coal, natural gas, nuclear, and renewable resources–also threatens to take a bite out of your wallet. To quantify this loss, the Global Energy Institute partnered with other groups to perform a comprehensive analysis conducted by the respected global research firm IHS Markit. This report–Ensuring Resilient and Efficient Electricity Generation–sets forth the adverse employment and economic impacts that would occur if the nation lost the significant contributions made today by coal and nuclear generating technologies. 

In particular, today’s diverse mix of electricity resources saves us $114 billion per year in electricity costs.  As a result, the cost of electricity is 27 percent lower than it would be without today’s diverse mix.

Higher electricity prices would ripple throughout the economy, meaning we would have to pay more for the products we purchase, the food we consume, and the services we hire.  The new report shows that higher electricity prices resulting from the erosion of our current resource mix could lead to the loss of 1 million jobs, the loss of $158 billion to our economy, and the loss of up to $845 in disposable income for every American household per year.  These are losses worthy of our attention. 

While we may primarily envision significant storms like Hurricane Irma when we think of weather events and electricity, there are many other weather events that could affect our power supply such as cold snaps and heat waves. We saw one of these noteworthy events in 2014 when the polar vortex plunged many Midwest and East Coast population centers into a deep freeze.  Thankfully, power suppliers were able to keep the heat on and the electricity grid up and running, despite spikes in demand, precisely because they had a diverse mix of generation resources upon which to call for electricity.

However, that may not be the case in the future. In 2014, coal-fired and nuclear power plants were essential in keeping the grid powered.  Today, those two sources are at risk. 

Last month, the Department of Energy (DOE) released a study that analyzes the challenges facing the electric grid and some of the very resources that kept the lights on back in 2014.  The Staff Report to the Secretary on Electricity Markets and Reliability concluded that today’s electricity markets are failing to support many of the positive attributes of our nation’s diverse electricity portfolio.  The DOE report found that while power markets do a fair job of keeping costs low, various state and federal mandates, regulations and subsidies, along with independent market factors, are threatening to close down the very same nuclear plants and coal generation units that serve as the backbone of our reliable and resilient power supply.  This market failure leaves us vulnerable to future power outages and the economic damages previously discussed.

But, these losses are not inevitable.  We can avoid them by keeping the diverse mix of resources that we currently enjoy.  If power markets properly value the beneficial attributes of today’s electricity mix, including the unique resiliency provided by coal and nuclear generation resources, the markets will ensure that those attributes continue to be available.  Only then will the markets safeguard our people and our economy from the next polar vortex.      

Ensuring Resilient and Efficient Electricity Generation shows that even if a less diverse future energy mix succeeds in keeping the lights on most of the time, that electricity will cost all of us and the economy more, hurt jobs, and divert more of our hard-earned income toward energy bills.  We urge federal regulators and legislators to act to ensure that the positive attributes of all generation resources are properly accounted for, and valued, as power markets evolve.  If power markets account for the positive attributes of different generation resources, our most reliable and resilient sources, particularly those powered by coal and nuclear technologies, will continue to provide our cities and towns with dependable and affordable electricity.

Editor's note: This originally appeared on the Global Energy Institute's blog.

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About the Author

About the Author

Heath Knakmuhs
Senior Director, Policy for the Global Energy Institute

Knakmuhs studies, develops, and communicates strategic energy policies and initiatives with a focus on the electric power sector. He also examines the impact of regulatory action, marketbased factors, and emerging threats on the American electric grid.