Author Describes Writing Controversial DOE Grid Reliability Report

When Energy Secretary Rick Perry set out this year to prove that Obama-era regulations were killing coal plants and undermining grid reliability, he turned to a veteran energy consultant from his home state of Texas to write the report.
Alison Silverstein was known to be proficient in energy efficiency and the effects of renewables, and she had worked in Washington as a senior advisor to a George W. Bush appointee. When Perry brought Silverstein back to Washington in May, she reviewed data for several weeks and began to outline the "Staff Report on Electricity Markets and Reliability." On Friday in Chicago, she described what happened when her supervisors reviewed her work:
I got to DOE, and I set up a storyboard, and I started writing. And they called me in one day and they said, 'There’s nothing in here about regulation, the horrible effects of regulation on all of these plants.'
I said, 'Well, it wasn’t a big deal.'
And they said, 'But you’re biased against regulation.'
And I said, 'Bring me the data. I’ve been in the building three or four weeks now, you guys are the ones who own the issue. Prove to me, bring me all of your research on how regulation has killed these.'
'Well, we don’t have any.'
'Then how am I supposed to do this?'"
The Staff Report Silverstein authored finds that regulation is not among the greatest contributing factors to the closure of coal and nuclear power plants. Neither, it says, are renewables. Perry nonetheless cites the report in a proposed rule he submitted to the Federal Energy Regulatory Commission (FERC) in September, calling for subsidies to prop up coal and nuclear plants. Perry's proposed rule diverges so sharply from the Staff Report, Silverstein said, that it's "as though they had never read it."
Silverstein said she studied the effect of regulations like the Mercury and Air Toxics Standard, a rule passed in 2011 that required power plants to control emissions of certain pollutants by the end of 2015.
"So I looked a lot into regulation and here’s what I discovered: (in) the early days of all of the Obama Administration regulations, everyone said the sky is falling, we’re going to have to fix all of these plants simultaneously, the walls will fall apart as we know it. Um, not so much. It turns out that when people have to actually do a job they find cheaper ways to do it," she said Friday at a panel sponsored by the Energy Policy Institute at the University of Chicago (EPIC).
"EIA analysis has indicated that in fact, significantly fewer plants had to close (than predicted), and that a lot of the modifications for these regs were done faster and cheaper, instead of the whole disaster that people had anticipated."
The coal plants that did close were already failing economically, Silverstein said, and their operators used the regulations' 2015 compliance deadline as a logical date to close them.
"These guys made a perfectly logical economic operations decision," she said of the coal-plant operators. "They said it doesn’t make sense to spend more money to retrofit a plant that’s already out of money. So what they decided to do—they decided this in 2013—(they decided) to do the Thelma-and-Louise strategy. That regulation date, the compliance deadline, is the edge of the cliff, and I’m just going to gun it and run this flat-out as fast as I can and get every possible kilowatt hour out of it before I have to shut it down—Boom!—and go out in a blaze of glory, literally. So that’s why you saw all those retirements at that deadline. It’s just common sense operational strategy not to piss away money."
That explains why the closures clustered around the compliance date of the new regulations, but it doesn't explain why plants were closing. Coal and nuclear plants were losing money not because of regulations or renewables, Silverstein said, but because of competition from cheap natural gas and the flattening demand for electricity.
"Wholesale competition works. It did exactly what it was supposed to do. It shut down inefficient plants. It shut down unneeded stuff. It made it much clearer that you don’t piss away good money after bad. If prices are going to keep falling and you’re not in the game, get out early," she said.
"The most important thing: the coal and nuclear plants that retired were old, really old, and really inefficient, and they had earned their AARP cards, and it was time for them to get off the playing field and go enjoy a nice retirement somewhere. A whole lot of these plants retired well before renewables got big."
Renewables have had some economic impact, too, but their greatest impact—combined with advances in information and communication technology—has been to speed up the grid. Since distributed solar, smart meters and energy apps have blossomed across America, the grid moves faster, Silverstein said—too fast for coal and nuclear.
Coal plants become more expensive to operate when they cycle on and off, "and a nuclear plant, what you want to do is turn it on and walk away and come back 18 months later and refuel it. You don’t want to cycle that puppy at all.
"They cannot provide the essential resiliency and reliability services that we need, like voltage support, reg-up, reg-down, primary frequency response, secondary frequency response. Coal and nuclear plants are just not good at anything but spinning reserve. They can’t do anything except generate electricity that was once cheap and now ain’t so cheap relative to the other stuff."
Silverstein finished writing the Staff Report on July 7 and returned to Texas on July 8. DOE held onto the report for another seven weeks before releasing it with a list of recommendations and a cover letter. Silverstein sarcastically said those documents were "kind of related" to the report in that they used some of the same words, like "baseload" and "reliability." Silverstein released her own set of recommendations in October in an opinion piece for UtilityDive. Despite the divergent recommendations, she said most of the technical report remains as she wrote it.
"What DOE mostly did was pretty up the graphics and mush up some of the language in the technical study," she said.
DOE Administrators may have been hamstrung in any effort to revise the report in July and August because Silverstein's draft had been leaked to Bloomberg in late June.
Even though the report does not seem to support the case for subsidizing coal and nuclear, in September Perry wrote a letter to FERC proposing subsidies and citing the Staff Report as support.
"I was nowhere near this," she said. "It got cooked up long after I was back in Texas cooling my heels."
Silverstein has a record with FERC, having served as a senior advisor to FERC chairman Pat Wood III, a Bush appointee, from 2001-04. She followed Wood from the Texas Public Utility Commission.
The Department of Energy did not immediately respond to a request for comment.
In proposing the rule, Perry invoked an obscure power the Department of Energy had never used before: the ability to set an agenda item before FERC (John Bullock of the Harvard Environmental Law Review tells us DOE has used that power before, but not since the 1980s). EPIC Director Sam Ori asked Silverstein why DOE would take that unusual step instead of following FERC's usual procedure for regulating electricity markets.
"If you work for an administration that is making a big deal about helping coal, and you have a lot of senior staff people who don’t have a significant amount of expertise, either about the industry or about the administrative and policy issues that you are dealing with, I think what you do is say, 'Heck, we’ll send over something that’s a Hail Mary, does all the right political stuff about coal and nuclear. We’ll be the heroes, and it’s FERC’s job to do the dirty work,'" she said.
"Perry and his team are doing all the right things for the cause, and if it works, Great! If it doesn’t work, it’s someone else’s fault. I think that’s the raw political answer."
CLARIFICATION: This story and its headline originally stated that Silverstein was pressured to find fault with regulation. After it was published, Silverstein said she did not feel pressured. That term was the reporter's interpretation of the dialogue quoted above and has been removed from the story at Silverstein's request. "I was the hired help and DOE had the right to make it say whatever they wanted to," she said. "I was not pressured to fault regulations — they told me to look at it and I looked at it, but they didn’t tell me what to write in the drafts and I didn’t write stuff that wasn’t supported by facts on regulation or anything else."