The Trump administration is pulling out all the stops to give a leg up to coal and nuclear, moving to take unprecedented action to intervene in the U.S. electricity markets to essentially bail out failing plants as they face an existential threat from natural gas and renewable energy.
For more than a year, the Trump administration has been trying to come up with a justification to boost coal and nuclear power plants, but several attempts have failed to pass legal muster. In 2017, Secretary of Energy Rick Perry proposed offering a subsidy of sorts to power plants that held a 90-day supply of fuel on site, a definition that only coal and nuclear could meet. FERC rejected that proposal earlier this year.
But Trump isn’t given up yet. Last week, the President basically ordered Sec. Perry to come up with some way to keep unprofitable plants open, a desperate bid that has attracted criticism from many directions.
“Impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our nation’s energy mix and impacting the resilience of our power grid,” White House spokeswoman Sarah Sanders said in an emailed statement to Bloomberg on Friday. The President ordered Secretary Perry “to prepare immediate steps to stop the loss of these resources and looks forward to his recommendations.”
The legal logic is based on some federal laws that use national security as justification to keep the aging coal and nuclear plants open. The administration argues that because coal and nuclear can keep fuel on site, and are not dependent on pipelines, they are more secure than other forms of electricity generation.
The proposal calls for the Energy Department to direct the purchase of electricity from a list of specific facilities “to forestall any future actions toward retirement, decommissioning or deactivation,” according to a memo that was obtained by Bloomberg News. In other words, the government wants to force consumers into buying more expensive electricity from failing coal and nuclear power plants.
That would then buy time to conduct a two-year study that would look at vulnerability to the U.S. electricity system, including a focus on the vulnerabilities of gas supplies via pipelines.
The move is odd, given the alleged sanctity of the free market for Republicans and the supposed antipathy to picking “winners and losers.” But Trump’s proposal is a brazen attempt to prop up specific industries – assets that are failing in the market – at the expense of other, more efficient and more profitable entities. Related: OPEC’s Dilemma: Demand Destruction Or Production Boost
Predictably, the outcry came from all corners. Environmental groups are dead set against the proposal, but so too are some conservative groups, free market proponents, the oil and gas industries and the wind and solar industries.
Here is a small sampling of the reaction:
• A spokesperson for the American Petroleum Institute said propping up coal and nuclear plants “that are struggling to be profitable under the guise of national security would be unprecedented and misguided.”
• “This is an outrageous ploy to force American taxpayers to bail out coal and nuclear executives who have made bad decisions by investing in dirty and dangerous energy resources,” said Mary Anne Hitt, director of Sierra Club’s Beyond Coal campaign. “It will be soundly defeated both in the courts and in the court of public opinion.”
• "The federal government should not use the pretext of 'national security' to pick winners and losers in the energy markets and it must certainly not treat U.S. manufacturing jobs as inferior to the jobs at uneconomic power plants,” said John P. Hughes, CEO and President of the Electricity Consumers Resource Counsel, a national association of large industrial users of electricity. Related: Russia’s Middle East Strategy Explained
Even grid operators are dumfounded by the thesis that the grid needs the government’s assistance. “There is no need for any such drastic action,” PJM Interconnection, a grid operator that oversees electricity markets in the mid-Atlantic, said in a statement. “Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers.”
PJM ensures the reliability of electricity in 13 states plus DC, serving over 65 million people. “The PJM electrical grid is more reliable than ever, with 23 percent reserve margins and billions of dollars of new investment.” Despite the wave of coal plant retirements, there is little evidence of a threat to the grid.
In other words, pretty much everyone is opposed to the Trump administration’s desperate bid to bailout the coal and nuclear industries, based on faulty logic and a questionable legal foundation, except the obvious beneficiaries – the coal and nuclear operators.
By Nick Cunningham of Oilprice.com
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