Trump Administration May Give Mouth-To-Mouth To Resuscitate Coal Industry
The Trump administration may try to resuscitate the coal industry by using laws that, in effect, conclude that national security is at stake because the reliability of the electric grid is at risk. That is a hard case to make both to Congress and to the public, which is experiencing stable electricity prices and cleaner options.
The White House has two regulatory levers at its disposal: The first is one developed during the Truman era that was used to help the steel sector and the second is one that authorizes the U.S. Department of Energy to ensure stable electricity supplies under a 2015 highway measure. Both ideas are in response to a prior rejection by federal regulators that would have subsidized older coal and nuclear plants.
“Power plant retirements are a normal, healthy feature of electricity markets,” says a letter written to the Department of Energy by a far-ranging group of energy interest — from American Wind Energy Association to the Natural Gas Supply Association. “There is no emergency or threat to the national defense on which the Department could lawfully base the exercise of its emergency.”
Indeed, the group that also includes the Advanced Energy Economy, the American Petroleum Institute and the Electric Power Supply Association, goes on to say that the electricity market is healthy and is undergoing a transformation — and that the retirement of older and less efficient units is quite natural.
According to Bloomberg New Energy Finance, about 16,200 megawatts of coal and 550 megawatts of nuclear are expected to retire in 2018. It adds that as many as 33 more nuclear plants could close by 2021 because they are uneconomic.
To be clear, propping up nuclear plants is premised on the prioritization of low-carbon power production. As such, nuclear energy provides about two-thirds of that CO2-free electricity in the United States. Natural gas would replace much of that, which has been and would continue to elevate levels of heat-trapping emissions.
Multiple states are thus enacting legislation that subsidize low-carbon power production, which includes not just nuclear power but also wind and solar energies. The policy pushes in combination with improved technologies mean that solar panel prices have fallen 30% in the last year and they will be 20% less this year.
New Jersey, for example, elected to keep the Public Service Enterprise Group’s Salem and Hope Creek nuclear plants operating — facilities that support 5,800 jobs, supply power to 3 million homes and produce 90% of the state’s carbon-free power. The units will receive an $11 per megawatt-hour subsidy.
Cold Reality
Briefly, the administration is considering a policy enacted in the 1950s that was set up to keep the military up-and-running during wartime. Because U.S.-based military institutions get their power from privately-owned utilities, any risk to their power grids would put American national security at risk. This particular policy was used in 2001 to keep natural gas flowing to the state of California, where the regulatory regime had collapsed and where state utilities were suffering.
The 2015 Highway Bill gives the U.S. energy secretary the ability to order up resources to ensure the lights stay on and to maintain economic production. “Resiliency and reliability” are the foundations for American prosperity, Energy Secretary Rick Perry recently told the House Committee on Science, Space and Technology.
However, “The planned retirement of old coal and nuclear plants that is due to economic competition is not a national emergency,” responds Kenneth Reich, a Boston-based energy and environmental lawyer, in an interview. “The U.S. has adequate reserves of oil and natural gas … and both solar and wind are on their way to becoming significant energy sources. The proposal under discussion by the administration is simply a thinly disguised attempt to prop up coal and nuclear at the expense of oil, gas and renewables.”
