On June 1st President Trump directed Energy Secretary Rick Perry to halt the closure of competitive coal and nuclear power plants, which are being pushed offline by less expensive energy sources. A leaked memo outlined a plan to subsidize these facilities using Energy Department emergency authorities under the Federal Power Act and a Cold War-era defense law enabling the Department to nationalize parts of the power sector. The memo claimed that saving these “fuel-secure” plants is a matter of national security.
The North American Electric Reliability Corporation and regional grid operators have not found evidence that a grid emergency exists that warrants massive interventions. PJM, the grid operator that would be most affected by coal and nuclear bailouts, said “there is no immediate threat to system reliability” and that such federal intervention would be “damaging to the markets and therefore costly to consumers.” Large industrial consumers went so far as to say that “the cost consequences of this planned [Energy Department] action will devastate U.S. manufacturing.” In addition to adding billions in subsidy costs to consumer bills, artificially retaining the bulk of unprofitable facilities would deter new, innovative low-cost entry into power markets.
Proponents of the administration’s move are primarily advocates for coal and nuclear power. Consumer, free market, environmental and independent experts have come out in strong opposition. Experts at a recent grid resilience workshop hosted by Resources for the Future and the R Street Institute found no pressing threat to system resilience from the closure of power plants and suggested more emphasis on transmission and distribution elements, which are by far the most vulnerable elements on the system. From a more holistic grid resilience perspective, experts contend that retaining unprofitable coal and nuclear provides low value but over two dozen higher value actions to address resilience threats exist.
The Federal Energy Regulatory Commission (FERC) unanimously rejected the Energy Department’s first attempt to save coal and nuclear plants. At the same time, FERC opened a preceding on grid resilience to evaluate and consider reforms in a fact-based manner. It is unclear whether and how the next move by the Department would involve FERC.