Trump orders protection for US coal and nuclear, despite power system resilience

US President Donald Trump has responded to the country’s struggling coal and nuclear power industries by asking the US Secretary of Energy Rick Perry to take ‘immediate steps to stop the loss of these resources’, despite a lack of concern from the US energy regulator on coal and nuclear closures impacting the country’s security of energy supply.

Perry first made proposals that the US Federal Energy Regulatory Commission (FERC) should act to set up a mechanism to provide extra payments to coal and nuclear plants in September last year (see Energy World November 2017). He argued that coal and nuclear plants should receive bolstered prices for their electricity to reward their ‘reliability and resilience attributes’. Energy industry and environmental groups did not respond well to the proposals.

The new statement from the White House says that ‘impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of [the US] energy mix, and impacting the resilience of [its] power grid.’ It says that a ‘strong and secure’ US grid protects US national security.

The profitability of US coal and nuclear power is being undermined by cheap supplies of fracked natural gas in the country, as well as cheap renewable energy. Coal and nuclear plants have closed or face closure, or have halted construction, across the country.

Analysis from Bloomberg New Energy Finance (BNEF) indicates that over a quarter of US nuclear power plants don’t make enough profit to cover their operating costs, and this could lead to more early retirements. Out of the US’ 66 nuclear plants, the analysis indicates that 24, or 32.5 GW, could close by 2021. BNEF says around 16 GW of US coal capacity will also either retire or be announced to retire this year.

Bloomberg reported from a leaked memo that the US Department of Energy (DOE) is now seeking to create a ‘strategic electric generation reserve’ and compel state grid operators to buy electricity from struggling plants over the next two years.  

Members of FERC, which rejected Perry’s original request in January this year, reportedly indicated to a hearing in June that they do not see a national security risk from the closure of coal and nuclear plants in the US.

The action to support the plants, if enacted, has been described as an ‘unprecedented intervention’ into US electricity markets. Critics range from green groups to industry lobbyists, which state that the move would raise prices for consumers. A coalition that included both oil and gas and renewables organisations released a statement condemning the action.

A blog from the US National Resources Defense Council says that if the DOE carries out its proposals, ‘it would be an insult to true national security needs, America’s electricity customers and markets, and FERC.’ It indicates that FERC’s ongoing investigation into the US power system is indicating that the US grid is already resilient. It questions the legality of the leaked proposals, and the idea of utilising national security arguments to justify the subsidies.

The largest US grid operator, PJM, said that there was ‘no immediate threat’ to system reliability and that the intervention would be costly to consumers. It said that its grid was more reliable than ever, and that there is ‘no need for any such drastic action’.

The Nuclear Information and Resource Service (NIRS) said the move could cost US consumers an extra $17bn a year on nuclear power alone, with a similar amount for coal. It also said it could hinder growth of the US renewables industry. Tim Judson, Executive Director of NIRS said: ‘Betting on old, increasingly uneconomical nuclear and coal power plants as a national security strategy is like gold-plating a Studebaker and calling it a tank.’