Facing intense opposition, the Department of Energy has decided to frame its proposal to prop up uneconomic coal and nuclear power plants through subsidies as a national security issue. The proposal, sent to federal regulators late last month, is under attack from industry officials and environmental groups who believe it would push a huge amount of unnecessary costs onto consumers and reverse gains made in reducing greenhouse gas emissions.
A DOE official stressed Tuesday that the proposed subsidies represent an effort to strengthen national security through grid resiliency. Sean Cunningham, executive director of DOE’s Office of Energy and Systems Analysis, dismissed arguments that the proposal, which is currently under review by the Federal Energy Regulatory Commission (FERC), is about picking winners and losers among competing fuels for power generators.
“This is about national security,” Cunningham said at an event in Washington, D.C., sponsored by the Bipartisan Policy Center. “National security is a winner no matter how you want to argue about it. We are picking that. Part of that is fuel-secure generation.”
The nation’s security is better protected by power plants that have storage onsite “to help the grid bounce back in the event of major fuel disruptions to other fuels that don’t have onsite storage,” Cunningham added. This argument, however, has not gained much traction among industry experts. “Having fuel on-site does little for resilience. The plants are not indispensable. No one expects energy outages if baseload plants continue closing,” Dave Roberts at Vox explains.
“During Hurricane Harvey, the coal piles were soaked and weren’t able to be used. During the  polar vortex, the coal piles were frozen,” Malcolm Woolf, senior vice president of policy for Advanced Energy Economy, said on a recent conference call.
Earlier this month, Energy Secretary Rick Perry was asked at a congressional hearing whether DOE had measured the proposed rule’s cost to consumers. “I think you take costs into account, but what’s the cost of freedom?” Perry responded. “What’s the cost to keep America free?”
At Tuesday’s event, Cunningham was asked to elaborate on what Perry meant when he used “freedom” to justify the new subsidy program. Cunningham declined to explain the meaning behind Perry’s comment. “The point the secretary was making there was pretty obvious,” he said.
Prior to joining DOE this past summer, Cunningham worked at the law firm Balch & Bingham LLP, where he represented electric utilities. He is a member of the Federalist Society, a right-wing legal organization, and serves as a lecturer for the Institute for U.S. Law.
Energy Innovation Policy & Technology LLC, a San Francisco-based consulting firm, researched DOE’s proposal and determined that its proposed subsidies for power plants with a 90-day onsite supply of fuel — almost exclusively coal and nuclear plants — could cost customers up to $10.6 billion per year.
In its new report, Energy Innovation said the $10.6 billion annual subsidy will directly support uneconomic coal and nuclear generators, could bring retired coal generation back online, and would threaten solar and wind projects across the country. The proposal’s costs will be borne on the back of U.S. businesses and residents, according to the report.
“These costs are unnecessary; markets are operating today as intended, with record low prices, and no reliability concerns. A mere 0.00007 percent of outages since 2012 have been caused by fuel supply emergencies — this [proposal] is aiming to solve a problem we do not have,” Energy Innovation said.
Appearing on the same panel as Cunningham, John Moore, senior attorney at the Natural Resources Defense Council and director of the Sustainable FERC Project, spoke out against the DOE proposal, saying it would exacerbate climate change — a major national security issue — by propping up coal-fired power plants.
Climate change is widely viewed as a major contributor to extreme weather. Ironically, Moore said, the security of distribution and transmission lines — as seen recently in Puerto Rico and Florida — often is compromised by intense storms that are being fueled by carbon dioxide emitted by coal-fired power plants.
Furthermore, the Trump administration is “bootstrapping” itself by using the national security argument to justify its proposal to subsidize coal and nuclear plants. “They are trying to cram as many different reasons to get their preferred outcome from the [proposal]. Even if the DOE proposal was dead on arrival for a lot of people in its original form, coming up with the new reasons seems to be the name of the game here,” Moore told ThinkProgress after the event.
As part of the plan, DOE proposed that FERC provide new revenues and guaranteed profits to the owners of aging coal and nuclear power plants. Specifically, DOE wants plants that can store 90 days’ worth of fuel onsite to be offered extra market compensation — an effective subsidy.
DOE suggested the U.S. electric system is unreliable, and claimed coal and nuclear power are crucial to saving it. The proposal was sent to FERC about a month after the DOE released an electric grid study that Perry had ordered to find out if renewable energy had an unfair regulatory advantage over coal and nuclear plants.
However, the grid study does not back up the proposal sent to FERC. Instead, the grid study came to the conclusion that there’s no reason to keep coal plants open.
Almost every sector of the U.S. power industry, except coal and nuclear companies, has objected to the proposal. But FERC Chairman Neil Chatterjee has expressed support for the plan, stating that it “fits comfortably within those efforts” to facilitate the creation of market structures that promote grid reliability.
Eight former members of FERC — including five former chairs — filed comments with the commission opposing Perry’s proposal. The former commissioners said Perry is seeking to reverse a quarter-century of FERC reforms that have created a marketplace for electric power generators and that many of the coal plants he is aiming to bolster have no advantage when it comes to reliability.
Headquartered in Washington, FERC regulates the interstate transmission of natural gas, oil, and electricity and oversees the wholesale sale of electricity. The commission’s policies have played a major role in determining the extent to which renewable energy, energy storage, and energy efficiency are integrated into power markets.
Four of the former FERC commissioners who signed the letter to the commission appeared on a separate panel at the Bipartisan Policy Center event. Pat Wood, who served as commission chairman under President George W. Bush and chairman of the Public Utility Commission of Texas, organized his fellow former FERC commissioners to file the comments.
Wood said DOE’s proposal took him by surprise because Perry was a strong advocate of competitive power markets when he was governor of Texas. “To see this, it was like your best friend drove his truck through your house,” Wood said of Perry’s proposal.