DOE grid ‘grenade’ shakes up reliability debate

Source: Geof Koss, Sam Mintz and Hannah Northey, E&E News reporters • Posted: Wednesday, October 4, 2017

The Department of Energy’s controversial call to implement market reforms to boost coal and nuclear power is drawing mixed reviews on Capitol Hill, as lawmakers weigh the proposal’s effect on oil and gas and other energy sectors.

DOE wants the Federal Energy Regulatory Commission to quickly take action on the notice of proposed rulemaking unveiled last week, saying the independent regulatory agency should compensate operators for “reliability and resiliency attributes of generation with on-site fuel supplies” (Greenwire, Sept. 29).

Critics of the proposal say it “rolled a grenade in the room” by putting the focus squarely on plants that have 90 days of fuel on-site, which many industry sources said would appear to benefit a number of struggling nuclear plants and some coal units. But FERC is signaling it intends to take fast action on the plan.

Senate Energy and Natural Resources Chairwoman Lisa Murkowski (R-Alaska), who has jurisdiction over both DOE and FERC, said in a statement she had “respect” for Perry “for taking an action that he believes is necessary.”

Perry’s move “will spur action on a debate that has been underway since the start of this decade,” Murkowski added, noting she looks forward “to seeing the record develop even further, and will be following the proceedings closely.”

Murkowski said yesterday she understood the qualms of various energy sectors over Perry’s proposal.

“Is this going to be a situation where you’re going to have the secretary kind of pick winners and losers, if you will?” she asked E&E News. “I certainly would hope that that is not the direction.

“I am one of those who really believes in the ‘all-of-the-above,’ and I don’t think that it is inconsistent to talk about renewables at the same time that I talk about what we need to be doing within the [National Petroleum Reserve-Alaska] with our oil and our gas. I don’t think that that is inconsistent,” Murkowski added. “And when Secretary Perry was here before the committee, he reaffirmed that he too has that view of the world.”

Asked how the proposal could affect her own state, which largely exists disconnected from major electric grids, Murkowski noted the University of Alaska, Fairbanks, is building the only new coal facility in the country.

“They’ve been trying to get natural gas and haven’t been able to do that, so they continue to rely on coal,” she said. “But much of our coal is for export.”

Sen. Maria Cantwell (D-Wash.), the Energy Committee’s ranking member, was dismissive of Perry’s “radical proposal.”

“Secretary Perry has embraced an obsolete view of the grid,” she said during a committee hearing yesterday. “This proposal would bail out coal and nuclear power plants at the expense of everyone else, rising electricity rates for other consumers. Natural gas, renewable efficiency and storage, and most importantly the consumers would lose out in this proposal. I hope FERC rejects it and his unsolicited, backward proposal.”

Senate Environment and Public Works Chairman John Barrasso (R-Wyo.) said yesterday he hasn’t delved into the details of DOE’s proposal but lauded its goal.

“In terms of what we focus on in energy, and you need it all, you need stable baseload power to make sure that’s there when the wind isn’t blowing and the sun isn’t shining,” Barrasso told E&E News, noting he spoke at a National Mining Association event on the proposal earlier in the day.

Wyoming is not only a major producer of coal, which it also burns to generate power, but also is the No. 1 producer of uranium used to produce nuclear fuel. Barrasso noted his home state is a major wind power producer as well.

“We have huge wind farms, and our big issue is trying to get the transmission lines to move that wind to places where people want to use it because realistically where the wind is blowing most of the time are not necessarily places that most people want to live,” he said.

Barrasso sidestepped a question about industry concerns with the proposal but reiterated his support for the concept it espouses. “We need to make sure we have affordable baseload power and how do you do that,” he said. “But if you’re focusing on the structural stability of the grid for reliable power, you need to do something.”

House lawmakers also tried to wrap their heads around the move at two timely hearings yesterday, where both grid research leaders and energy industry advocates tried to get in their pitches.

At one hearing, in the Energy and Commerce Committee, industry representatives toed their technology lines. Nuclear and coal industry leaders feel positively about DOE’s rule, while renewables and natural gas want the agencies to pump the brakes.

Lawmakers, though, are largely holding their views close to the vest, with a few exceptions — mostly on the Democratic side.

“This is quite a misguided effort that they need to take back to shop and work on,” said Rep. Kathy Castor (D-Fla.).

Rep. Gene Green, a Texas Democrat, also said he has concerns with the rule. “I’m afraid the latest move may artificially tip the scale,” he said.

And Rep. Marc Veasey, another Texas Democrat, said at a separate hearing in the Science, Space and Technology Committee he is “very concerned with how the DOE may be using and redefining grid resiliency to accomplish a political agenda.”

Under questioning from Rep. Mark Takano (D-Calif.), four experts testifying before that committee yesterday all said they do not believe subsidies for the coal industry are an effective or cost-efficient way to make the grid more resilient.

All eyes on FERC

Ultimately, it likely will not matter what lawmakers think — the ball is in FERC’s court.

James Danly, FERC’s general counsel and the first agency official to speak publicly since the DOE announcement Friday, said yesterday at a Senate hearing the agency plans to solicit comments and then “review them and take the appropriate action within the 60-day time frame.”

The DOE notice of proposed rulemaking had directed FERC to “take final action” within 60 days.

But that rushed timeline, which experts have said may be impossible to legally meet, has also been challenged by an unlikely coalition of the rule’s opponents, including renewable and oil and gas industry groups.

In a motion filed with FERC yesterday — which was an update of another filing from Monday — the 11 groups asked for an extension of FERC’s comment deadline.

FERC has said it will allow 21 days for initial comments and 15 days for replies — an uncharacteristically squeezed comment period. The renewable and gas and oil groups want 90 days to allow for comments and 45 days for replies.

“We encourage the Commission to adopt extended deadlines for these comments that are more commensurate with the stakes of this proceeding and are at least the same duration that the Commission typically affords such matters of this importance,” they wrote.

The time factor is on the minds of lawmakers too.

“The time frame set by the DOE is extraordinarily too short for such a transformative, impactful type of shift in federal policy that is going to impact all consumers across the country and all businesses,” said Castor. “Hopefully smarter heads will prevail on that time frame.”

Industry unhappy

The nation’s largest pipeline lobby expressed “deep disappointment” with Energy Secretary Rick Perry as former transition officials such as Tom Pyle and groups including the American Petroleum Institute took to Twitter to vent frustration in a series of tweets. On the other side, the nuclear and coal industry applauded the move as a win. Energy insiders are now wondering what the new alliances are — and if they’ll last.

“The question is, does DOE view this as a conversation opener or are they going to advocate for this?” said Mike McKenna, a Republican energy lobbyist who briefly served on President Trump’s transition team. “I’m not sure anyone knows the answer to that question, including the DOE.”

Trump has for months vowed to save struggling coal and nuclear plants, and McKenna said the DOE request for action from FERC was an obvious “first step.” McKenna said he understands the concern but questions why anyone would be surprised.

“The amount of anxiety among natural-gas-fired generators and their suppliers is palpable,” he said. “Whether it has a lasting effect on their relation with the department, that’s an open question.”

Lobbyists were careful not to cast Perry’s request as an affront to the oil and gas industry, but instead some offered a cautious approach.

“It’s too early to answer that question,” said Pyle. “I think the department and administration are legitimately struggling with a valid attempt to determine the value of coal and the nuclear fleet, but DOE itself has a limited role in determining the direction of that conversation.”

FERC won’t take this up in earnest until the rest of the commission is confirmed, Pyle added.

Reporters Christa Marshall and Nick Sobczyk contributed.