Energy Department’s recommendations would bolster coal, nuclear power plants

Source: By Steven Mufson, Washington Post • Posted: Thursday, August 24, 2017

A much-anticipated Energy Department report on the electricity grid made recommendations for regulatory changes that would bolster coal and nuclear power plants.

The changes, if adopted, would alter the way prices are determined in electricity markets, ease environmental reviews for coal plants and speed the permitting process for a variety of energy sources.

The 187-page report rejects the notion that the coal and nuclear plants that have been forced to shut down over the past 16 years had been closed prematurely, noting that cheap, abundant natural gas had been the main factor — not environmental regulations or renewable energy sources as Republican leaders have contended.

“The biggest contributor to coal and nuclear plant retirements has been the advantaged economics of natural gas-fired generation,” the document states.

The Energy Department document carries little weight on its own, and most of its recommendations fall in the turf of other departments and agencies.

But the report has been seen as a test of whether the Trump administration is going to politicize government studies and disregard scientific evidence.

The in-depth look at the state of the grid quickly drew praise from coal and nuclear groups, and sharp rebukes from environmental and solar energy groups.

Among the recommendations is one that suggests that the Environmental Protection Agency ease permitting requirements for new investments at coal-fired plants, a process known as new source review.

It said that “the uncertainty stemming from” EPA’s new source review “creates an unnecessary burden that discourages rather than encourages installation of C02 emission control equipment and investments in efficiency because of the additional expenditures and delays associated with the permitting process.”

The report also endorsed price changes that would prevent solar and wind energy from providing energy at negative prices, which they can do thanks to federal tax credits.

This hurts other energy suppliers, especially in the nuclear industry, and the recommendation was welcomed.

“We’re very pleased with the top line recommendation for the implementation of long overdue energy market reforms,” said Joe Dominguez, executive vice president of regulatory affairs at Exelon, the nation’s largest nuclear power utility. “The big thing from our perspective is energy market price reforms. That’s something that’s been talked about in our sector for years. It’s real meat-on-the-bones stuff.”

The report suggested that the Nuclear Regulatory Commission speed up its permitting process so that it could continue to “ensure the safety” of new and existing nuclear reactors “without unnecessarily adding to the operating costs and economic uncertainty of nuclear energy.”

“The U.S. Department of Energy’s electric grid study reaffirms our view that nuclear energy is a key and necessary contributor to a clean, reliable and resilient electric grid,” Nuclear Energy Institute President Maria Korsnick said. “Today electricity markets do not properly credit nuclear energy for the numerous benefits it delivers, forcing plants to close years before the end of their useful lives and compromising grid reliability and resiliency in the process.”

Other industry groups praised the report. “The National Mining Association applauds the department for its timely analysis of the nation’s power grid and the recommendations it proposes,” the association’s president, Hal Quinn, said in a statement. He praised the report’s finding that government regulations and mandates had “accelerated the closure of a substantial number” of power plants.

Environmental and renewable industry groups slammed the report for failing to deal with climate change and the drive toward low carbon electricity, and noted that the final report differed from earlier drafts that had been leaked.

“This report is not worth the paper it’s printed on,” Earthjustice attorney Kim Smaczniak said in a statement. “Rather than embrace the progress we’ve made and move full steam ahead with the transition to clean energy, the Trump Administration is burning tax payer dollars on a report on ‘baseload’ power – an antiquated code word for coal and nuclear – to conjure up false attacks on clean energy.” Smaczniak added that “Worse, the report shows that science is not safe from manipulation under this Administration. Sound findings in the earlier draft of the report have been mysteriously excised, replaced by trumped up claims about the costs of environmental regulations. And this report says nothing about climate change.”

The Solar Energy Industries Association president Abigail Ross Hopper said in a statement that “solar and other renewables provide significant cost savings, relieve pressure on our nation’s infrastructure and improve the grid’s overall performance.”

And Graham Richard, chief executive of Advanced Energy Economy, a national business group, said that “this report seriously overstates the challenges associated with new energy resources. It also implies that certain power plants now losing out in the marketplace make an irreplaceable contribution to reliability and resilience, which is not the case.”

The electricity grid report has been the subject of political and corporate interest since April 14, when Energy Secretary Rick Perry asked the department’s staff and experts to produce a study explaining the reasons for the “premature retirement” of “baseload” coal and nuclear plants.

The framing was widely seen as setting up a document that would champion coal and nuclear and point to shortcomings of wind and solar.

But the report, which was written by the department’s career staff, rejects the premature label, saying that coal plant shutdowns have been the result of four factors: cheap, plentiful natural gas; the spread of ever-cheaper renewable energy; stagnant electricity demand; and government regulation.

It noted that the combination of the leveling in electricity demand and the construction of an additional 390,500 megawatts of power plants since 2002 “made significant amounts of older higher cost capacity redundant.”

Perry, in his response to the report, said it was important to study the effects of regulation and subsidies on electricity supply.

“The core objective of electricity regulation has always been, and should continue to be, to ensure a reliable and resilient electric supply system that serves customers in an equitable manner,” Perry said in a statement. “It is apparent that in today’s competitive markets certain regulations and subsidies are having a large impact on the functioning of markets, and thereby challenging our power generation mix. It is important for policy makers to consider their intended and unintended effects.”

The report also said that the aging power plants retired over the past 16 years were no longer being used as “baseload plants,” a phrase that means the plants can run 24 hours a day, seven days a week, unlike wind and solar. It said that the coal plants shut down in recent years were operating at a small fraction of their capacity, far less than the nationwide average for coal plants.

“Not every power plant retirement is cause for alarm,” the report cautioned. “While stakeholders may maintain that a power plant has been forced to retire prematurely based on one or more of the considerations above, the results of this study show that some observed power plant retirements are appropriate and consistent with markets as they are currently functioning.”

Energy Department officials who briefed journalists on the report said the country is “at a pivotal moment” for decisions about electricity’s future.

The officials said that the Office of Energy Policy and Systems Analysis, essentially the department’s in-house think tank, was essential to coordinating the report. But the Trump budget proposal for fiscal year 2018 would eliminate the office.

Chris Mooney contributed to this report.