FirstEnergy ’emergency’ is a ‘policy problem’

Source: Saqib Rahim, E&E News reporter • Posted: Saturday, April 21, 2018

NEW YORK CITY — FirstEnergy Solutions Corp.’s financial problems won’t factor into the Energy Department’s decision on whether to throw it a policy lifeline, a deputy to Energy Secretary Rick Perry said yesterday.

FirstEnergy Solutions, the competitive-generation arm of FirstEnergy Corp., filed for bankruptcy last month, and it has since asked DOE to apply a rarely used “emergency” authority that would require its plants to keep running. Bob Murray, the CEO of coal miner Murray Energy Corp., has lobbied for the same action.

Dan Brouillette, deputy secretary of energy, said DOE’s decision on FirstEnergy will hinge on the threat to the U.S. power grid, not what’s good or bad for the companies themselves.

“We’re going to approach this as a policy problem, not an economic emergency for individual companies,” he said at the Columbia Global Energy Summit.

The remarks highlight the Trump administration’s continuing search for policies that can support coal and nuclear generators immediately, and not just in the longer term. The White House has begun to roll back EPA’s Clean Power Plan and withdraw from the Paris Agreement, both signature climate initiatives under President Obama that cemented the bearish long-term outlook for coal. Perry, meanwhile, has described nuclear as a fuel critical to grid reliability and national security and pushed for reforms in power pricing.

But those structural changes may not come in time for the coal or nuclear plants that already sit at the financial edge, thanks to cheap shale gas and rapid growth in solar and wind installations. In the case of nuclear, the industry has also complained that its generators get no credit for being carbon-free.

Brouillette said there may not be a reliability problem today but that business as usual could lead to one in the future, and that warrants policy action in his view. Grid operators such as PJM Interconnection and ISO-New England have disputed the magnitude and immediacy of that threat.

He said DOE was right to advocate to the Federal Energy Regulatory Commission last year for pricing reforms that supported baseload generators such as coal and nuclear. At the time, it was seen as a significant departure from the conventional wisdom on “competition” in power markets. Ultimately FERC, led by Trump appointees, rejected DOE’s proposal in January, devolving the issue to regional grid operators.

Brouillette defended DOE’s push.

“We’re very concerned about some of the results of the ‘so-called markets,'” he said. “If FERC does not act soon, we think there will be a grid reliability problem coming up.”

Now Perry is exploring the use of emergency authority, as provided under Section 202(c) of the Federal Power Act. Lawyers knowledgeable in 202(c) say that law is meant for emergencies in their traditional meaning, not the market-driven distress that coal and nuclear plants face now.

Yesterday, Bloomberg reported that the administration is also exploring options under a Truman-era authority, in the Defense Production Act, to help coal and nuclear.

Brouillette took one option off the table for DOE: subsidies. He noted that while some states, such as Illinois, New Jersey and New York, are using “zero-emission credits” to pay nuclear plants to stay open, “I don’t know if [DOE] will do that. It’s more of a congressional prerogative,” he said.

Brouillette also offered some color on the Trump DOE’s longer-term strategic priorities.

The deputy secretary credited the Obama administration with its move to allow exports of crude oil from the United States, calling that consistent with the Trump administration’s mission of “energy dominance.”

However, he said, Perry’s DOE wants to change the focus of its research and development work, moving away from applied research as favored by President Obama and toward basic research.

Brouillette said certain key clean-energy technologies are nearing the limits of their improvement; he cited lithium-ion batteries and solar photovoltaic cells.

By devoting more of its budget to basic research, he said, the administration can help advance technologies that offer a step change in performance. He cited magnesium ion as one example.

The deputy secretary also signaled support for Advanced Research Projects Agency-Energy, the Obama-era office that some in the administration would like to cut. “By and large, the program has a track record of success,” he said.