Report: DOE coal, nuclear bailout on hold at White House

Source: By Gavin Bade, Utility Dive • Posted: Wednesday, October 17, 2018

  • A Department of Energy plan to bail out closing coal and nuclear plants is stuck at the White House, Politico reports, after backers failed to convince key administration officials to approve it.
  • The DOE sought to use its emergency authority or a 1950s wartime law to save the plants after President Donald Trump directed the agency to stop retirements this spring. The plan is now on hold due to skepticism from members of the National Economic Council and National Security Council, unnamed sources told the outlet.
  • Demise of the DOE plan puts the spotlight on Congress and the Federal Energy Regulatory Commission. Last week, the CEO of the nation’s largest electricity market urged FERC to move ahead with a docket on grid resilience, and Sen. Joe Manchin, D-W.Va., told Utility Dive he would consider new legislation to save coal and nuclear plants if the DOE plan ran aground.

The end of DOE’s coal and nuclear plan lifts the pall that a potential bailout had cast over Washington energy policy.

Energy insiders worried that subsidizing a significant number of failing generators could upend wholesale electricity markets and that the debate over such a plan was subsuming other policy issues in Washington.

“I just hate that everybody’s wasting time worrying about this [stuff],” former FERC Chair Pat Wood III told Utility Dive last month, “instead of worrying about real things that matter.”

This spring, a leaked memo from the National Security Council revealed that the Trump administration was considering two options for saving at-risk plants — the DOE’s emergency authority under the Federal Power Act, and the Defense Production Act, a 1950s law that allows DOE to nationalize parts of the power sector during wartime.

How the administration would pay to keep the plants open remained unclear, Politico reports, and backers of the plan failed to convince National Economic Council Director Larry Kudlow that saving the generators was a national security imperative — a key argument behind the plan.

The end of the DOE’s subsidy proposal puts the focus back on FERC to figure out how to fairly compensate coal and nuclear plants in wholesale power markets, where they are threatened by cheaper natural gas and renewables.

FERC rejected a separate coal and nuclear bailout from DOE last spring, opening a broad proceeding to address grid resilience — the ability to bounce back from outages.

That docket, along with reforms to the capacity market in the PJM Interconnection, where many retired plants are located, could boost revenues for plants that would have been targeted by the DOE plan. But the resilience proceeding is moving slowly, and last week the CEO of PJM publicly pushed FERC regulators to move ahead.

“We really need to move forward with some of these issues of paying resources for their reserve characteristics and paying them for their fuel security characteristics,” Andrew Ott, president and CEO of PJM, told the Senate Energy and Natural Resources Committee.

Even if FERC moves on the resilience docket, pricing changes are not likely to come quickly enough to save a group of plants scheduled to come offline in the next few years, like those owned by bankrupt FirstEnergy Solutions, a Trump administration ally that asked DOE directly for a bailout this spring.

PJM and other regional grid operators say their systems will remain reliable despite scheduled coal and nuclear retirements, but coal and nuclear supporters like Manchin remain skeptical.

“I am truly concerned about the reliability of the grid,” he said. “They say they’re studying this and studying that and I see a lot of baseload plants coming offline.”

Top image credit: House E&C