DOE’s Grid Resiliency Pricing Rule Offers Hope for Nearly Extinct Coal, Nuclear Plants
The U.S. Department of Energy’s recently-proposed grid resiliency rule offers new hope for nearly-extinct coal plants and endangered nuclear power plants operating in competitive organized wholesale power markets and, if successful, would deliver results on one of President Donald Trump’s signature campaign promises to bring back coal jobs as well.
During the 2016 Presidential Campaign, Mr. Trump often promised to make coal-mining great again, in part by bringing back demand for coal and ending the Obama Administration’s regulatory restrictions on coal-fired power generation. Despite President Trump’s frequent promises to reinvigorate the coal industry, many in the electric utility industry and wholesale power generation sectors – and the broader media – pointed out that the economics of coal were no longer viable anyway, no matter what President Trump said. Data shows natural gas is the cheaper power generation fuel these days and, therefore, coal fired power plants are closing.
Coal-fired power generation is not the only type of power to be struggling these days in the competitive wholesale power markets. Even nuclear power generators have been feeling the pinch in recent years as the nuclear industry complains that their power plants can no longer compete with low-cost natural gas fired power plants. Within the last year or so, states that include New York and Illinois have adopted programs to compensate at-risk nuclear power plant operators for the greenhouse gas reduction value of nuclear generation, as states recognize that the wholesale market price of power is insufficient to support nuclear generation. Other states, including Connecticut, New Jersey and Pennsylvania have similarly faced the issue of whether their nuclear power plants are viable long-term.
In issuing the proposed rule on September 29, 2017, Energy Secretary Rick Perry stated, “A reliable and resilient electrical grid is critical not only to our national and economic security, but also to the everyday lives of American families.” Perry added that, “A diverse mix of power generation resources, including those with on-site reserves, is essential to the reliable delivery of electricity—particularly in times of supply stress such as recent natural disasters. My proposal will strengthen American energy security by ensuring adequate reserve resource supply and I look forward to the Commission acting swiftly on it.”
The proposed rule, which takes the extraordinary step of requesting that the Federal Energy Regulatory Commission either take direct final action within 60 days or issue the proposed rule as an interim final rule, seeks to have the federal government stem the tide of closing coal- and nuclear-fired power generation facilities by providing extra compensation to these so-called “fuel secure” plants due to their resiliency value and services to the grid. The proposed rule states that these fuel-secure resources are essential for the reliability and resiliency of the nation’s electric power grid and, therefore, are indispensable to the nation’s economy and national security.