We all remember the financial and auto bailouts during the Great Recession. They arguably saved significant parts of the economy from even further destruction. The Trump administration says the federal government now needs to step in to prop up the coal and nuclear industries. Energy Secretary Rick Perry has proposed a rule that will force the electric grids in some parts of the country to basically guarantee profits for coal and nuclear plants. But who will pay for that guarantee? Anyone who gets an electric bill.
Energy secretary Rick Perry, has proposed a rule that will force the electric grids in some parts of the country to basically guarantee profits for coal and nuclear plants.
Ben Storrow is a reporter for E&E News and he says the most important thing to understand is that the grid, like so many aspects of our economy, is changing because of new technology.
“That can be wind and solar, but also energy storage, and grid operators’ ability to rapidly manage all of those different resources. So basically what’s happening is a lot of those traditional power plants — like coal and nuclear — which were built to run around the clock and are the foundation of our grid, are having trouble making money and they’re closing. And so Rick Perry is concerned about that and is trying to come up with a plan that he says will ensure the resiliency of our grid by keeping these plants open.”
One way the plan has been described is the “squirrel plan.” That’s because the federal government would pay coal plants to store 90 days of fuel. The theory is that if you have the fuel on site, and there’s an emergency of some sort, it’s ready to go. You can burn it and make the grid more resilient. But is a 90 day supply going to actually help keep the grid operating after a hurricane or some sort of unforeseen event? Why 90 days? Storrow says that question gets to the heart of the controversy of the plan.
“There are a lot of people who question the basic assumption of the whole plan. There’s a consulting group, the Rhodium Group; they did a study and found that .00007 percent of all power outages in the last five years were due to fuel supply problems. So at its most basic, the criticism of this plan is that it’s trying to solve for a problem that doesn’t really exist. And we’ve seen a lot of the grid operators come out against it; we’ve seen state regulators states come out against it; we’ve seen the oil and gas industry form a really unique alliance with renewable companies.”
So who does like this plan? Storrow says there’s a pretty small base of support that largely centers around the big coal mining companies. They say the plan is necessary and without it, the lights are going to go off.
“They’ve sought to push this idea that we’re on the precipice of a crisis. I think part of why this is such a controversial plan is that a whole lot of people who monitor the grid, they just don’t see it like that. The grid is changing and moving to more natural gas and solar. It’s not necessarily a good thing or a bad thing; it’s just a different operational and economic model than what we’ve had in the past.”
One of the companies that would stand to benefit from this plan is Murray Energy, run by coal magnate Bob Murray. Murray is an outspoken supporter of President Trump and held a fundraiser for him during the campaign. It’s reported that Murray pitched the idea of the bailout to Energy Secretary Rick Perry at a meeting at the Energy Department in March 2017. Less than a month later, Perry set the plan in motion. Murray denies that it was his idea, but he does seem confident that it will get done. Talking to reporters recently he said, “It has to occur. The lights are going to go out. People are going to freeze in the dark.” So who is going to pay for it and how much will it cost? The simple answer, says Storrow, is you, me and everybody else who consumes electricity in the form of a higher electric bill.
“I think people would be unsurprised to know that supporters of the plan say that this is a relatively modest cost and worth it to ensure that when we flip on the light switch it works. And opponents say that it’s going to be really, really costly — maybe into the billions of dollars. The proposal that the Department of Energy actually sent to the Federal Energy Regulatory Commission (FERC) was pretty short on details. So how this would work and how it will get paid for would need to be worked out.”
One of the rationales that gets raised for the Department of Energy Plan is the polar vortex. This was the brutal cold snap that hit large parts of the country in 2014 and really stressed the grid. Storrow says the polar vortex has almost become a mythical event in the history of our power grid.
“It’s something that coal supporters point to a lot. And that’s because it was so cold, there were some gas pipelines that failed. And while we ultimately had enough power, it was it was a close call. Now the thing that has been pointed out by the grid operators is that, yes, gas had trouble. But so did coal — some of the coal piles froze. It was just brutally cold. But people have been thinking a lot about how to bolster systems against something like that. It’s a worst case scenario.”
So this all brings up this question, should we be paying extra for coal companies and nuclear plants to stay in business if there are cheaper alternatives that basically do the same thing? Storrow thinks there are two schools of thought on this that stem from our varying approaches to electricity regulation in this country.
“In some states, power companies are regulated monopolies and they own the power plants and the transmission lines and the distribution system. And state regulators basically get to decide how much money they’re going to make. And folks who like that system like it because it’s centralized planning. But there’s another school of thought in places like the Northeast and California and Texas where wholesale electricity markets are more efficient. And when you make power plant owners compete against each other to try to submit the lowest bid to get called upon to sell power, the consumers will ultimately benefit. And so what they say when they look at those challenges you know look look at PJM a ton of new gas plants have come online in recent years. You have a lot of new capacity. You know this the market is working as intended by pushing out really old and inefficient resources. But I think what this gets down to is we’ve come to a place now in this country where we’ve politicized different sources of energy. And so there are people who want to boost renewables and there are folks who want to save coal and this is sort of their way of doing that. That’s the root of this debate.”
An independent federal commission will decide what to do with the proposal this month.