By Dino Grandoni
May 14, 2018 - Aging coal and nuclear power generators, facing increasingly stiff competition from natural gas and renewable energy, are calling on allies in the Trump administration to invoke the emergency powers to prop up their plants.
But critics throughout much of the rest of the energy sector say saving these plants is not actually a national security imperative — and their pending closure is simply a consequence of good old marketplace competition.
One proposal involves dusting off a 68-year-old law enacted at the height of the Cold War. Energy Secretary Rick Perry told a House panel last week that he is "looking very closely" at using off the Defense Production Act of 1950 to revive coal and nuclear plants in the name of national security. The law, which President Harry Truman invoked with the steel industry shortly after the start of the Korean War, would give the government the power to effectively nationalize private industry to ensure it never faces a wartime shortfall of critical goods or services.
Energy Secretary Rick Perry speaks during the Americas Society/Council of the Americas conference at the State Department last week.
Photo by Andrew Harrer, Bloomberg
Another plan involves invoking emergency powers under the Federal Power Act to guarantee profits so that coal and nuclear plant can stay online. Earlier this year, the Ohio-based electric utility FirstEnergy filed an application with the Energy Department administration asking the government to bail out its nuclear and coal plants under that law, warning of a “power crisis" if the plants close.
But other energy interests usually aligned with the Trump administration — namely, the oil and natural gas producers — are pushing back against both ideas. Even one Republican senator appeared skeptical of using the Defense Production Act.
“I haven’t looked at it closely enough to really talk specifics in terms of his proposal, but in general, I don’t favor nationalizing anything,” Sen. John Hoeven (R-N.D.), a member of the Senate Energy and Natural Resources Committee, told The Washington Post at an Energy 202 event on Thursday.
At the same event, Federal Energy Regulatory Commission Chairman Kevin McIntyre said that using the Defense Production Act to boost coal and nuclear power is “perhaps not the most obvious fit” for the law. His pushback is significant, given that he was appointed by Trump to head of the nation's main regulator of the wholesale electricity markets.
Other energy law experts expressed similar doubts about being able to use the Defense Production Act absent any imminent wartime threat.
“Commissioner McIntyre was being diplomatic when he said that the Defense Production Act of 1950 was a poor fit for justifying executive action to subsidize coal and nuclear power,” David Spence, a professor at the University of Texas at Austin who specializes in energy law, wrote in an email.
“The proposal is, frankly, a sop to coal-producing swing states,” Spence added. “One can’t really use this wartime authority to subsidize coal and nuclear with a straight face. And I say that as someone who believes that keeping nuclear power plants open is good policy.”
A coalition of lobbying groups representing the oil, natural gas and wind sectors told Perry in a letter last week that "the Defense Production Act cannot be used to command favorable pricing for a favored class of power plants. Moreover, to invoke the concept of 'national defense' for what is transparently a domestic effort to boost an uneconomic segment of industry would be an unprecedented abuse of the Act."
Innovations in natural gas extraction, as well as technological advances in wind and solar power, have driven down the cost of those forms of electricity generation over the past decade. The cheaper competition helped cause the closure of 268 coal-fired power plants since 2010, according to a tally kept by the Sierra Club.
But coal and nuclear plants, their advocates say, provide something essential to the grid: reliability. Unlike solar and wind generators, which only produce power when the sun shines and the wind blow, coal and nuclear plants run 24/7. That so-called “baseload” power is necessary for national security, according coal proponents such as Sen. Joe Manchin III (D-W.Va.).
“The security of our homeland is inextricably tied to the security of our energy supply,” Manchin wrote in an April letter to Perry and Defense Secretary Jim Mattis urging the Trump administration to use the law to prop up coal and nuclear plants. “Therefore, the ability to produce reliable electricity and to recover from disruptions to our grid are critical to ensuring our nation’s security against the various threats facing our nation today — whether those threats be extreme weather events or adversarial foreign actors.”
But Alison Silverstein, an energy consultant who helped draft a recent Energy Department study on grid reliability, countered that many coal plant today are simply expensive to operate for baseload power. "Money that we spend on uneconomic generation is money that we can't spend on protecting customers" against power interruptions," she said.
While FERC may balk at invoking the Defense Production Act, courts have historically granted the president “a lot of deference in deciding what parts of the economy are necessary to national security,” James Coleman, a Southern Methodist University energy law professor, said by email. Earlier this year, the FBI and the Department of Homeland Security may have helped create some basis for invoking the law after accusing Russia of engineering cyberattacks on the U.S. electric grid.
But the law places a limit on how far that presidential authority stretches. Congress must authorize any project under the law costing more than $50 million, which may not be enough to help many coal and nuclear plants.
Perry has been down this path before. Last year, the Energy Department asked FERC to impose a new rule favoring power plants able to store a 90-day fuel supply on site, a requirement coal and nuclear generators can meet but that unlike renewable energy or natural gas plants cannot. That plan also widely opposed by natural gas and renewable energy producers. In January, independent five-member commission unanimously rejected the proposal.
At the same time, FirstEnergy made an appeal under Section 202(c) of another law, the Federal Power Act, which allows the Energy Department to force the regional grid operator to pay nuclear and coal plants enough to make a guaranteed profit. One of FirstEnergy's main suppliers of coal is Murray Energy, whose chief executive, Robert E. Murray, was a major Trump booster during the 2016 presidential campaign.
The Energy Department told The Post by email that the application “is now under review.” That pitch, too, has been panned by critics outside the coal and nuclear sectors, including the chairman of FERC.
"I don’t think we have an emergency on our hands right now in these sense of our ability of our grid to perform today and in coming weeks and months," McIntyre said Thursday when asked about FirstEnergy's 202(c) application. "I don’t think we have that sort of situation."
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