Opposing Subsidies for Coal and Nuclear Power Plants

What's at Risk, Talking Points and What You Can Do

The Proposed Rule

The Department of Energy (DOE) under the DOE Act is proposing that the Federal Energy Regulatory Commission (FERC) a final rule that would subsidize generation of electricity by coal and nuclear power plants and disadvantage electricity from natural gas and renewable resources.  It justifies this by saying that subsidizing coal and nuclear plants is important for grid reliability, a claim that cannot be supported.  The proposal would represent a significant change in the way electricity is priced in competitive wholesale markets.  It would have an adverse effect on consumer electricity prices, the economy, and the environment.  Yet no analysis of these impacts is offered by DOE.

How the Rule Would Work

This rule would have electric utilities pay for all of the electricity generated by coal and nuclear plants whether it is needed or not.  It would require that wholesale electric grid operators, in pricing electricity, assign monetary value to attributes that only apply to coal and nuclear plants – specifically, storage of a 90-day supply of fuel on the plant site.  It would guarantee that plants with 90 days of fuel on site would be paid for all of their costs plus a return, regardless of whether that electricity is needed.

American consumers of electricity have enjoyed relatively affordable electricity largely because we have a system that delivers least cost electricity first and only moves to more expensive power when necessary to meet demand.  Coal and nuclear units have been struggling in recent years as the price of electricity from natural gas and renewable energy has fallen dramatically. That means that electricity from coal and nuclear plants is being pushed out by less expensive renewables and gas. This DOE proposal would upend that system.  It would force the wholesale grid operators to subsidize more expensive power generation as a way of propping up old and expensive technology. The cost of that subsidy would be paid for by utilities and then would be passed on to ratepayers. So, in the end it is the consumers that would have to pay the cost of propping up older, less efficient, more expensive, and dirtier generation. In spite of this, DOE provides no assessment of the impact of the proposal on consumers, on the economy, or on the environment.

The rationale for the rule is that generating plants with a 90-day supply of fuel on site -- i.e., coal and nuclear plants -- should be subsidized to assure electricity reliability and resiliency.  But just in September, Gerry Cauley, President and CEO of the North American Electric Reliability Corporation, said in testimony before a House subcommittee, “Even with all the changes underway, the bulk power system  remains highly reliable and resilient, showing improved reliable performance year over year.”[i] This testimony is consistent with the Department of Energy’s own report on reliability – or at least the body of the report – which concludes that maintaining old coal and nuclear plants is not necessary for grid reliability and that “a diverse portfolio of generation resources” together with demand side resources is a sound strategy going forward.[ii]

The older technologies that this rule favors have significant negative environmental impacts.  There is no environmental analysis accompanying the proposal.  In the United States, coal-fired electric power plants are the largest emitters of a number of air pollutants including sulfur dioxide, mercury, nitrogen oxide and carbon dioxide.  They generate large amounts of solid waste and wastewater that contain toxic contaminants.  Although the Obama administration had regulated the discharges of wastewater by these plants, the Trump Administration has delayed that regulation until November 2020, allowing these plants to continue to pollute the waters of the United States.  Nuclear powered plants are low emitters but they are not environmentally benign.  They use large quantities of water for cooling and the resulting effluent, because it is warm, is damaging to aquatic wildlife.[iii] Furthermore, safety and long-term containment of radioactive wastes are concerns.[iv]  (See "note on nuclear power" after endnotes.)

In addition to providing no analysis of the economic or environmental impacts of the proposed rule, DOE has provided surprisingly little detail about how the rule would work.  The Department leaves that up to FERC to work out, and FERC is given only 60 days.

It is important to realize that FERC is an independent agency led by presidentially appointed commissioners.  It does not have to do what DOE proposed.  So there is every reason to let FERC know what you think about it.

The text of the full proposal can be found in this downloadable pdf:

https://energy.gov/sites/prod/files/2017/09/f37/Notice%20of%20Proposed%20Rulemaking%20.pdf

Suggested Talking Points

This rule is based on the mistaken idea that inefficient, older coal and nuclear plants that are no longer economically viable must be kept around to maintain electric reliability.  The facts do not support that -- as shown, for example, by the September congressional testimony of the North American Electric Reliability Corporation.

This rule would give unfair economic advantage to the types of electric power generation that most threaten public health, safety, and the environment. Yet DOE has not even analyzed the environmental damage that would result.

DOE based this proposal on dubious claims:

• DOE wrongly claimed that the proposal is supported by the Quadrennial Energy Review. That study made a number of recommendations to assure that reliability is maintained as the power system moves to newer, more efficient and cleaner technologies to generate electricity.  But those recommendations looked forward to new technologies and sources of power; they did not recommend subsidies to prop up old plants and technologies that are no longer economically viable.[v]
• DOE also maintained that the polar vortex in 2014 threatened reliability because many coal plants had closed. In fact, PJM -- a regional transmission organization that coordinates movement of wholesale electricity in all or part of 13 states and the District of Columbia -- reported that during the polar vortex, “All conventional forms of generation, including natural gas, coal and nuclear plants, were challenged by the extreme conditions.” PJM made a number of suggestions for dealing with extreme cold weather but propping up old coal and nuclear plants was not among them.[vi]
• DOE even maintained that the recent hurricanes reinforce the need to act now. But in fact, Energy Information Administration, a DOE energy data and analysis office, reports that the very attribute that this rule would promote -- fuel stored on site -- was a liability on the Gulf coast as fuel piles flooded and became unusable. As a result there were power outages.[vii]

It is irresponsible to rush a fundamental change in the wholesale markets for electricity without providing any analysis of the impact on consumers or on the economy. We can expect that these impacts will be consequential and negative.

It is irresponsible to rush a policy that favors older more polluting power plants, without any analysis of the environmental impact of the policy. Coal-fired generation is the most environmentally damaging way to generate electricity.

America was never made great by propping up production facilities through subsidies that disadvantage newer more efficient technologies. In fact, in doing so we damage America’s opportunity to become a leader in the energy sources of the future.

FERC questions for commenters:  Commenters with relevant expertise are encouraged to respond to a list of questions that FERC put in the docket for this rule. The list of questions can be found at: https://www.ferc.gov/media/headlines/2017/2017-3/10-04-17.pdf

Accessing Comments Submitted to FERC

Comments that have been submitted can be found in the docket for this proposed rule, FERC Docket No. RM18-1-000.  You can see all of the comments submitted to the FERC docket by going to http://www.ferc.gov and doing the following:

• Click on “documents and filings” and “elibrary” using the pull-down menu.
• Once in elibrary go to “advanced search”
• Click on “submittal” and unclick “filed date”. After “Docket”, type RM18-1. Scroll all the way to the bottom and click on "submit."

You will be taken to the comments that have been submitted for this rule.

What You Can Do

It would be great if well-reasoned, fact-based comments were enough to win the day, but in today’s deregulatory environment, raising the political stakes of regulatory rollbacks is crucial to stopping or slowing them down.  For rules that are particularly important to you, please consider taking one or more of the following steps, too.

• Write to your members of Congress and other elected officials.  Let them know your concerns and ask them to weigh in with the agency proposing the rollback. You can find contact information for your members of Congress and other elected officials here: https://www.usa.gov/elected-officials
• Write letters to the editor and even op-eds in your local papers. Remember that letters to the editor should generally be fairly brief; you can find specific guidelines in your local paper.
• Organize or participate in letter-writing campaigns.
• Join or organize demonstrations.
• Talk to your friends, colleagues and neighbors and encourage them to comment and otherwise join in this effort.  Voicing your concerns on social media can be a very effective way to spread the word.

Note on nuclear power:  Nuclear power plants emit no greenhouse gases and as such there is a debate as to whether they should be supported for a period of time until other zero emitting sources such as renewable power, energy storage, demand response, distributed generation, and energy efficiency can take up the slack if the nuclear plants retire.  This proposal is not consistent with that idea.  Logically such a policy would be temporary and would not apply to coal-fired plants. This proposal is not temporary, it does apply to coal-fired power plants, and the rationale for this proposed rule has nothing to do with limiting climate change.

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ENDNOTES

[i] “Powering America: Defining Reliability in a Transforming Electricity Industry”, Testimony of Gerry W. Cauley, President and Chief Executive Officer North American Electric Reliability Corporation before the Subcommittee on Energy House Committee on Energy and Commerce, U.S. House of Representatives, Washington D.C., September 12, 2017.  https://democrats-energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/Testimony-Cauley-EP-Hrg-on-Powering-America-Defining-Reliability-in-a-Transforming-Electricity-Industry-2017-09-08.pdf

[ii] US Department of Energy, Staff Report on Electricity Markets and Reliability, Washington, DC, August 2017, p.  100. https://energy.gov/sites/prod/files/2017/08/f36/Staff%20Report%20on%20Electricity%20Markets%20and%20Reliability_0.pdf  The meat of this study, written by DOE staff, has a different tone than some of the summary material that tends to point to the importance of “base load” (coal and nuclear).

^[iii] New nuclear power plants must recycle their cooling water but the average nuclear plant is 36 years old. See Frequently Asked Questions: “How old are U.S. nuclear power plants, and when was the newest one built?” https://www.eia.gov/tools/faqs/faq.php?id=228&t=21

[iv] See: http://www.ucsusa.org/nuclear-power#.WdZ49EyFTVo ; and http://www.nytimes.com/2011/03/18/science/earth/18scientists.html

[v] Department of Energy, Quadrennial Energy Review Second Installment: Transforming the Nation's Electricity System, January 2017.  https://www.energy.gov/epsa/downloads/quadrennial-energy-review-second-installment

[vi] PJM Interconnection, Analysis of Operational Events and Market Impacts During the January 2014 Cold Weather Events, May 8, 2014.  http://www.pjm.com/~/media/library/reports-notices/weather-related/20140509-analysis-of-operational-events-and-market-impacts-during-the-jan-2014-cold-weather-events.ashx

[vii] EIA, Today in Energy, September 13, 2017.  https://www.eia.gov/todayinenergy/detail.php?id=32892