On Monday, the Federal Energy Regulatory Commission (FERC) denied a rule proposed by Energy Secretary Rick Perry earlier this year (PDF) to compensate coal and nuclear generation facilities over and above the compensation they currently receive if they kept 90 days’ worth of fuel on site.
Perry’s rule was written to be fuel agnostic at face value, but its details would have bolstered coal and nuclear plants in the energy market because natural gas- and oil-fed generators generally can’t keep 90 days’ worth of fuel onsite (they receive their fuel via pipeline), and renewable energy generation is variable. One of President Trump’s key campaign promises has been to revive the coal industry, which has suffered in the shadow of plentiful, cheap natural gas.
In Monday’s notice, FERC wrote that the proposed rule never met the threshold requirement of showing that grid managers are currently offering “unjust and unreasonable” compensation to existing coal and nuclear plants.
The commission wrote:
[W]e note that the Proposed Rule would allow all eligible resources to receive a cost-of-service rate regardless of need or cost to the system… The record, however, does not demonstrate that such an outcome would be just and reasonable. It also has not been shown that the remedy in the Proposed Rule would not be unduly discriminatory or preferential. For example, the Proposed Rule’s on-site 90-day fuel supply requirement would appear to permit only certain resources to be eligible for the rate, thereby excluding other resources that may have resilience attributes.
Still, FERC noted that resilience is an important attribute for a modern grid to have, and the agency opened a new docket to investigate how to improve resilience in a broader sense—that is, not just in ensuring stockpiles of fuel. Instead, FERC’s new study will evaluate how grid managers build resilience in their specific geographic footprint.
“This examination of the resilience of the bulk power system will be a priority of the Commission,” FERC wrote, directing grid managers across the US to submit reports within 60 days.
FERC’s decision culminates a year of contentious politics at the Department of Energy. Perry issued a memo in April accusing the previous administration of implementing policies that destroyed jobs and made the coal industry unprofitable, never mentioning renewable energy but hinting at a censure of its rise. Perry commissioned a study of “baseload” energy (primarily coal and nuclear plants, which are kept constantly running because of the enormous cost to start and stop them), but when the study was published it was more even-handed. While it recommended that the Department of Energy review how coal and nuclear power were valued on the grid, it also correctly stated that coal and nuclear were suffering because they were too expensive compared to cheap natural gas, not because renewables or clean air policy had driven them out of the market.
Perry responded by sending a Notice of Proposed Rulemaking (NOPR) to FERC, asking the commission to allow new rules to compensate energy generation that was able to stockpile more than 90 days of fuel, that is, coal and nuclear plants. Critics argued that high prices during times of energy shortage already compensated plants with surplus fuel, so no additional compensation was necessary. Critics also pointed to the fact that, despite record coal retirements, the US electric grid experienced relatively few blackouts.
The industry reacts
The critics repeated their sentiments today. John Moore, the Natural Resources Defense Council director of the Sustainable FERC Project coalition said in a statement “The law and common sense prevailed over special interests today… Secretary Perry’s plan would have subsidized coal and nuclear plants with a 90-day fuel supply, yet Perry never explained why those plants were inherently more reliable or resilient.”
Moore continued, “Rick Perry’s scheme to prop up aging nuclear and dirty coal plants was never about making sure the lights and heat stayed on. It was about protecting the bank accounts of plant owners with a more than $14 billion bailout at the expense of everyday Americans’ budgets, health, and safety.”
Similarly Avi Zevin, an attorney at the Institute for Policy Integrity at New York University School of Law, said in a statement, “Blanket subsidies for coal and nuclear plants are not the way to address legitimate concerns about grid resilience. FERC was right to tread carefully on this important matter and ultimately reject the Department of Energy’s ill-considered proposal as inconsistent with the requirements of the Federal Power Act. This unanimous, bipartisan decision by FERC is a promising sign that its new effort to improve resilience will be thoughtful and sensible.”
This report is breaking and will be updated.