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Coal group insists grid plan is not a bailout

17 Oct 2017, 5.50 pm GMT

Coal group insists grid plan is not a bailout

Washington, 17 October (Argus) — US Energy Secretary Rick Perry's sweeping "grid resilience" proposal is not a bailout for coal and nuclear generators but a necessary step to guard against instability in US power supply, according to American Coalition for Clean Coal Electricity (ACCCE) president Paul Bailey.

The goal of the proposal is simply to establish a common definition of resilience so that markets can be structured to support this vital attribute, Bailey said today at the Energy Bar Association's mid-year forum in Washington, DC.

"A lot of the discussion now is because of the way the grid is changing," he said.

At the moment, "there are no criteria for resilience, there are no metrics for measuring resilience," Bailey said.

US coal capacity has fallen to 262GW from 318GW in 2010, and another third of the fleet is set to retire in coming years. This has led to questions about how resilient the grid may be in the case of a "high-impact, low-frequency" event like the 2014 polar vortex.

Perry's plan to compensate certain power plants for their stability in service has drawn skepticism, including from members of the US Federal Energy Regulatory Commission (FERC) sensitive to critics' concerns that the proposal could disrupt power markets. But the ACCCE and other coal groups say coal-fired plants should be compensated if they can be shown to play a crucial role in preventing power service hiccups.

It is not clear whether "every coal, every nuclear plant necessarily needs a subsidy or should be" operating, but current market structure does not adequately price resiliency into the market, said American Electric Power (AEP) executive vice president of external affairs Charles Patton. AEP considers fuel diversity to be a major aspect of reliability and resilience, and "large coal plants, nuclear plants are not being dispatched today."

But whether FERC subsidies would actually preserve the coal fleet "depends on how that support is structured," according to Marc Chupka, principal at the Brattle Group, a consultancy group.

Nuclear power will almost certainly benefit from FERC's intervention into power markets, but it "may or may not do much for coal," he said.

The Trump administration's support for natural gas exploration will keep a lid on prices, putting further pressure on coal generation and raising "the cost of implementing this program," which will probably require billions of dollars of support.

This "may be an expensive way to preserve resilience for the electricity grid, if solid fuel is the keystone to resilience," Chupka said.

The Natural Resources Defense Council views Perry's proposal as a bailout for coal and nuclear, and believes that it is unlikely utilities are "going to make major new investments based on these policies" given the likelihood of a future administration changing direction, senior attorney Benjamin Longstreth said.

The Energy Department's grid reliability study, which preceded the proposal for FERC, was based on anecdotal evidence about events like the importance of on-site fuel supply during the polar vortex, but ignored counterpoints like coal piles freezing and becoming unusable during that extreme weather event, according to Longstreth.

There is an "absolute lack of analysis to support the proposal," he said, noting that paying subsidies to coal and nuclear would contradict Environmental Protection Agency administrator Scott Pruitt's rationale for repealing the Clean Power Plan, which was that the federal government should not be "picking winners and losers" in power markets.


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