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Trump administration enters coal-gas reliability fight

05 May 2017 20:47 (+01:00 GMT)
Trump administration enters coal-gas reliability fight

Washington, 5 May (Argus) — President Donald Trump's administration has buoyed coal producers but put the natural gas sector on edge by touting the electric benefits of coal and questioning the reliability of gas-fired power generation.

The gas sector has not panicked but is closely watching for policies that might disadvantage the fuel in the power industry. The coal industry, meanwhile, is cheering on the focus on grid reliability, a topic it says deserves closer scrutiny as the grid becomes more reliant on pipeline-supplied gas.

The US since 2012 has lost 54GW of coal capacity and added 34GW of gas capacity, according to the Federal Energy Regulatory Commission (FERC). That shift has also curbed greenhouse gas emissions.

US energy secretary Rick Perry in a 14 April memo highlighted concerns about the loss of coal capacity and launched a review to determine whether wholesale power markets are adequately compensating power plants with an "on-site fuel supply" and other reliability attributes. Most gas-fired plants do not have on-site fuel, such as backup fuel oil, and instead rely on gas supplied by pipelines.

US Environmental Protection Agency (EPA) administrator Scott Pruitt was more explicit about the grid reliability threats from the potential overreliance on gas-fired generation in a televised interview on 3 May, focusing on the need for power plants to have fuel stockpiles nearby in the event of supply disruptions.

"You need solid hydrocarbons on site that you can store so when peak demand rises you have got solid hydrocarbons to draw on," he said. "What would happen if we had an attack on infrastructure when you have converted to natural gas almost exclusively, and you do not have coal there as a safeguard to preserve the grid?"

Trump campaigned heavily on the promise he could bring back coal jobs by rolling back environmental regulations. But coal industry officials say competition from low-cost natural gas is their primary threat, raising questions about whether the new administration would look at other options, such as a policy preference for on-site fuel, that would support coal and nuclear.

FERC has the clearest authority to push for changes to favor on-site fuel supplies, and Trump has the power to nominate officials to fill four of the agency's five positions. Republican lawmakers in the US Congress have also urged FERC to consider regulatory changes to support resources with on-site fuel.

Gas industry officials say they fully expect the Trump administration will roll back regulations that have disadvantaged coal, but they are not overtly worried about new policies that would hinder natural gas. And they are downplaying Pruitt's suggestion that an attack on pipelines could pose a threat to electric reliability.

"What it says to me is that we need to further educate and explain perhaps a bit better and more thoroughly how our sector works," Natural Gas Supply Association president Dena Wiggins said. "I think the track record on gas being reliable is extraordinary."

The coal industry is lauding Pruitt's comments. The American Coalition for Clean Coal Electricity president Paul Bailey said coal-fired power plants are the "best insurance policy" for a reliable electric grid and said he hopes FERC also appreciates coal's benefits.

The US Energy Department's electric grid study may offer the clearest indication of where the administration is headed on reliability policies. Perry has asked for its completion by 18 June.