DOE Plans to Order Guaranteed Profits for Coal, Nuclear Power Plants

by added on 1 June 2018, Comments Off on DOE Plans to Order Guaranteed Profits for Coal, Nuclear Power Plants , posted in Grid Edge, Regulation & Policy, Utilities, Energy, Nuclear, Fossil Fuels, Policy, News,

In an unprecedented move, Trump administration officials are preparing to order U.S. grid operators to purchase electricity from struggling coal and nuclear plants, in an effort to prevent them from shuttering.

“Federal action is necessary to stop the further premature retirements of fuel-secure generation capacity,” states a 41-page draft memo first obtained by Bloomberg. The memo, also obtained by GTM, is dated May 29, and was circulated ahead of a National Security Council meeting to address the issue on Friday.

According to a memo, the Department of Energy plans to exercise emergency authority under the Defense Production Act of 1950 and the Federal Power Act to direct system operators “to purchase or arrange the purchase of electric energy or electric generation capacity from a designated list of Subject Generation Facilities (SGFs) sufficient to forestall any further actions toward retirement, decommissioning or deactivation of such facilitates during the pendency of the DOE’s Order.”

The Energy Department also plans to direct power plants on the SGF list outside of RTO/ISO territories to continue operating under their existing contractual arrangements with load-serving entities.

The DOE is also planning to establish a “Strategic Electric Generation Reserve,” in the name of promoting national defense and maximizing domestic energy supplies.

The Order is described as a “stop-gas measure” that would remain in place for 24 months as the DOE completes a more in-depth analysis — never before undertaken — to designate “Critical Defense Facilities served by the Defense Critical Electric Infrastructure.” This analysis includes research on specific vulnerabilities in the U.S. energy delivery systems, including interdependencies between electric generation and transmission, natural gas and petroleum pipelines, and supply chains.

The memo confirms earlier reports that the Energy Department has been looking to use its emergency authority to shore up coal and nuclear power plants — which are struggling to compete against low-cost natural gas and renewables.

This isn’t the Trump administration’s first attempt to save the two ailing industries. Last September, Energy Secretary Rick Perry introduced a plan to provide support for power plants with 90 days of fuel on site — something only nuclear and coal plants can do — citing a critical need for enhanced grid resilience and reliability. However, the plan was rejected by the Federal Energy Regulatory Commission, which opted to open its own resilience proceeding instead.

Then in March, FirstEnergy requested the DOE use its emergency authority under Section 202(c) of the Federal Power Act to provide a lifeline to its coal and nuclear plants.

The Trump administration has not confirmed a final strategy. However, the recently obtained draft memo represents the administration’s most fully developed plan to intervene on behalf of coal and nuclear power plants to date, which is now being presented to top security advisers at the NSC.

This is a developing story.

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