Secretary of Energy Moves to Save Coal: The Art of the Squeal
Image: Winged pig from the Katherine Hours | J. Paul Getty Museum | Public Domain
A collective sigh of relief could be heard over Capital City in late August, after the U.S. Department of Energy released its much anticipated and even more dreaded study on the reliability and resilience of the U.S. electric grid. The report was ordered by Secretary of Energy Rick Perry in April and took just five months to complete.
According to Perry’s order, the findings of the study were to help the federal government formulate sound policies to protect the nation’s electric grid. Perry had earlier commented that he, as the Secretary of Energy, had an obligation to assure the nation of a reliable and resilient electric grid.
Appearing a reasonable request, the renewable energy industry and the environmental community read the order as a thinly veiled threat of some proportion to the growing market share of clean energy technologies like solar and wind. An attack thought consistent with the anti-climate, pro-fossil/pro-nuclear leanings of the Trump administration.
The perceived threat flowed from directive’s focus on baseload power. Translated into everyday terms, baseload power pertains to large-scale central electric generating plants fueled primarily by fossil and nuclear fuels.
The on-again/off-again nature of wind and solar, without storage, has often been identified as the fly in the clean energy elixir. The negative interpretation given Perry’s order was a natural outcome of the frequency Trump and others have referred to wind and solar as unacceptable alternatives to fossil and nuclear.
Natural gas straddles the line. Even the cadre of conservatives in the Trump administration understand the demise of coal and nuclear in recent years has something to do with the abundance of low-priced natural gas—even should they ignore its relatively smaller carbon footprint.
Prior to the August release of the study, organizations like the American Wind Energy Association (AWEA) sought to preemptively challenge the anticipated conclusions and recommendations of the DOE study. A report by the Analysis Group concluded the transition to non-coal, non-nuclear generating sources was being driven by the market—not by federal or state policies.
When the Department’s report was finally released, it admitted the rise of increasingly cheap and available solar and wind were not the culprits condemning coal and nuclear to the slag heap of U.S. power supplies. Still, the report suggested—strongly—the nation needed to prop up the two sectors the market was otherwise turning away from—for reliability and security reasons.
According to Cushman and Gustin, the DOE report calls for:
…easing up on the requirement that coal plants upgrade their pollution controls when they modernize—as required by the Clean Air Act. Environmentalists immediately declared that they would fight any such move in court.
…also…for changes in pricing regulations that could reward coal plants with payments for providing standby power and for buffering the grid against brief power fluctuations.
The report also took a shot across the bow of states like California who’s renewable portfolio standards were proving successful enough to create a negative price for wholesale power. The shot was indirect, suggesting only that negative pricing should be discouraged. Solar and wind penalize costly fossil and nuclear at times when there is an abundance of clean energy alternatives.
Predictably, Perry’s report said nothing about climate change. Perry’s recommendation, in fact, was to encourage his compadre over at the EPA to craft rules allowing coal-fired plants to improve efficiency and reliability, without triggering new regulatory approvals and associated costs.
Whereas, DOE fell short of an all-out attack on state clean energy policies; it had proposed a frontal assault on the Clean Air Act. An assault, I have previously called a canary in the coal mine.
Sighs of Relief Have Now Turned to Grief
Perry used the study to direct the Federal Energy Regulatory Commission (FERC) to open a rulemaking that would require utilities to keep on-hand a 90-day supply of what the Trump administration refers to as fuel-secure resources. Most of the rest of the world calls these resources coal, nuclear, natural gas and diesel.
Being a helpful sort of Secretary, Perry attached a Notice of Proposed Rulemaking (NOPR) to his FERC letter. The NOPR suggests the sum and substance of the rule he would like to see made. The proposal includes justifications for aspects of the suggested rule, including FERC’s authority to issue it without an environmental assessment or impact statement.
The NOPR also allows grid operators to set “just and reasonable rate tariffs” with a “fair rate of return” guaranteed to generators that have to secure the 90-day supplies required by the order.
The Secretary also references departmental research concluding there would be no significant economic impacts on small entities and, therefore, is not subject to the Regulatory Flexibility Act of 1980. Since Perry sees no legal impediments and has already done the heavy lifting of writing the proposed rule, he sees no reason FERC cannot:
1. Consider and complete final action” on the NOPR within 60 days from publication in the Federal Register; or
2. Issue the proposed rule as an interim final rule.
Any rules included in the final action will go into effect within 30 days of publication.
Despite FERC’s being an independent agency, Perry exercised the Department’s Section 403 authority. The legislation creating the Department grants a Secretary of Energy the power to propose rules for Commission action under certain circumstances, including electricity rate-related functions under the Federal Power Act.
FERC, however, is under no obligation to act as requested. The authority is an allowance in principle. Whether Perry is justified in his exercise of it in this instance is a matter of opinion.
It is also a matter still subject to the Administrative Procedures Act (APA). The absence of an emergency and of any proof that Congress had meant to waive notice and comment requirements under the situation Perry alludes to raises legal questions that will have to be answered.
For a rule of this magnitude, that’s fast. It may be too fast; and, as with other of Trump administration efforts to blow past the requirements of the APA may prove the basis for a court to overturn any final decision.
The likely plaintiffs in such a case are the the eleven energy industry associations that just submitted a joint motion to FERC contesting Perry’s request for an interim final rule within an expedited timeframe. The eleven represent a wide variety of the power sector including renewables, gas, consumers, power associations and regulators.
Perry bases his order on the Administration’s support of an “all of the above” approach to energy development and use. He concludes his written directive to the FERC Chairman and Commissioners:
We need to properly recognize the value of each resource, being mindful of its role in our national defense, economic security, and pursuit of environmental outcomes…. we must account for the value of on-site fuel storage capability. Moreover, because of the long lead time to secure and maintain these resources, we must also ensure that the technical expertise and materials are readily available. If for example, we lose our educated workforce or no longer have the ability to build and operate our baseload plants because of short-sighted policies, it will not only weaken our workforce but will threaten our energy dominance and national security. (emphasis added)
Face it, 90 days of coal is a lotta coal. It would dramatically increase the demand and price for coal while decreasing those for solar wind and natural gas. The order props up the purchase of un-economic fuels and facilities, passing the costs on to the consumer.
Perry’s proposal ignores the economics of coal relative to other fuel alternatives. The Secretary took the study he called for in a much more radical direction than was ever recommended by his own staff.
The conservative R Street Institute’s Devin Hartman recently wrote:
DOE’s proposal marks a deeply troubling departure from the thoughtful recommendations in its August technical grid report. That report sought to enhance the performance of electricity markets, whereas this overtly political proposal inflicts an impossible timeframe and concocts a recipe for wounding competitive markets, while potentially imposing billions of dollars in unnecessary costs for consumers.
R Street Republicans are not the only ones calling out the Secretary’s efforts. Nora Mead Brownell, a Republican former FERC commissioner has been quoted as saying the proposed rule was:
…the antithesis of good economics. It’s going to destroy the markets [and] drive away investment in new more efficient technologies, whether they are generating plants or energy efficiency, at a cost to business and ratepayers that is astronomical.
It would be one thing if keeping 90-days’ worth of fuel-secure resources on site at a central generating plant would actually make the grid more secure and/or resilient. The one does not follow the other.
Consider Puerto Rico. The grid there was destroyed. Having the fuel to generate power that can’t be transmitted hardly improves the situation. This is as true of coal-fired central systems as it is of solar or wind.
A Coincidence? I Think Not!
I would like to think that I’m one of those people willing to give credit where credit is due, even when I am not much in favor of what was being done. Perry picked his time wisely.
In the Notice, Perry cites Nature as the mother she can sometimes be—and not in a loving way:
The recent Polar Vortex, as well as the devastation from Superstorm Sandy and Hurricanes Harvey, Irma, and Maria reinforces the urgency that the Commission must act now. Moreover, the Commission should take action before the winter heating season begins so as to prevent the potential failure of the grid from the loss of fuel-secure generation–as almost happened during the 2014 Polar Vortex.
Nature is not the only thing motivating the Secretary, however. The timing of this is no coincidence.
FERC lacked the needed quorum to act for the past 6 months. The Senate approved two new commissioners on its way out of town in August. Currently, the Commission has 3 of its 5 commissioners in place.
Although the rules require two of the five commissioners to be of opposing parties, the FERC bench now has all three Trump nominees ready on the field. The two Democratic nominees still await final confirmation.
The current line-up did not escape Perry’s notice in his transmittal letter to FERC. Now that a quorum has been restored at the Commission, I am confident that the Commission will act in an expeditious manner to address this urgent issue.
There is some speculation that Chairman Chatterjee and Commissioners LaFleur and Powerlson will wait for the two Democrats to be approved, before taking so major an action. Such supposition may be correct, although there appears nothing substantive to support it. If, as they say, wishes were horses, beggars would ride.
Not to cast aspersions on nominees McIntyre and Glick, being resource agnostic in front of a Senate confirmation panel may or may not hold true once approved. FERC is free to act now with the three in-place commissioners. Even when all five are empaneled, three of a kind still beats a pair.
FERC need not follow the letter of Perry’s instructions. However, it is clear Perry, Pruitt and Trump expect “their commissioners” to find a way to move cash payments into the coal and nuclear industries.
Market sense notwithstanding, the President has made certain commitments to the anti-climate pro-fossil and nuclear communities. These are core supporters.
The President badly needs a victory or two. To think he won’t pressure his own administration on this is to whistle past the graveyard. The same resting place as that of the Paris climate agreement.
Potential Impact on the States
I worry the directive is as much an intended assault on the role of the states as it is on the operation of a marketplace that increasingly rejects costly and environmentally harmful energy sources. A rejection based on the very economic forces conservative Republicans say they support.
Why an attack on the states? The suggested rule works against state policies and programs that support clean climate-friendly electric generating sources, i.e. renewable portfolio standards.
Perry’s proposal does more than discourages negative wholesale pricing. It uses a false claim of national security to limit the ability of states and generators to use the market’s own forces in favor of more sustainable energy sources.
This from the tag-team of Perry and Pruitt, who just months ago were supporting state legal challenges to the Obama administration for its interference with the rights of states to set their own clean energy and climate policies.
I look at what the Trump administration is doing in the energy field and I see them creeping to-wards preemption of states’ rights and capacities to move towards low-carbon economies. I realize I am in the minority in holding this view.
Yet, I see Trump and his climate denying doyens ultimately having little choice but to limit state actions. How else can they achieve their goals of supporting coal and other unclean and unsustainable energy sources?
The market is against them. Many of the states are not only opposed to Trump’s energy and climate policies, they are actively pursuing opportunities to compensate for its failure to protect the environment and pursue an economic course that has already proven itself a source of growth and opportunity.
A number of states are aggressively challenging the federal government not just domestically but internationally. Foreign leaders attended the National Governors Association summer meeting. Why? They are looking to negotiate bi- and possibly multi-lateral climate agreements with states.
Individually states may not be able to replace the loss of an actively engaged U.S. in combating global climate change. In confederation, they certainly can make a very large contribution.
Perry’s proposed NOPR is just another example of his and Pruitt’s service as stalking horses of the White House’s promise to slow the nation’s transition to a low-carbon economy. For the states, it could not come at a worst time.
Some states have already met their RPS goals. Others are nearing and most of those with portfolio standards will within five years. Debates about the future of solar, wind and other clean energy technologies are taking place in state legislatures. Any skewing of the economics of market forces away from unsustainable sources will negatively impact the transition to a low-carbon economy.
The question must be asked: where is the victory for climate change deniers if the states are able to compensate significantly for the retreat of federal policies from climate protections? Will President Trump, Perry, Pruitt, Zinke, Sessions, Miller, et. al. — who prevailed upon Trump to exit Paris — permit the perceived disloyalty? Or, will they claim national security as the reason to deploy the nuclear option of preemption?
Only time will tell. I suggest, however, that the possibility of federal preemptions be kept in mind when considering and commenting on the recent NOPR and other Administration actions.
I completely understand the concerns of the eleven energy associations and the environmental community in the case of Perry’s FERC proposals. I support their arguments and am hopeful the administration will once again exceed its legal authority to feed its political appetites so they may once more be reminded we are a nation of laws.
I am saddened, however, by this being one more opportunity to tie the process in knots. Delay is the deniers’ opioid. In the final analysis, it is the enemy of sensible efforts to combat climate change and must be opposed.
This article was originally published by CivilNotion.com and was republished with permission.