US grid report calls for saving coal plants

Bloomberg

The Energy Department, in a long-anticipated report on the security of the US electric grid, makes the case for rescuing the nation’s coal industry from widespread plant shutdowns, but stops short of an assault on renewable power that environmentalists had feared.
The study, commissioned by Energy Secretary Rick Perry who has warned that policies favoring solar and wind may be forcing plants to shut and threatening the grid, recommends that the Environmental Protection Agency ease rules on coal plants. It also calls for changes to how wholesale electricity is traded and easier permitting for resources such as coal, nuclear and hydropower.
The report hands President Donald Trump a plan for fulfilling his campaign promise to revive America’s ailing coal industry and put miners back to work. It paints a somewhat grimmer picture of grid security than an earlier draft that concluded the nation’s power system is more reliable than ever, in spite of coal plant shutdowns. By contrast, the final report cautions that “market designs may be inadequate” to keep “traditional” power generation online.
“It is apparent that in today’s competitive markets certain regulations and subsidies are having a large impact on the functioning of markets, and thereby challenging our power generation mix,” Perry said in a statement. “Customers should know that a resilient electric grid does come with a price.”
The report appeared to have little effect on the shares of utilities, power generators and coal miners. Miner Alliance Resource Partners LP fell 1.4 percent to $17.80 at 11:35 a.m., its biggest intraday decline. Power producer NRG Energy Inc. dropped as much as 1.9 percent, the biggest intraday decline in a week. Exelon Corp., the biggest US nuclear generator, was little changed at $38.28.
The report was “consistent with market expectations and does little directly to correct market anomalies,” Barclays analysts led by Daniel Ford wrote in research.
Federal prodding could lead to higher profit margins in PJM, the largest US power market, by the summer of 2018, according to the research.
The US power industry has been waiting for the Energy Department to release the study for months. Power generator FirstEnergy Corp. said in April that it wanted to see the results before pressing ahead with a plan to divest money-losing coal and nuclear plants. Rival Exelon, the largest operator of reactors in the US, told investors this month that it expected the report to highlight the “critical role” that nuclear plays.
The report lays out policy options that could support coal in the future, but falls short of offering immediate solutions for companies like FirstEnergy, which is weighing the closing of three coal plants in Pennsylvania, Ohio and West Virginia.
“It is too soon to tell the extent to which the federal government’s action will assist FirstEnergy’s
facilities,” Jennifer Young, a spokeswoman for FirstEnergy said by email.
The company, along with coal supplier Murray Energy, had asked the Energy Department to issue an emergency order that would enable its plants to keep operating. In the days leading up to the release of the grid report, the agency still had not granted that request.

CHEAP GAS
The sweeping 181-page report concludes that coal-fired and nuclear power plants are being forced out of business primarily because they can’t compete against cheap and abundant natural gas, which is flowing out of US shale formations at a record pace. Policies favoring solar and wind energy have also played a role, the study shows.
It stresses the critical need to preserve coal, nuclear and other “baseload” plants that continue to produce power when the wind isn’t blowing and sun isn’t shining. The report argues that even natural gas-fired generators, which rely on pipelines to receive fuel, may be less resilient.
“The more we rely on natural gas, the more we’re relying on fuel that arrives just in time” at a power plant, said Joseph Dominguez, Exelon’s vice president of governmental and regulatory affairs and public policy.

A ‘WARPED VIEW’
Federal regulators are “going to have to value these resilience attributes” of dependable resources, especially coal plants that can store enough fuel on-site to last months, said Paul Bailey, chief executive officer of American Coalition for Clean Coal Electricity.
“Coal stacks up really well.
Natural gas does OK. Nuclear
does pretty well. Renewables
don’t do well in some respects and do OK in others.”
“You need a coal fleet in order to have a resilient and reliable grid,” Bailey said. John Shelk, president of the Washington-based Electric Power Supply Association, said ensuring the resilience of the US power grid doesn’t simply mean handing out subsidies for coal and nuclear plants.
“Coal and nuclear want resilience to be a code word to subsidize them when they can’t compete,” said Shelk, whose group represents power generators such as NRG Energy Inc. and Dynegy Inc. that sell their supplies into wholesale markets. “That’s a warped view of resilience. All fuels, technologies and attributes should be considered together.”