Trump’s best shot at saving coal is an obscure power market

Image from Wikimedia Commons

In the past three months, regulators appointed by President Donald Trump have disrupted ambitious plans to combat climate change in electric grids serving 85 million people in the U.S., from Chicago to New York to Washington.

It was easy: an agency just rewrote some obscure pricing rules.

With that, the Federal Energy Regulatory Commission cranked up to a new boil the simmering debate over whether the U.S. should get its electricity from fossil fuels or sources that don’t spew carbon.

The commission’s Republican majority decided the playing field should be leveled so no one generator gets special treatment.

The commission’s Republican majority decided the playing field should be leveled so no one generator gets special treatment

“They’re taking these markets in a totally different direction than states want to go,” said Ari Peskoe, director of the Electricity Law Initiative at Harvard Law School. “It could backfire quickly.”

The rulings set up a battle over whether left-leaning states including New York, New Jersey and Illinois can effectively promote clean power. Wind and solar have long depended on state quotas and subsidies for growth, and those incentives could now be hobbled.

Trump, who campaigned on promises to revive the troubled coal industry, has tried before to prop up that fuel in power systems, and to keep natural gas as a major generating engine too. Most efforts had limited impact. His decision to pull out of the Paris accord on climate change, for instance, did nothing to reverse the lousy economics of coal plants. A push to subsidize struggling coal plants failed in 2018.

With the new rules, though, regulators have found a potentially potent lever to pull. The markets affected are massive and feed households in places where renewable energy is backed with incentives and nuclear power is subsidized. FERC can thwart ambitions to strip carbon emissions out of the power-making process because it’s the agency that decides how electricity is bought and sold in wholesale markets—which is where most utilities get their power.

The U.S. could be left “holding the bag with high-cost resources while the rest of the world makes the transition to low-carbon energy,” said Jules Kortenhorst, chief executive officer of Rocky Mountain Institute, which advocates a no-carbon future. He accused regulators of trying to “suppress clean energy.”

What the agency did was impose an expanded minimum price floor for bids from providers that sell in the so-called capacity market, where deliveries are promised years in the future so utilities and grids can plan for meeting peak demand. For the first time, renewable generators and nuclear plants that get boosts from subsidies or other incentives can’t bid below that price, eliminating an advantage they’ve had. Among those at risk of losing out are massive wind farms off the East Coast that are scheduled to come on line starting in 2022 and that states up and down the Atlantic seaboard are planning to rely on to curb carbon emissions.

FERC Commissioner Richard Glick, a Democrat, voted against the new rules, saying they would “slow the transition to a clean energy future.” FERC’s chairman, Republican Neil Chatterjee, defended the agency’s action as in the interest of the public and the free market.

While FERC is an independent agency, the president appoints the commissioners. Up to three of the five seats may be occupied by members of the president’s party. FERC currently has two Republican commissioners and one Democrat; the other seats are vacant. Trump has nominated one commissioner, Republican James Danly. Senator Joe Manchin, a West Virginia Democrat, called on the president Tuesday to nominate a Democrat, too.

“Filling the Republican seat while leaving the Democratic seat vacant is not in keeping with the longstanding practice of this committee or the need to keep the commission bipartisan,” Manchin, the ranking member of the Senate Energy and Natural Resources Committee, said in a statement. 

The White House referred questions on the floor-price rulings to FERC. A spokeswoman for the agency declined to comment.

The National Mining Association, which represents coal companies,  is among those supporting the new rules

The National Mining Association, which represents coal companies,  is among those supporting the new rules, saying they’ll put coal plants on a level playing field with subsidized wind and solar farms.  

“The commission’s order is necessary to ensure that these resources are finally able to compete fairly,” Rich Nolan, the group’s chief executive officer, said in a Feb. 3 letter to FERC.

Since the agency changed the price rules, both New Jersey and Illinois, which cap the northeastern and western ends of the giant grid operated by PJM Interconnection, have threatened to exit the PJM capacity market because new solar and offshore wind projects will lose their edges. And PJM has asked FERC to overturn parts of its rule.

FERC also approved new price-floor rules for the operators that oversees New York state’s grid. The state has vowed to eliminate carbon emissions from power plants by 2040. Senator Chuck Schumer, a New York Democrat, blasted FERC on Twitter, saying it “has become a wholly-owned GOP subsidiary, doing the bidding of the biggest polluters.”

The new price rules could hit customers when utilities start to get charged in years ahead for the capacity they will be buying in upcoming auctions. For PJM alone, those additional costs to support fossil fuel plants could balloon to as much as $2.4 billion a year, according to FERC’s Glick.

Brianna Lazerwitz, an analyst at BloombergNEF, calculated that as much as 22 gigawatts of carbon-free electricity—enough to power about 18 million homes—could be taken out of the market. At the same time, as much as 13.3 gigawatts of mostly coal power that had been at risk of retirement might be saved. What FERC did, she said, will, “artificially increase the cost.”

Chatterjee, the FERC chairman, said during a hearing in December that it was far too early to predict what the impact on consumers might be, dismissing what he called “back-of-the-envelope” estimates.

(By Chris Martin)


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