Last week, the Environmental Protection Agency (EPA) introduced a proposal to replace the Obama-era Clean Power Plan (CPP) with a new set of rules that would significantly reduce pollution control requirements for coal-burning power plants. The proposal, officially dubbed the Affordable Clean Energy (ACE) rule, was unveiled ahead of President Trump’s trip to West Virginia for a campaign-style rally, providing additional fodder for the President to tout his deregulatory bona fides in the heart of coal country.
While the President claimed that the proposal “will help our coal-fired power plants,” the plan is unlikely to influence the overarching market forces that are driving the shift away from coal and towards more cost-effective sources of generation like renewable energy.
The resurgence of the domestic natural gas industry and the precipitous drop in the costs of wind and solar power have made those sectors increasingly competitive over the past decade. As a result, renewable energy resources have been the largest source of new power-generating capacity added to the U.S. power grid since 2008. Due to these market conditions, and the strong demand for renewable energy created by corporations, cities and states, utilities have increasingly retired uneconomic coal-powered plants and directed new investment towards deploying these lower-cost alternatives.
Instead of aiming to reduce emissions in the power sector and encouraging the development of renewable energy infrastructure, the proposed ACE rule would give states the latitude to decide how to regulate GHG emissions from individual plants. If the rule is issued and upheld in court, states would be allowed to focus on efficiency improvements on a plant-by-plant basis and to bypass the EPA’s New Source Review program, which forces plant owners to install pollution controls when they upgrade a plant. These deregulatory actions would lessen the financial and regulatory burden on certain coal plants and could incentivize states to keep uneconomical plants open longer than they might have otherwise.
Although the ACE plan may provide a short-term breather for individual coal plants, it will not bring about the resurgence of the coal industry that President Trump has long promised. In its own impact analysis of the proposed regulations, the EPA estimates that without either the CPP or the ACE, coal power generation will decline by 23 percent by 2030. EPA estimates that if it were to enforce the ACE rule, electricity production from coal plants will still drop by approximately 20 percent by 2030. The new proposal will inject some uncertainty into the marketplace (and cause as many as 1,400 premature deaths by the EPA’s own assessment), but it will not undermine the long-term trends driving investment in and deployment of renewable energy.
Since the ACE proposal is unlikely to resurrect a declining coal industry on its own, the Administration may look elsewhere in its continuing effort to bolster coal. As readers of the this blog will know, attempts to bail out uneconomic sources of generation started in earnest in the fall of 2017 when Department of Energy (DOE) Secretary Rick Perry filed a notice of proposed rulemaking (NOPR) at the Federal Energy Regulation Commission (FERC), asking the commission to provide financial support to power plants that maintain a 90-day supply of onsite fuel. Thankfully, all five FERC commissioners unanimously rejected the NOPR in January, in an explicit rebuke of the administration’s thinly veiled attempt to provide out-of-market support to uneconomic coal and nuclear power plants.
The latest proposal to intervene in competitive markets was revealed in June with a leaked draft memo indicating that DOE is considering use of emergency national security authorities to order grid operators to purchase power from struggling coal and nuclear plants. After release of the memo, the White House issued a supporting statement directing Secretary Perry to prepare steps to prevent the further loss of coal and nuclear power plants, which it characterized as a threat to the nation’s security. At the West Virginia rally last week, the president even hinted that a military-style bailout could follow the CPP reversal, commenting that “we are working now on a military plan that’s got to be something very special.”
Such a bailout would represent an unprecedented intervention into competitive power markets, undermining market principles that have worked over the past two decades to keep American power reliable and affordable. The bailout plan outlined in the draft memo would cost American electricity consumers more than thirty billion dollars for subsidies to coal and nuclear power plants that are no longer economic. The resulting instability and uncertainty would fundamentally disrupt decisions regarding investment and grid planning, which, ironically enough, would weaken the reliability of America’s grid.
The suggestion that grid reliability is in danger due to coal and nuclear power plant retirements has been discredited time and again by leading energy policy experts, a long list of current and former FERC commissioners and leading members of the utility and grid planning industries. Especially troubling is that the spurious claim of an impending grid emergency from plant closures is a distraction from real, tangible threats to the U.S. power grid infrastructure, including cybersecurity threats, extreme weather events and transmission and distribution outages.
Here at ACORE, we will continue to focus on these very real threats and oppose bailout proposals that undermine the integrity of the nation’s competitive power markets. In the coming weeks we will also showcase the range of important national security benefits that renewable energy brings to the table.