U.S. to Say Power Markets Must ‘Evolve’ to Value Coal, Nuclear

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  • Energy Department’s report set to be released late Wednesday
  • Study to highlight ways markets can evolve to protect plants

QuickTake: Trump Pushes Coal Revival

The U.S. Energy Department will issue a long-anticipated report late Wednesday that will stress the need to “evolve” the nation’s power markets so they value resources such as coal and nuclear more, a document obtained by Bloomberg shows.

The report commissioned by Energy Secretary Rick Perry will recommend that regulators “improve” wholesale electricity markets to ensure the U.S. has enough supply to keep the lights on during extreme events, the document shows. The study details how cheap natural gas, government regulations, weak power demand and increasing volumes of solar and wind power are challenging the economics of coal and nuclear plants.

The department’s study is coming at a critical time for nuclear and coal power producers fighting for government help to stay afloat as weak demand and competition from natural gas, as well as solar and wind energy, squeeze their profits. These generators have been counting on the findings to help make their case for aid. Perry ordered the report in April, warning that subsidies and policies enacted before President Donald Trump took office may be forcing nuclear and coal generators to shutter plants, threatening the grid.

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, Paul Bailey, chief executive officer of American Coalition for Clean Coal Electricity, said Wednesday. “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.”

‘Warped View’

The Energy Department said Wednesday that the agency will release the study “late tonight.”

John Shelk, president of the Washington-based Electric Power Supply Association, said ensuring the resilience of the U.S. 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’s a warped view of resilience. All fuels, technologies and attributes should be considered together.”

An earlier draft of the agency’s study concluded that the grid was more reliable than ever, but suggested that the Federal Energy Regulatory Commission -- which oversees the nation’s electricity markets -- could play a role in preserving so-called baseload plants that supply around-the-clock power.

The department’s findings echo comments recently made by Neil Chatterjee, who was tapped by Trump to temporarily lead FERC. Chatterjee said last week that coal-fired plants are a crucial part of America’s energy mix that needed to be “properly compensated to recognize the value they provide.”

The Energy Department will recommend in its report that FERC expedite efforts to improve “price formation” in wholesale power markets and look at valuing resources for their reliability, according to the document obtained by Bloomberg. The department is also recommending that federal agencies accelerate and cut the costs of permitting for nuclear, hydropower and coal plants.

— With assistance by Mark Drajem, Jennifer Jacobs, and Catherine Traywick

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