As DOE’s Coal Rescue Reportedly Dead-Ends, Stakeholders Recommend New Pathways

The White House may have shelved an effort to force grid operators to buy power from uneconomic coal and nuclear plants amid opposition inside the administration, Politico reported on October 15. 

The publication reported “four people with knowledge of the discussions” have confirmed that opposition from the president’s own advisers on the National Security Council and National Economic Council may have derailed a Department of Energy (DOE) directive to prop up coal and nuclear for national security reasons as outlined in a memo leaked on May 31. The DOE has not yet responded to POWER’s requests for more information. 

A Controversial Two-Year Directive

The draft memo says that regulatory and economic factors have prompted the premature retirement of “fuel-secure” plants—which include nuclear and coal, but also oil-fired and dual-fuel units with adequate storage—at the “expense of fuel security and resilience.” It reasons that because premature retirements of fuel-secure baseload plants reduce resilience to fuel supply disruptions, and because this “crisis” is caused by regulatory and economic actions, federal and state regulatory bodies as well as the private sector must act promptly “to achieve a lasting solution that meets the needs of both national security and the efficient operation of energy markets.”

In the memo, the DOE also noted it had begun a 24-month-long analysis, working with five national laboratories to identify critical defense facilities” served by “Defense Critical Electric Infrastructure.” 

Perhaps more critically, the DOE in the memo also said that it planned to issue a directive—which will be effective for two years—to direct system operators “to purchase or arrange the purchase of electric energy or electric generation capacity from a designated list of subject generation facilities (SGFs) sufficient to forestall any further actions toward retirement, decommissioning, or deactivation of such facilities during the pendancy of DOE’s order.” SGFs, outside of wholesale market territories should meanwhile continue generation and delivery of power according to their existing contractual arrangements with load-serving entities.

The memo was the latest effort by the DOE to save ailing generators faced by tumult in competitive markets. In the spring of 2017, the DOE issued two emergency orders to keep open four coal units otherwise slated for closure due to Mercury and Air Toxics Standards (at a plant in Oklahoma and another in Virginia). And in September 2017, the DOE proposed a “Grid Resiliency Pricing Rule,” directing the Federal Energy Regulatory Commission (FERC) to require that grid operators establish reasonable rates for power plants that show “reliability and resiliency attributes,” but FERC slapped down the measure in January 2018.

Coal Stakeholder Recommendations En Route to the Energy Secretary

While the DOE has not yet confirmed the death of its leaked directive, wider efforts to prop up the coal industry continue. 

On October 3, members of the National Coal Council, a 35-year-old nonprofit that serves as an advisory group to the U.S. Energy Secretary, endorsed a draft report published this September responding to an April 7, 2018, letter from Energy Secretary Rick Perry. Perry asked the NCC to identify what actions should be taken to optimize the coal-fired power fleet “so it can continue to provide reliable, resilient, affordable power as part of a diverse electric generation mix” as well as to determine what “unique benefits” coal provides. 

The report was prepared in consultation with a long list of coal power stakeholders. The NCC Coal Policy Committee includes non-partisan research organizations like EPRI, legal firms, as well as coal producers and generators. 

NCC CEO Janet Gellici told POWER on October 4 that the “Power Reset: Optimizing the Existing U.S. Coal Fleet to Ensure a Reliable and Resilient Power Grid,” report will be forwarded to Perry “in a couple of weeks with NCC’s recommendations.” 

The NCC lamented the retirement of 24% of coal capacity between 2005 and 2017, and noted that nearly 40% of the U.S. coal fleet operating in 2010 has retired, converted to another fuel, or is slated for retirement by 2030. But it fashions its strategic objectives and tactics to stem the decline of coal power around an assortment of factors that caused it, notably: “competitive pricing from other fuel resources, federal and state energy and environmental policies, declining electricity demand, inadequate funding for technology innovation, and societal pressures.”

Key strategic objectives of the NCC’s recommended approach include an assessment of the value of the current coal fleet; supporting efforts to retain continued operation of the existing fleet; reforming the regulatory environment; and renewing investment in coal generation through research development, demonstration and deployment. 

Among its recommendations are: 

Grid Resilience

  • Establish a uniform definition of grid resilience.
  • Assess the fuel security of ISOs/RTOs.
  • Establish quantitative metrics against which to evaluate grid resilience.
  • Evaluate the experience of other nations regarding the value of firm, dispatchable power and challenges associated with intermittent renewable energy deployment.
  • Provide appropriate economic and regulatory incentives to stem the tide of plant retirements.
  • Establish an environment that values and compensates diversity.

Policy Reforms

  • Support mechanisms to immediately compensate the U.S. coal fleet for the essential services it provides.
    Reform New Source Review rules and  the Public Utilities Regulatory Policies Act of 1978
  • Revise the 2015 Coal Combustion Residuals ruling.
  • Support changes to Effluent Limitation Guidelines establishing wastewater treatment standards. 
  • Advance CO2 storage laws and regulations on Federal and tribal lands.
    Engage EPA as it progresses the Affordable Clean Energy plan.

Market Reforms

  • Support FERC capacity market reform initiatives.
  • Support FERC initiatives to refine ISO/RTO price formation.
  • Support FERC efforts to establish and enforce standards for essential reliability services.
  • Support efforts by ISOs/RTOs to conduct assessments evaluating fuel security and resilience of the bulk power system.

Tax Reforms

  • Support legislative initiatives to provide temporary tax credits to cover a portion of O&M
    expenses for existing coal plants. 
  • Support legislative initiatives that would complement and further incentivize utilization of the 45Q tax credit for existing coal plants, including Master Limited Partnerships and Private Activity Bonds. 
  • Support changes to the 48A tax credit, such as removing the efficiency increase requirement that would facilitate retrofits of CCUS technology to the existing coal fleet. 

Technology Investment

  • Support development of the following technologies: 
    • Advanced coal mining and processing technologies
    • Coal beneficiation technologies, including coal washing and upgrading
    • Retrofitting and repowering technologies 
    • Energy storage technologies, especially thermal energy storage
    • Advanced air emissions control system technologies 
    • Water effluent technologies
    • Carbon capture and storage technologies
    • Rare earth element extraction from coal and coal byproducts
    • Technologies identified in the CURC-EPRI Roadmap that enhance the efficiency and cost-competitiveness of the existing coal fleet.
  • Promote education and awareness about the water-energy nexus.
  • Promote initiatives to enhance transparency about the inherent costs and benefits associated with all U.S. energy resources.

The NCC also said that its members (who serve in a voluntary capacity) endorsed creating a DOE-led government-wide task force to monitor and coordinate policy developments relevant to advancing coal exports.

Among core recommendations to achieve that objective are to deploy advanced coal mining and processing technologies to reduce production costs, thus making U.S. coals more competitive in international markets, and to enhance U.S. coal mining operations with export potential in both traditional and non-traditional coal supply regions. The NCC also calls for enhancements for river and land transport infrastructure, and a general federal push to improve trade opportunities abroad, such as promoting “the elimination of regulatory and institutional barriers to the deployment of coal-based facilities worldwide.”

—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)