Energy Secretary Should Use Discretionary Authority to Support Clean Coal Technologies

COMMENTARY

The threat to power grid resilience and reliability due to the continued retirement of coal-fired power plants has generated calls for immediate action. A severe weather event such as the “bomb cyclone” or “polar vortex” may stretch power capacity to the limits at any time.

Low-carbon technologies that increase efficiency and reduce carbon emissions are available to modify existing coal plants or incorporate into new facilities. The use of these technologies helps to address environmental concerns.

However, time and startup costs are the clear obstacles for would-be projects to access public and private resources. In some cases, the Department of Energy (DOE) secretary has discretionary authority that may be used more aggressively to expedite or otherwise modify the approval process of existing programs, which could fund projects to preserve existing coal-fired facilities and serve as a bridge to power plants of the future.

Options Include Federal Power Act

As an example of the urgency of the issue, FirstEnergy Corp. asked DOE Secretary Rick Perry to declare a power-grid emergency to trigger payments to FirstEnergy. Perry has met with members of Congress to gain support for the potential use of section 202(c) powers under the Federal Power Act, or alternatively to identify “any other options that are out there that are reasonable.”

Perry made clear his opinion that “the time for study is over.” As an alternative or in addition to invoking section 202(c) powers, Perry has the discretion to expedite or otherwise modify the approval process of existing DOE programs to support the preservation of coal-fired power plants.

Robert P. Simons

Potential applicants for DOE programs, though, need time and money. The Title XVII Innovative Energy Loan Guarantee Program provides loan guarantees to accelerate the deployment of innovative clean energy technology. But the non-refundable application cost alone may be up to $400,000, and the application process takes upward of two years. These time and cost estimates do not include the expense and time outlays for preparing the application, which given the breadth and depth of the application requirements themselves are extensive. As a result, $8.5 billion of public money earmarked for fossil fuel projects remains untouched.

There are potential avenues for navigating these obstacles. Specifically, the regulations for the loan guarantee program provide a mechanism for deviating from the application requirements where the requirements are not “specified by the [Energy Policy Act of 2005] or other applicable statutes.” Such requests are determined by the secretary “in his discretion.” Accordingly, aspects of the application process that are not explicitly required under the statutory scheme may be avoided by requesting a deviation or deviations.

The loan guarantee program is an example of where the DOE secretary has discretionary authority to reduce the time and cost for projects to access existing funding or credit support. Efforts should be made to identify other programs where this discretion could be applied, such as in “vertical integration” projects to acquire and modify one or more existing coal-fired power plants.

Projects incorporating pressurized fluidized bed combustion (PFBC) technology, such as that employed at the Karita PFBC Power Plant in Japan, should be supported. This plant has more than 40% efficiency with a supercritical steam turbine. Carbon capture technology can be added to a plant such as this, and supply sources can include waste fuel.

Coal FIRST Initiative

The DOE is laying the groundwork for power plants of the future, and to meet the need to preserve coal-fired power generation, with programs such as the Coal FIRST (Flexible, Innovative, Resilient, Small, and Transformative) initiative. Analysts have suggested that preserving existing coal plants, even with closure commitment dates, is preferred to replacement with natural gas because it would provide time for technological advancements, including for carbon capture and sequestration. Again, efforts should be made to streamline the application process for DOE funding and provide for startup costs for these and other projects.

Investment in clean coal technologies is consistent with the Trump administration’s energy policies including under Executive Order 13783, Promoting Energy Independence and Economic Growth. It is also consistent with the EPA’s proposed regulation to replace the prior administration’s regulation for greenhouse gas emissions applying to new, modified, and reconstructed coal-fired power plants.

The present threat of coal-fired power plant closures to the resiliency and reliability of the power grid may provide the basis to expedite or otherwise modify the loan guarantee program application process and exercise discretion as it may exist in other programs. The secretary’s exercise of such discretion may provide a reasonable alternative option, or be in addition to, invoking emergency section 202(c) powers.

Coal will remain a primary source of electricity in the foreseeable future; it provided about 30% of U.S. power generation in 2017. There is ample justification to provide the resources necessary to preserve existing coal-fired power plants at least as a bridge to the power plants of the future. ■

Robert P. Simons is a partner in the Business & Finance group of Reed Smith, adjunct to the global law firm’s Energy & Natural Resources group, and he is the leading lawyer in its coal industry practice.