Coal and nuclear industry groups are pressing the nation's top grid watchdog to begin implementing policy changes outlined in Energy Secretary Rick Perry's new grid reliability study aimed at saving their power plants from closing.
The bulk of the changes recommended in the report would have to be made by the Federal Energy Regulatory Commission, which regulates the interstate electricity markets that the study focuses on, to fix many of the problems affecting coal and nuclear plants.
"All the fingers seem to be pointing, rightfully, at FERC," said Paul Bailey, president and CEO of the pro-coal American Coalition for Clean Coal Electricity, in an interview with the Washington Examiner. "So, how does FERC bring everyone together and say what kind of criteria do we want to establish for resilience, what kind of analysis needs to be done here. And what's overlaying all that is how quickly it can get done."
The FERC electricity markets favor the least expensive forms of energy. That is the reason natural gas has come to dominate the electricity markets. The low cost of natural gas, spurred on by fracking and the shale boom, has increased economic pressure on coal and nuclear power plants. The Perry study says it's the top reason for the challenges facing coal and nuclear.
At the same time, less demand for electricity has reduced the power plants' revenue streams, while environmental rules have forced dozens of older coal- and oil-fired power plants to retire early.
Perry's grid study addresses those concerns by recommending that FERC look at new grid rules that value nuclear and coal power plants' attributes, ensuring that they receive a better price for the reliability, resilience and low-emissions benefits they provide to the grid.
It is a process that the commission would have to coordinate with the grid operators it oversees, such as PJM Interconnection and the Midcontinent Independent System Operator, that manage the massive wholesale electric markets that extend from New Jersey to the Dakotas.
Bailey said his group, which represents coal utilities, has been in talks at the White House in recent days on what to expect in terms of FERC being able to deliver on the recommendations. "I think most people understand the need for speed, the question is whether this whole system with FERC and the grid operators, and technical conferences, are set up to move these things quickly," he said.
In one scenario, it could take years, said Michelle Bloodworth, chief operating officer for the coal group, who previously worked at the Midcontinent Independent System Operator, or MISO.
"I think it's all going to come from what timeframe FERC gives these grid operators," Bloodworth said. "If they kind of say, 'well, OK, we'll let you talk to your stakeholders,' then I'd say they would take years."
But there have been times when FERC has acted quickly, for example, after the near misses during the 2014 polar vortex when extreme cold temperatures placed enormous strain on natural gas power plants that nearly caused power outages in the PJM market in the Northeast. Bloodworth said the commission acted swiftly to direct the grid operators to analyze fuel assurance immediately and gave them about three months to respond with fixes to prevent a potential disaster.
So, it is possible that FERC could take action in which the grid operators respond in six months to the recommendations in the report, including looking at "price formation from a resiliency standpoint," she said. The commission has been workinng on developing new rules on price formation for about three years, but the coal group wants it to look at coal-specific attributes, in addition to speeding up the process.
"They've talked a lot about price formation, but they haven't really looked at price formation from a resilience standpoint, valuing ... coal onsite fuel at 75 to 85 days compared to natural gas that [has] three to five [days], and many of the plants don't even have a little," Bloodworth said. She was referring to the number of days that coal plants have enough fuel stockpiled onsite to ensure electricity can be produced reliably amid a catastrophic or unexpected event.
But a major natural gas industry group said it "possesses several key attributes that make it inherently resilient compared to other energy delivery systems," said Dave McCurdy, president and CEO of the American Gas Association, representing distribution utilities.
"Natural gas systems are far more resilient in the face of extreme weather events because natural gas pipelines are predominantly underground and more protected from the elements," McCurdy said. "Our natural gas infrastructure also has the advantage of built-in redundancy of interconnections for receipt and delivery of natural gas."
The nuclear energy industry also wants the commission and grid operators to value resiliency at nuclear plants based on reactors being self-contained electricity generators that are not subject to fuel delivery constraints.
"To the extent that the utility system values resiliency, then nuclear is going to be well-positioned," said Matt Crozat, the Nuclear Energy Institute's senior director of policy development. "The reason is because we have our fuel not just on site, but in the reactor. We aren't reliant upon deliveries."
There are two parts to resiliency: "One is being able to recover from a problem. And the other is not having the problem in the first place. We fit very well into the second category of providing those stable generation sources."
Crozat is confident that nuclear plants will be recognized for their role in maintaining resilience of the system. But he also said the industry wants to be valued in the markets as a zero-emission resource.
"Where we've seen the most activity to date has been at the state level where we've seen New York and Illinois pass laws to do a better job of recognizing what nuclear brings to their systems," he said. "And the report did a good job of highlighting the appropriateness of those actions and providing an opportunity to move even faster than FERC and the federal government might be able to."
FERC "is not going to be inclined to, out of the gate, go mandate [the operators] to impose a carbon tax" to drive value in the markets for nuclear's zero emission attribute, Crozat said. "I think what they are going to be looking for, though, are ways to harmonize different state policies within markets."
It is much more efficient to enact policy goals through the markets than a "patchwork of state policies," he continued.
The commission will be inclined to encourage a broader solution, which will underscore the reliability and resiliency approach in Perry's report, he said.
The grid study also makes a priority of reducing regulatory burdens at the Nuclear Regulatory Commission, the top federal agency for regulating the nuclear power industry. The study wants the NRC to focus on ensuring that the existing fleet is able to relicense its reactors to continue to provide reliable electricity to the grid.
The industry wants the nuclear commission to ensure that its current slate of regulations and oversight is appropriate and adds to the security of the system, instead of just "making work for people that happen to be employed there."
Amy Farrell, senior vice president for government and public affairs at the American Wind Energy Association, said the wind industry welcomes "using markets and valuing reliability services. We think markets are the way to go toward getting us more reliability."
As far as the commission moving quickly on new rules for price formation, she said the wind industry values a good "outcome" over the pace of moving new regulations into force.
FERC already was working on those issues, and the "ball is already rolling," despite "a bit of a backlog" the commission is facing from lacking a quorum for six months, she said.
Overall, she said the Perry study has a "balanced look" at the markets by not favoring one resource over another. Perry noted in his accompanying letter with the report that this is "a conversation starter," she said.
The free-market R Street Institute think tank also will be pressing the pro-market aspects of the Perry study with FERC.
R Street has been advocating that the Trump administration support FERC's markets to meet its policy goals by supporting a wide range of power resources and competition. The study's findings are encouraging because it emphasizes the use of markets to find the right solution to a problem, instead of being predisposed to a certain outcome, according to the group.
R Street met with Energy Department staff during the development of the report, said Devin Hartman, senior fellow with the group and former FERC staff member. He will be writing an open letter to FERC in September, "pushing them in a healthy direction on market design improvements, things that should pass muster with the rhetoric of this administration, but are also good economic policy principles."
Hartman said the issue of price formation has had bipartisan support in the past and was actually begun under the Obama administration. "Those are kind of no-brainers [for recommendations], so it was kind of good to see them revisit that," he said.
"But overall, the study sets a healthy tone that they are going to do things that are empirically driven, and they want to have a productive dialogue on how to take a market-based approach going froward," Hartman said.
R Street also supports the infrastructure recommendations in the study, which support improvements to the permitting and siting of hydropower projects, which the commission also has jurisdiction over.
Hartman just released a paper on hydropower that underscores the slowness in licensing the facilities. He said many people blame FERC for that, but it is actually the maze of other agencies that must sign off on a project that can delay development for years.