President Trump’s plan to save coal and nuclear power plants could cost a whopping $17.2 billion per year, a new study funded by opponents of the bailout said Thursday.
The report by the consulting and engineering firm Brattle looked at two scenarios to assess the possible cost of a Trump power plant bailout that range from $16.7 billion to 17.2, far exceeding a recent estimate from a coal group that said it would cost $4 billion per year.
The Brattle report was done for the Advanced Energy Economy and funded by members of a broad coalition of strange bedfellows opposing the Trump plan to bailout the power plants.
The funders included the large oil group American Petroleum Institute, the American Wind Energy Association, the Natural Gas Supply Association, the Electric Power Supply Association, and the Electricity Consumers Resource Council, representing large manufacturers and industrial users of electricity.
Brattle based its assessment on an administration draft memo reported by news outlets on May 31 to inform its analysis.
Trump ordered Energy Secretary Rick Perry to develop a plan to save coal and nuclear plants from closing prematurely due to unfavorable market conditions, notably the low cost of natural gas.
The report’s first scenario applies a market annual payment of $50 per kilowatt of electricity for power plants if they continue to operate.
The scenario assumes that the payments would apply to the entire current fleet of coal, including 235.8 gigawatts, and nuclear, comprising 99.1 gigawatts, which would imply a direct cost of $16.7 billion dollars per year. The payments would take the form of out-of- market payments via contracts or other mechanisms, according to the report.
The second, “less expansive and less uniform” scenario would tailor out-of-market payments, or subsidies, to exactly cover estimated operating shortfalls, the report stated.
“If such a policy were extended to all coal and nuclear plants that we estimate currently experience operating shortfalls …, the policy cost would be between $9.7 and $17.2 billion per year,” it read.
The $17.2 billion is what the oil and natural gas industry will be using in arguing against the coal and nuclear power plant bailout. The coalition opposing the Trump plan says it undermines the electricity markets to favor more expensive and less efficient forms of energy.
But the Brattle report goes even further by saying the Trump plan could reach as high as $35 billion per year, depending on how the payments are devised by the administration.
“If the Administration adopts a financial support formula that includes a return on invested capital, as it proposed last year, this would substantially increase the amount of out-of-market payments,” the report read.
“We conservatively estimate that cost-of-service recovery (including embedded capital) could at least double the policy cost to between $20 and $35 billion per year,” according to the report.
“The magnitude and range of these estimates indicate the significant impact of yet-to-be determined policy design parameters and the uncertainty of the scope and impact of those choices on cost,” it continued. “Arresting the retirement of uneconomic generating assets in the current market environment will likely prove quite costly.”
The cost report was released ahead of the Trump administration’s own cost assessment for the plan that Perry said is being pulled together.
The pro-coal group American Coalition for Clean Coal Electricity released its own assessment earlier this month, showing the plan would cost $4 billion per year based on available information and studies.
It argued that paying $4 billion each year to subsidize coal and nuclear plants is not that much for consumers to bear because of the benefits to energy reliability and national security.
“While $4 billion per year is not trivial, it is tiny compared to other investments for national security,” according to the paper. It explains that Defense Department spending over the past three fiscal years averaged about $645 billion per year. Therefore, “paying an additional $4 billion per year to promote national security would represent less than 0.6 percent of federal funding for the same purpose,” the paper added.
President Trump was in West Virginia recently, where he stressed how keeping coal in the nation’s energy mix is a matter of national security because it is “indestructible” compared to natural gas that relies on pipelines that can be easily bombed.
“You know, you bomb a pipeline, that’s the end of the pipeline,” Trump said. “With coal, that stuff is indestructible.”
“So for national security purposes, I don’t think people talk about it enough — coal,” he said.
