A top official at the nation’s largest regional grid operator said Monday that President Trump’s order for the Energy Department to bail out failing coal and nuclear plants “complicates” the functioning of competitive power markets that produce low costs for consumers.
Craig Glazer, vice president of federal government policy of PJM Interconnection, which operates the power grid for 65 million people in 13 states from Illinois to Virginia, said Trump’s call to save coal and nuclear plants worsens the “headache” of recent federal and state efforts to subsidize energy sources.
“The actions of President Trump and Energy Secretary [Rick] Perry complicates this issue even more,” Glazer said at the Energy Information Administration’s annual conference in Washington.
After the White House announced Trump’s order Friday, PJM Interconnection said its grid is “more reliable than ever” and that any federal intervention “would be damaging to the markets and therefore costly to consumers” by raising electricity prices.
Glazer on Monday said he feared policymakers at the federal and state levels are undermining unregulated competitive wholesale power markets that have defined recent decades by moving to subsidize favored energy resources, as the grid uses more lower-cost natural gas and renewables.
In addition to Trump and Perry’s efforts, states such as Illinois and New Jersey are subsidizing nuclear plants to keep them online.
“We are sort of half going back to the old days, regulating plant by plant and state by state,” Glazer said. “You have competitive generation competing with regulated subsidized generation. This is a half-slave, half-free problem. I am not sure that is sustainable. I worry as we move down this path we are ignoring lessons of past.”
Under the current system, operators of wholesale power markets hold auctions during which electricity generators make bids, with the goal of matching supply to demand at the lowest price for consumers. Coal and nuclear plants are increasingly uncompetitive because they struggle to keep costs low and make a profit.
About 20,000 megawatts of coal have recently retired in PJM, and about 4,000 megawatts of coal could retire in the next few years.
But Glazer pointed to recent successes for coal to make the case that markets operate fairly, without favoritism.
For example, generation from coal increased in PJM’s most recent capacity auction, and coal also performed well during the lengthy cold snap this winter.
“I like to analogize markets to my kitchen blender,” Glazer said.
“I put in different units, and the market blends them together and tells me what’s the most efficient mix of those resources. The market is doing exactly what it was designed to do, which is to drive efficient investment. You can’t blame the market for not retaining nuclear or coal or whatever. People sort of use the markets as a whipping boy.”
As PJM pushed back, Perry on Monday defended Trump’s call for him to “prepare immediate steps” to stop the closing of unprofitable coal and nuclear plants. The Energy Department is considering ordering grid operators such as PJM to buy electricity from coal and nuclear plants for two years, using an emergency authority that is normally meant for crises such as natural disasters, terrorist attacks, or energy shortages.
“Fuel-secure [coal and nuclear] units are retiring at an alarming rate that, if unchecked, will threaten our ability to recover from intentional attacks or from natural disasters,” Perry said in a speech in Austin, Texas.
