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U.S. lays groundwork for saving coal plants with grid report

Bloomberg

The Energy Department, in a long-anticipated report on the security of the U.S. electric grid, makes the case for rescuing America’s coal industry from widespread plant shutdowns but stops short of the assault on renewable power that environmentalists had feared.

The study, commissioned by Energy Secretary Rick Perry, who has warned that policies favoring solar and wind may be forcing plants to shut and threatening the grid, recommends that the Environmental Protection Agency ease rules on coal plants. It also calls for changes to how wholesale electricity is traded and easier permitting for resources such as coal, nuclear and hydropower.

The report hands President Donald Trump a plan for fulfilling his campaign promise to revive America’s ailing coal industry and put miners back to work. It paints a somewhat grimmer picture of grid security than an earlier draft that concluded the nation’s power system is more reliable than ever, in spite of coal plant shutdowns. By contrast, the final report cautions that “market designs may be inadequate” to keep “traditional” power generation online.

The sweeping 181-page report concludes that coal-fired and nuclear power plants are being forced out of business primarily because they can’t compete against cheap and abundant natural gas, which is flowing out of U.S. shale formations at a record pace. Policies favoring solar and wind energy have also played a role, the study shows.

It stresses the critical need to preserve coal, nuclear and other “base load” plants that continue to produce power when the wind isn’t blowing and sun isn’t shining. The report argues that even natural gas-fired generators, which rely on pipelines to receive fuel, may be less resilient.

Advanced Energy Economy, a group that promotes solar and wind, said the report “seriously overstates” the challenges associated with new energy resources.

The American Petroleum Institute noted that natural gas is now the source of more electricity in the U.S. than any other fuel and has cut consumers’ energy costs “without government mandates and subsidies.”

One way that the federal government can assist uneconomic coal plants is to compensate base load plants for the resilience they offer the power grid, according to the report. The authors recommend that the Federal Energy Regulatory Commission, which oversees power markets, study ways in which those reliability attributes can be appropriately valued. That could include the creation of new pricing mechanisms or changing the agency’s approach to energy price formation, the report says.

The commission is already weighing whether it should redesign market rules to better account for state policies encouraging the use of zero-emissions power. New York and Illinois recently established subsidies for nuclear power and others are considering doing the same.

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