A Trump administration plan to bail out otherwise uneconomical coal-fired and nuclear power plants potentially could cost consumers more than $34 billion over a 2-year period, a study commissioned by the Natural Gas Supply Association, American Petroleum Institute, and four other national energy associations concluded.
The Brattle Group, in a study that the groups jointly released on July 19, estimated that such a bailout could directly cost consumers:
• $16.7 billion/year, or $34 billion for 2 years as proposed, if every US coal and nuclear power plant was given a uniform (dollars per unit of capacity) support at the level of the average financial shortfall experienced by such plants.
• $9.7-17.2 billion/year, or $20-34 billion over 2 years, if only those plants that now face shortfalls were given payments sufficient to cover their operating losses.
• $20-35 billion/year, or $40-70 billion total, if power plant owners were also granted a return on their invested capital in addition to payments for operating shortfalls.
“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,” the report said. “Arresting the retirement of uneconomic generating assets in the current market environment will likely prove quite costly.”
NGSA Pres. Dena E. Wiggins said, “We hope that federal policymakers will reject this short-sighted measure to bail out old and economically failing power plants at a direct cost to consumers that could exceed $17 billion for every year it’s in place—with no improvement to reliability. Policymakers should be even more deeply troubled by the longer-term consequences that went unquantified in the study, such as the harm the bailout would do to the competitive power markets.”
API Market Development Group Director Todd Snitchler said, “Bailouts of coal and nuclear plants around the country could raise costs for American consumers and fundamentally hurt the administration’s goal of American energy dominance throughout the world. Affordable, reliable natural gas has earned its share of the power markets, which is why it has become our nation’s top source of US electricity.”
Officials from Advanced Energy Economy, American Wind Energy Association, Electricity Consumers Resource Council, and Electric Power Supply Association also commented on the study’s findings.
US Energy Sec. Rick Perry announced the proposal on Sept. 29, 2017, after years of growing reliance on gas to generate electricity domestically, inferring that coal and nuclear power plants are less vulnerable to disruptions. The US Federal Energy Regulatory Commission ended an examination of the idea earlier this year and directed regional operators to provide information on whether they and FERC need to take additional action to make power grids more resilient instead (OGJ Online, Jan. 9, 2018).
But DOE still may be considering the idea, particularly after a subsidiary of Akron, Ohio-based First Energy Corp. petitioned Perry on Mar. 29 to issue an emergency order that would secure the long-term capacity of FES and other utilities’ nuclear and coal-fired plants in the region to compensate their owners “for the full benefits they provide to energy markets and the public at large, including fuel security and diversity.”
