Coal And Nuclear Subsidy Still Alive Despite Stall

Oct 26, 2018

Official Department of Energy Photo of Energy Secretary Rick Perry.
Credit Ken Shipp/U.S. Department of Energy

Coal-fired power plants are closing down in unprecedented numbers, many of which are Wyoming coal customers. In June, President Trump took a step to change that. Taylor Kuykendall, a coal reporter with S&P Global Market Intelligence, gives context to the coal and nuclear plant subsidy introduced last June.

TK: The basic idea is that the Department of Energy would like to intervene into the energy markets and basically either order grid operators to buy electricity from struggling coal nuclear plants or they would provide some sort of an incentive to do so. And currently, a lot of those units are retiring because it's cheaper to get energy from elsewhere. And so, what the DOE is doing here is making a national defense or a national security argument that basically gives wide deference to the administration that would allow them to come in and intervene in those markets and put their thumb on the scale in support of coal and nuclear plants that otherwise might not dispatch.

So, how would this theoretically affect states coal-dependent states like Wyoming who had seen several of their customers leave the coal markets to natural gas, renewables?

It's going to be really to see any of those plants come back online even with this sort of drastic proposal we've heard here. Obviously, one of the biggest problems that these coal companies face and what we're hearing from both the trade groups, the coal companies themselves and other organizations that are that are pro-coal is that one of their top priorities right now is preserving the existing fleet. I think as much as they would love to see new coal customers come online and have an outlet for that coal, more than anything, they really just want to hold on to what they got. And that's basic with his proposals aimed at.

Back to what it once was so this proposal has not been taken too seriously? It seems it's kind of stalled out... why is that?

And I think the kind of consensus of the problem is is that a lot of people on the that are outside the coal industry you really don't think that this proposal is necessary. Unprecedented opposition. I mean you saw oil companies and natural gas company's renewable energy companies all band together and say we don't need this. Even some utilities that have coal plants in their fleet don't like this idea of intervening in the market. In cases like recent reports that we're seeing now that even internally the Trump administration is having difficulty selling even its own staff on some of these proposals. And so I think while there's a lot of political will both coming from the top from Trump down and his supporters would like to see coal saved. I think that it's actually a really difficult task that's going to inevitably face all kinds of opposition. And so, I think what you're seeing is a bit of an attempt to try to win out to have a proposal that does come out is bulletproof but I think that there also may be finding that that might not quite be as easy as they thought it would when they initially started out this task.

So now Energy Secretary Rick Perry who's been the fourth behind this proposal brought it up again last week in front of reporters saying it's still possible you could still see this proposal he's still committed to it. What are your thoughts on that?

I think you're going to see some sort of proposal eventually come out whether that's successful or not is yet to be seen. I mean I think one of the things to keep in mind is that even all of the even before the opposition is stacked against the proposal any sort of legal battles is going to be a very protracted process. One of the proposals that we saw looked at a period of two years essentially kind of stopping the retirement of coal and nuclear plants for two years. Realistically any legal challenge might eat up that entire time. I don't think there's a lot to lose by putting this out there. I think that there might be some questions of timing whether they're going to put this out before mid-term elections or wait till after. But I think you're almost definitely going to see something eventually come out. Whether it's drastically different from the original proposal or they try to push this out there but I think there's a lot of kind of a top-down political drive to move this thing forward.

Anything else that we're missing in this discussion before we wrap it up?

I mean I think one of the major things that's not talked about a lot on the support side is that this is this is probably going to be a very costly proposal and anything that we've seen so far doesn't really detail who's going to pay for it or how they're going to pay for it. It would make sense that this is somehow passed on to consumers in some way cost estimates that we've seen have ranged from a couple hundred million up to several billion depending on how the plan actually shakes out. But that's going to be I think a big part of what's going to keep this from coming out is that from actually being successful is that someone's got to pay for it and that's going to be pretty politically damaging. I would think an arrest that maybe they don't want to take ahead of the midterms. But again, I just think that there's so much invested in trying to save the coal industry. I would find it hard to believe that at least some sort of proposal doesn't come out.