Groups aligned with the U.S. natural gas industry railed against the Trump administration's plan to move forward with policies that would promote coal and nuclear power generation at the expense of other energy sources, arguing that the policy meddles with markets without improving energy security.
"Are we surprised by the draft plan? No. Outraged? Yes," Natural Gas Supply Association spokeswoman Daphne Magnuson said June 4. "Mandating subsidies is a disastrous approach to rescuing failing units and only prolongs the inevitable at the expense of consumers and the healthy, competitive energy market."
The association, which represents companies that produce and market natural gas in the U.S., is exploring its legal options, Magnuson said.
The U.S. Department of Energy in a draft document said it plans to start telling grid operators to buy power or capacity from certain "fuel-secure" power plants with "secure on-site fuel supply," such as coal and nuclear fuel, with the goal of assuring grid resilience. The draft addendum to a pending DOE order said the policy would be a "temporary stop-gap measure" to prevent premature plant retirements while the agency performs a two-year analysis of critical power infrastructure.
Even a temporary measure could have lasting effects on the nation's energy markets, and those effects could be higher costs for consumers and stunted investment in gas infrastructure, according to Todd Snitchler, the American Petroleum Institute's market development group director.
"Right from the get-go," companies investing in new gas-fired facilities, investing in upgrades to existing facilities, or seeking funding to launch new projects would see higher costs and slower development, Snitchler said in a June 4 interview. Uncertainty over what the playing field is going to look like in the power generation space over the next two years and beyond could jeopardize billions in investments, he said.
API and a diverse coalition of energy sector participants — including associations for wind, solar, energy storage and similar industries — are preparing to fight the DOE policy in whatever form it comes. The groups have already done a legal analysis of the statutes that the DOE might use to support its actions, Snitchler said.
"It's all dependent on what statutes may be used to justify any extra-market, or outside-of-market, intervention, but I think everything up to and including litigation is on the table for consideration," Snitchler said.
The DOE document said there is a "growing threat" from multipoint attacks, such as cyber attacks, on the power grid. Gas pipeline systems increase the risk of "high-impact events that could result in significant harm to human life, the economy, the environment and national security," the DOE said.
The American Gas Association in a June 1 statement argued that national security is not imperiled by the power grid's increasing dependence on gas-fired generation. AGA, which represents about 200 of the nation's gas utilities, pointed to record gas deliveries at the beginning of 2018 during a sustained cold snap, noting the high demand did not translate to power outages.
"Any fact-based, objective examination of the natural gas delivery system demonstrates unquestionable reliability and resilience through extreme weather and today's reality of constant cyber attack," Dave McCurdy, AGA's president and CEO, said in a statement. "America's natural gas utilities work alongside the Department of Homeland Security, Department of Energy and other government partners to maintain the highest level of cybersecurity preparedness."
Snitchler agreed that the cybersecurity argument put forth by the DOE to support nuclear and coal plants is misplaced. Natural gas pipelines supplying power plants are not the only targets for cyber attacks. Power plants can also find themselves in the crosshairs, he said.
"The administration's draft plan to provide government assistance to those coal and nuclear power plants that are struggling to be profitable under the guise of national security would be unprecedented and misguided," Snitchler said in a statement. "As an industry we stand ready to do our part to protect our nation's energy and national security."
The DOE previously asked that the Federal Energy Regulatory Commission craft a rule to ensure full cost recovery for merchant power plants in competitive markets that store at least 90 days of fuel onsite, a mandate that would primarily benefit coal and nuclear generation facilities. FERC rejected that proposed rule, however, saying there was not enough evidence to justify the move. API, the Electric Power Supply Association and other groups argued to DOE that power plant retirements are a normal part of competitive markets and that the agency went outside its legal bounds to try to bolster uneconomic infrastructure that would otherwise retire.
