Coal and nuclear power proponents are pressing supporters in Congress to introduce new tax credits before the end of the year, potentially providing billions in dollars of support to coal and nuclear plants.
Backers of the plans, first reported by Axios, said tax credits would level the playing field for coal and nuclear plants, which are under pressure due to market and regulatory challenges and are competing with renewable power facilities, which they said receive billions of dollars each year in federal tax credits. The proposals come after the U.S. Department of Energy asked the Federal Energy Regulatory Commission in late September to draft a rule ensuring coal, nuclear and other power plants with at least 90 days of on-site fuel supply can recover their costs in regions with competitive energy and capacity markets.
Coal and nuclear plants economics have been challenged in recent years, particularly by low natural gas prices, according to the DOE's study of the grid reliability released in August.
All coal plants that comply with major Clean Air Act regulations would be eligible for the credit, which would be based on a qualifying coal plant's operations and maintenance expenses. The credit would cover half of the unit's operations and maintenance costs up to a limit of $26/kW of installed capacity.
The credits could cost up to $6.5 billion per year if all qualifying plants in the country received the maximum credit of $26/kW, said Michelle Bloodworth, COO of the American Coalition for Clean Coal Electricity, which is involved in the proposal. Bloodworth said ACCCE is proposing to have the credits in place for 10 years. Unlike the DOE cost recovery proposal, which only applies to about 40,000 MW of coal capacity, mostly in the PJM Interconnection, the tax credits sought by American Electric Power Co. Inc. and ACCCE would be available to almost all the 262,000 MW of U.S. coal-fired capacity, she added.
Melissa McHenry, a spokesperson for coal-heavy generator AEP, said the tax credits would provide temporary support for coal plants while the Federal Energy Regulatory Commission or the North American Electric Reliability Corp. conduct a deeper study on what plants are needed to ensure a reliable and resilient grid as part of the DOE action.
"The tax credit would be an interim solution to keeping critical baseload units operating while those studies are underway," McHenry told S&P Global Market Intelligence, adding that the studies would take about five years to determine exactly what generation is needed in each reliability region and whether those facilities need more compensation.
The nuclear power industry is also urging Congress to consider tax credits for its existing U.S. fleet, which, like coal's, has seen a wave of plant retirements in recent years.
David Brown, vice president of federal government affairs and public policy for Exelon Corp., said the company has been working with lawmakers on Capitol Hill and has seen strong bipartisan support for helping the nuclear power sector. Echoing AEP and ACCCE's concerns, Brown said FERC could take a "few years" to fully respond to the DOE's request and tax credits for nuclear power could be a "good bridge" to a final decision on price formation in competitive markets.
Exelon is seeking a 30% investment tax credit for nuclear plant capital expenditures over four years. Brown said those credits would total about $1.0 billion to $1.2 billion annually. Using figures from the Joint Committee on Taxation, ACCCE estimated that solar and wind credits average $7.5 billion each year.
Neither AEP, ACCCE nor Exelon provided information on possible sponsors in Congress for the coal and nuclear tax proposals. Bloodworth said she hoped to see the coal proposal introduced by late 2017 or early 2018. Brown said he would like to see a nuclear tax measure introduced by the end of December, possibly as part of a tax extenders bill from the Senate Finance Committee. The proposals would not be part of a comprehensive tax reform bill congressional lawmakers are hoping to pass by the end of the year.