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White House backs strategic power reserve that could favor coal, nuclear units

The U.S. electric grid could benefit from a voluntary electricity generation reserve that gives preference to nuclear and coal-fired units, the White House said in a new report.

President Donald Trump released his economic report to the U.S. Congress on March 19 together with an annual report by the White House Council of Economic Advisers.

While touting the rise in U.S. oil and natural gas production, the report said "a number of energy policy issues remain salient," including with regard to electricity generation.

Disruptive changes in the U.S. power sector, including the rise of natural gas-based and renewable energy, can lead to the premature retirement of some units running on nuclear power and coal, the administration noted. It added that the resilience of the bulk power system is also at risk from severe weather events, cyberattacks and "other sources of interruption to fuel deliveries and ultimately electricity."

Although the White House did not list specific policy prescriptions, it discussed in broad terms steps the industry and regulators could take to address the evolving grid. For instance, it said the Federal Energy Regulatory Commission "could take a more interventionist role" in addressing issues that arise for the electric grid.

The report also discussed the "strategic need for an electricity generation reserve to promote the grid's resilience." All generation types could be eligible. Coal and nuclear plants that "might provide greater resilience benefits" could be "preferentially selected," the report said. Such a reserve could be voluntary, which would allow private entities to opt in to the program and select resources based on the lowest bid "rather than relying on the judgment of bureaucrats to select the most preferred units," according to the White House.

The suggestions echo parts of a draft proposal the U.S. Department of Energy formed in 2018 that called for establishing a "strategic electric generation reserve" to bolster national security while the DOE identified energy infrastructure critical to the country's defense. The proposal also called on grid operators to buy power or capacity for two years from designated "fuel-secure" plants, including coal-fired and nuclear facilities, while the DOE determined what assets are defense-critical. The DOE never issued a final version of the plan, however, nor did the White House act on the proposal.

The Trump administration has largely sought to support the U.S. nuclear fleet through better compensation for those plants' fuel-security and "baseload" generation attributes. But the March 19 report suggested another way to prop up the nuclear fleet. Despite Trump's work to unwind many climate change regulations, the White House said a program "accounting for the economic value of emissions could provide a boost to nuclear generation, depending on the value of the emissions."

But the report warned that "market design and efforts to dictate the dispatch order of plants must be carefully considered to avoid unintended consequences." To mitigate or avoid those consequences, the administration suggested implementing "two-part tariffs or other mechanisms" to provide regional flexibility in accommodating different energy resources.

"As grid operators wrestle with how to increase resilience and ensure continued reliability, the future balance between the legacy baseload and newer generators like natural gas and renewables will be struck, and this balance may differ regionally," the White House said.

The potential impact of the report is unclear. The White House never signed off on the DOE's fuel security proposal, and FERC rejected a prior Energy Department plan aimed at propping up vulnerable coal and nuclear plants in the name of grid resilience. But FERC is evaluating comments on a related grid resilience review that could result in new policies to save at-risk plants.