U.S. Department of Energy Secretary Rick Perry holds up a piece of coal mounted as a plaque that was presented to him during a visit to the National Energy Technology Laboratory's Pittsburgh site in July 2017. Documents show the administration is considering using national security as a defense to provide support to coal and nuclear power generation.
President Donald Trump's decision to invoke national security in a bid to preserve U.S. coal and nuclear power plants could present a major obstacle to the many opponents of potential government intervention in electricity markets unless they can persuade Congress to take action.
The Defense Production Act was designed in 1950 to give the president broad authority to ensure access to materials essential for national security and defense. Although some legal experts question whether Trump's move could withstand a legal challenge, courts historically have granted broad deference to the White House on national security matters even if it is "transparently political in use," said Andrew Holland, a senior fellow for energy and climate policy with the nonpartisan American Security Project.
For example, the U.S. Supreme Court recently hinted that it might uphold Trump's ban on travelers from certain countries under that precedent. The president also invoked national security to impose tariffs on U.S. trade partners.
"I actually think that this could go forward and the real check on this probably isn't the courts, it's Congress," Holland said.
Obama overused executive authority, Holland said, but Trump is "turbocharging it." Holland, who worked with the Obama administration on a Defense Production Act-based investment in biofuels for the military, said that while the authority has been invoked fairly often, it is usually specifically for military needs.
Trump's use of national security levers to deploy economic policy outside the context of a major war goes well beyond the scale of past presidents, wrote Peter Harrell, a former deputy assistant secretary for counter threat finance and sanctions at the U.S. Department of State who is now with the Center for a New American Security. In a June 7 opinion piece for The Hill, Harrell called on Congress to enact new procedural constraints on the president's use of national security laws.
"His use of national security authorities to impose trade restrictions has upended longstanding international agreements and stretched the definition of 'national security' beyond the intent of Congress in the decades-old statutes that Trump has relied on," Harrell wrote.
Congress could pre-empt actions
There are other means to alter electricity markets, including ordering purchases of electricity or setting a ceiling or floor on prices in the market, Holland said, but Congress would have to approve any program that has fiscal costs.
Robert Gramlich, president of the consultant firm Grid Strategies LLC, urged lawmakers in June 7 testimony to "rigorously oversee" the U.S. Department of Energy to prevent the Trump administration from rolling out a "misguided program to fund the continued operation of old, uneconomic and unreliable power plants."
While Holland believes it will take the Trump administration "months" to debut action, Congress could act pre-emptively to ban Trump from rolling out an intervention in power markets he said could "create a huge amount of uncertainty" in the market and slow investment in new capacity.
U.S. Department of Energy Secretary Rick Perry talks to Sen. Joe Manchin, D-W.Va., outside the Longview coal-fired power plant near Morgantown, W.Va.
Katie Bays, an analyst with Height Securities LLC, wrote in a June 14 note that with Trump returning from North Korea, rolling out a coal and nuclear bailout could come even sooner. The program could be structured as a "super-capacity payment" that would cover fixed operation and maintenance costs for generators without "tinkering with the dispatch curve." That, Bays said, would make the subsidy's impact primarily economic and more difficult for challengers to demonstrate irreparable harm before the court.
"If DOE chooses to structure the subsidy in this way, we believe it has a good chance of surviving an injunction for the duration of the program — expected to be two years," Bays said. "[T]he emerging consensus is that DOE has come too far to give up now, and inaction would be an unmitigated failure."
Executives with coal producer Murray Energy Corp. and electric utility FirstEnergy Corp. have called for the president to use emergency measures to save power plants. While some coal- and nuclear-focused trade groups have offered support of DOE's efforts, much of the energy industry has aligned against them. When U.S. senators asked the five members of the Federal Energy Regulatory Commission if they thought the electricity grid faced a national emergency, one said no and the others were silent.
Still, some politicians, including Sen. Joe Manchin, D-W.Va., have offered support of the idea to pause the retirement of "only clean-burning coal-fired power plants."
"The ability to produce reliable electricity and to recover from disruptions to our grid are critical to ensuring our nation's security against the various threats facing our nation today — whether those threats be extreme weather events or adversarial foreign actors," Manchin said in a recent statement.
Coal plant owner: 'It's ill-conceived'
Bays wrote that likely beneficiaries of such a policy include creditors of FirstEnergy's competitive subsidiary FirstEnergy Solutions Corp. and other owners of coal and nuclear units such as NRG Energy Inc. and Vistra Energy Corp. During the company's June 12 analyst/investor day, however, Vistra President and CEO Curtis Morgan said the company did not support a policy he said would be "incredibly messy" and "almost impossible" to implement.
"We think it's wrong for markets. We understand it's picking winners and losers. It's ill-conceived," Morgan said. "It's not even touching on the most fundamental national security issue around the energy infrastructure, which is transmission."
The coal plants most likely to benefit from DOE support are in regions that could use more diversification, said Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin. In West Virginia, coal-fired generation produced 94% of power in 2016, according to federal energy data.
Each energy resource presents unique benefits and challenges. Coal can be stored onsite at a power plant, for example, but is also susceptible to barge and rail disruptions or becoming too wet or frozen to be used in severe weather. A diverse fleet of power generation offsets the disadvantages of each source, Webber said, and retirements are simply the market working to drive out uneconomic generation.
"I guess we don't believe in free markets anymore," Webber said. "The efforts to protect coal from cheap gas and renewables are getting more blunt as time goes on."