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Perry's grid proposal is test of FERC's tech-neutral regulation

Despite assurances that federal energy regulators will not set policies to favor certain sources of electricity, the natural gas industry remains wary of an effort to improve grid resilience after the U.S. Department of Energy proposed a rule that was panned as a handout for coal and nuclear interests.

Energy Secretary Rick Perry rattled the power industry in September when he directed the Federal Energy Regulatory Commission to ensure that some plants are compensated for their reliability benefits. While energy security is widely seen as an important issue, critics view the DOE proposal as a heavy-handed attempt to bail out industries favored by the Trump administration.

With FERC due to take action by Dec. 11, Neil Chatterjee, the commission's chairman, on Nov. 28 appeared at Consumer Energy Alliance's "The Future of Electricity" forum in Washington, D.C., and said Perry's concerns would be addressed "in a technology-neutral way."

Dena Wiggins, president and CEO of the Natural Gas Supply Association, remained skeptical, saying during the same forum that the "fundamental premise that's underlying many of these discussions is that somehow coal and nuclear need to be propped up."

"We agree that an electric grid that relies on a diverse fuel mix is a good thing; it's desirable," Wiggins said. "However, we don't want to see market distortions and fuel preferences added into the regulatory mix."

The fight began in April when Perry called for a review of the country's electric grid, citing concerns about an "erosion of critical baseload resources." Rebuking the Obama administration's efforts to support renewables, Perry later that month told a gathering of clean-energy investors that "the days of hand-picked favorite sources of energy are over."

Advocates of renewable energy and natural gas breathed a sigh of relief when the DOE issued its report in August. Consistent with what most observers had been saying, the department found that low-priced natural gas was mostly to blame for the early retirement of coal and nuclear power plants but the grid has continued to operate reliably amid a shifting landscape.

Nevertheless, Perry in September proposed the rule to ensure power plants with at least 90 days of fuel supply on-site qualify for full cost recovery.

Reinforcing suspicions that the Trump administration was acting on behalf of special interests, documents sent to DOE officials in April by Ray Shepherd, vice president and senior counsel for federal government affairs at the coal company Peabody Energy Corp., urged regulators to consider the energy security benefits of 85-day coal stockpiles.

"DOE's purpose is not to serve polluters and force electricity customers to pay them more, it's to serve the United States and our actual energy needs," Mary Anne Hitt, director of the Sierra Club's Beyond Coal campaign, said in a Nov. 9 press release.

However, nuclear and coal-fired power plants "are two of the most reliable grid fuels we have," DOE Undersecretary Mark Menezes said during the Nov. 28 forum. "Despite the great strides that have been made in natural gas and renewable generation in recent years, allowing major portions of our nation's supply to wither on the vine before we can replace it would simply be irresponsible."

With a Dec. 11 deadline for FERC action on the DOE proposal looming, Chatterjee has said FERC has several options, including accepting it, rejecting it or pursuing a plan of its own. Since Perry's concerns will take time to properly address, Chatterjee would like FERC to come up with an interim measure to prevent the retirement of power plants that could be covered by a future rule.

Wiggins said she welcomes a discussion about the benefits of different fuel sources, "but in that conversation, let's not pretend that coal and nuclear get off scot-free." She pointed to instances when electricity suppliers have had to rely on natural gas because coal piles were flooded or frozen in storms.

Wiggens also expressed skepticism that the Trump administration is motivated by concerns about energy security. "[No] one was worried about diversity" when coal accounted for a larger share of the country's fuel mix, she said.