The U.S. Department of Energy may direct grid operators to buy power or capacity from designated coal-fired and nuclear plants for two years to assure grid resilience and bolster national security, according to a draft addendum to a pending DOE order.
Coal and nuclear industry groups applauded the draft document, saying the action will avert a resilience and reliability crisis for the electric grid. Critics of the plan, including natural gas groups, say it is another in a series of misguided attempts to save uneconomic plants that would otherwise retire, and the move will disrupt competitive organized power markets.
The document, dated May 29, was first reported May 31 by Bloomberg News, which said the draft was circulated before a June 1 meeting of the White House's National Security Council. Neither the White House nor the DOE has said when the Trump administration will release a final plan.
"President [Donald] Trump has directed Secretary of Energy Rick Perry to prepare immediate steps to stop the loss of these resources, and looks forward to his recommendations," White House Press Secretary Sarah Sanders said in a statement.
The 40-page draft addendum said the DOE wants to use authorities under the Defense Production Act of 1950 and Section 202(c) of the Federal Power Act to ensure that certain"fuel-secure"plants at risk of premature closure remain operational. The document said energy sources that can hold "secure on-site fuel supply" include coal-fired, nuclear, oil-fired and dual-fueled units.
As part of the plan, the DOE will ask system operators to buy or arrange to purchase electricity or capacity for 24 months from a designated list of "subject generation facilities" to avoid further plant retirements, although the draft document did not include a list of those facilities. The agency said it also will direct subject generation facilities outside of organized markets managed by regional transmission organizations and independent system operators to continue generation and delivery of power according to "existing or recent" agreements with load-serving entities.
In addition, the DOE's pending order would establish a "strategic electric generation reserve" to promote national defense and maximize domestic energy supplies.
The Energy Department said the order will be a "temporary stop-gap measure" to prevent further plant retirements while it conducts an analysis of "defense critical electric infrastructure," a review it said will take at least 24 months. The DOE is required to conduct the analysis under the Fixing America's Surface Transportation Act of 2015, known as the FAST Act.
Authorities
The DOE for several months has been considering requests that it use the rarely invoked Defense Production Act and Federal Power Act Section 202(c) to save at-risk coal and nuclear generating facilities. Opponents of the move say the requests are outside the typical scope of those laws, which mainly have been used to address short-term shortages of energy, including as a result of natural disasters such as hurricanes.
In the May 29 draft addendum, the DOE said the power grid is facing a rising tide of threats, including from cyber and physical attacks. The department also said growing reliance on natural gas pipelines is exposing the grid to fuel supply and delivery vulnerabilities. Those threats are putting the grid and, by extension, national security at risk, according to the DOE. The department said 99% of U.S. Department of Defense installations rely on the commercial power grid.
Some key industry stakeholders are skeptical of the DOE's plans. The PJM Interconnection, which is home to a substantial amount of coal- and nuclear-based capacity, issued a statement June 1 that said "no need for any such drastic action" exists, and the region's grid "is more reliable than ever."
"Markets have helped to establish a reliable grid with historically low prices," PJM said. "Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers."
