U.S. coal interests are driving federal discussion on energy policy, but the industry still faces a lot of skepticism about its push for government intervention to keep older power plants from retirement.
Many energy stakeholders balked at the recent revelation that the U.S. Department of Energy is considering exercising authority to direct system operators to purchase electricity from certain coal and nuclear power generators for two years. With a change in presidential administration, the coal sector has shifted from fighting new regulations or laws that govern coal mining and coal-fired generation to arguing that the current setup of U.S. energy markets is prematurely retiring coal to detrimental effect. In the process, those who do not stand to benefit have largely aligned against the effort.
"The president, every time he launches an initiative, gets this massive response of mockery from market gurus and renewable and other well-financed opposition groups. But there is great wisdom in what the secretary of energy and the president are trying to push," Mike Nasi, an attorney with Jackson Walker LLP, told attendees at a recent gathering of the coal industry and state lawmakers before the latest DOE memo was leaked. "The mockery needs to stop, and the reality check needs to start. We need to preserve this fleet."
The recent policy push would shift the risks of premature retirement from older coal and nuclear plants to newer, more efficient power plants, said John Shelk, president and CEO of Electric Power Supply Association, a trade association of independent power producers. A broad coalition of energy industry associations joined Shelk in denouncing the plan.
"I don't know that you're ever going to find unanimity on these kinds of issues," American Coal Council CEO Betsy Monseu said. "I wouldn't really expect that. I think what we need to continue to do is state why coal is an important resource in the future to protect grid stability, reliability and resilience, and there have been very recent and continuing indication of coal's importance."
Nasi said the coal market may be strong now, but those assets may disappear quickly if the way the market functions is not addressed soon. The argument has been one of the sector's primary talking points as power plant retirements have continued under the Trump administration.
In mid-2017, Peabody Energy Corp. President and CEO Glenn Kellow called for a two-year moratorium on the retirement of coal plants in the U.S. when he spoke at an industry event in Utah. He said coal was expected to decline but was also encouraged that the industry could "bend that trend" and preserve coal generation resources in the U.S.
"We not only need to change the playbook, we need to change the entire game," Kellow said.
That idea has since seen support from the DOE under Secretary Rick Perry. The agency has released numerous reports or statements in support of the idea that coal generation is crucial to the nation's power grid as coal industry leaders such as Kellow and Murray Energy Corp. CEO Robert Murray have pressed a need to work to preserve the nation's existing coal generation fleet.
Supporters of the industry are now pointing to those new DOE reports, including one about the response to a recent severe weather event that was released in March by the agency's National Energy Technology Laboratory, to justify actions to delay retiring baseload coal plants. During his presentation at the coal industry conference, Nasi said the DOE report proves coal could not have been "lived without" through the past winter.
Monseu said the report clearly showed that coal played an important role in responding to increased demand, specifically in the PJM Interconnection.
However, PJM said it has already addressed reliability and resiliency concerns around the electric grid. Impending retirements should not be a cause for concern or justification for government intervention in the marketplace, PJM said in a statement on potential emergency actions to be taken by DOE.
"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," PJM's statement said.
The problem with the DOE's "legally and financially risky" efforts to prop up coal and nuclear is that there is no electricity grid emergency, said Mark Kresowik, eastern regional deputy director of the Sierra Club's Beyond Coal campaign.
"We're facing electric systems that are massively oversupplied," he said in an interview. "There's too much generating capacity out there."
The DOE's call for a 24-month pause in coal retirements may give the agency time to study more permanent efforts to prevent coal plant retirements. It could also give the administration time to realize another goal: cutting down barriers to upgrading existing power plants and building new coal generation. The agency has relatively recently rolled out initiatives on both fronts, but industry and officials have indicated that several technological and engineering issues would first need to be overcome.
