Can Coal and Nuclear Power Plants Be Saved?

It's no secret that U.S. nuclear and coal-fired power plants are struggling to remain viable in competitive markets. Many plants have been retired for economic reasons long before the facilities reached the end of their useful lives. Some experts believe this trend poses a threat to the nation's power grid and national security.

President Trump has tried to offer support for reliable baseload power generators. In September 2017, Energy Secretary Rick Perry proposed a "Grid Resiliency Pricing Rule." In it, he directed the Federal Energy Regulatory Commission (FERC) to require that independent system operators and regional transmission organizations "establish just and reasonable rates" for wholesale electricity sales "to ensure that the reliability and resiliency attributes of generation with on-site fuel supplies are fully valued." However, FERC rejected the rule in January 2018.

In a May 27, 2018, draft memo written for the president's top security advisors, the early retirement of coal and nuclear plants is lamented. The memo quotes from a North American Electric Reliability Corp. reliability synopsis stating, "Premature retirements of fuel secure baseload generating stations reduces resilience to fuel supply disruptions." It suggests prompt action is needed by federal and state regulatory bodies to achieve a lasting solution that meets the needs of both national security and the efficient operation of energy markets.

The Importance of Nuclear and Coal-Fired Power

On that front, there is some cause for concern. One could argue that China and Russia are already the leaders in nuclear power know-how. There are 13 reactors under construction in China and six in Russia, and both countries are exporting nuclear technology to other nations.

Currently, only one commercial nuclear power project is in progress in the U.S., and even it faces some uncertainty. The Plant Vogtle expansion, which includes the addition of Unit's 3 and 4 at a site near Waynesboro, Georgia, has experienced schedule delays and cost overruns that threaten project completion. Nonetheless, on September 26 its owners-Georgia Power, Oglethorpe Power, Municipal Electric Authority of Georgia (MEAG Power), and Dalton Utilities-voted to continue construction. Units 3 and 4 are expected to be completed by November 2021 and November 2022, respectively.

Similar units being constructed in South Carolina were abandoned last year when cost and schedule challenges seemed insurmountable to its owners. Furthermore, there seems to be little interest among other U.S. utilities to embark down the nuclear construction path.

The coal industry faces even tougher challenges. The U.S. seems hell-bent on eliminating coal from the long-term power mix-public concerns about climate change are just too prevalent. There are no new large-scale coal plant construction projects in progress in the U.S., and it's unlikely any are even being considered. Regardless, there are good reasons to save the existing coal fleet.

The National Coal Council (NCC)-a federal advisory committee to the Secretary of Energy-is tasked with assisting the government and industry in the areas of coal research, production, transportation, marketing, and use. It recently posted a report on its website titled "Power Reset: Optimizing the Existing Coal Fleet to Ensure a Reliable and Resilient Grid." The report was requested by Secretary Perry on April 7, 2018.

The report says, "As of August 12, 2018, more than 115,000 MW of coal generating capacity has retired, converted to another fuel or been slated for retirement by 2030. This represents nearly 40% of the U.S. coal fleet that was operating in 2010." The report cites market distortions, regulation, and regulatory uncertainty, which have "most significantly and disproportionately impacted the nation's coal plants," as reasons for the industry's struggles.

Hitting Reset

As one example, it presents details of a recent "wind drought" experienced in early June in the UK. "Britain was 'becalmed' when wind turbines across the nation were at a standstill as the wind 'disappeared' for over a week causing a two-year low in electricity production. The lack of wind resulted in turbines generating less than 2% of the country's power, just after having produced 25% five days earlier," it says.

Yet, there continues to be a strong push across the U.S. to phase out nuclear and coal-fired power while increasing renewable generation. In September, California Gov. Jerry Brown signed legislation requiring the state to produce all of its electricity from renewable sources by 2045. It's a goal that has also been set by Hawaii and is being discussed in other states.

Some naysayers have argued that no matter what the Trump administration does, it still won't be able to save uneconomic coal and nuclear plants. However, the courts are proving that supportive measures can be taken. On September 13, the U.S. Court of Appeals for the Seventh Circuit upheld subsidies offered by Illinois to help struggling nuclear plants. The court rejected arguments from power producers and some Illinois energy consumers that zero-emission credits (ZECs) are preempted by the Federal Power Act. Similarly, in July 2017, a federal district court dismissed challenges against New York's Clean Energy Standard, which subsidizes upstate nuclear plants. That court ruled that federal law does not preempt New York and its Public Service Commission from using a ZEC program. That decision was challenged, but on September 27 the U.S. Court of Appeals for the Second Circuit concluded that New York's nuclear power subsidies are legally sound.

Perhaps policymakers interested in saving baseload power plants should consider the creation of a reliability and resiliency credit. a-

-Aaron Larson is POWER's executive editor.

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