Coal demand has declined as more and more coal plants retire before old age. Each time, the news ripples through Wyoming, the producer of 40 percent of the nation’s coal. Wyoming depends on other states that use its natural resources to keep the lights on. But the market is relying less and less on coal, and Wyoming’s mines are collateral damage.
Leaders in the state have fought regulations and policies that would further erode coal’s dominance in the electricity market, and coal companies have made their own suggestions about how Washington can support the industry, from carbon capture incentives to taking away federal support for competing energy industries like wind.
But recent talk of a subsidy for coal and nuclear-generated power caught even Wyoming experts by surprise. Energy Secretary Rick Perry, the former governor of Texas, recently directed the Federal Energy Regulatory Commission to craft a rule rewarding baseload power plants — those that keep 90 days of fuel stored on site — for their unique value to the electricity grid. Stored fuels can be used when other energy sources fail, when the wind doesn’t blow or natural gas pipelines are thrashed by a storm. It’s not a new idea but has until now been a debate for electricity wonks rather than the general public.
And the coal supporters, particularly in libertarian-minded Wyoming, have long pushed back against federal subsidies. Its proponents argue that the less government is involved in manipulating the energy market — whether from regulations built to reduced coal use or subsidies that increase the use of renewables — the more likely that coal can compete.
The secretary’s directive is far from certain. He backpedaled on an original proposal, narrowing the subsidy to certain markets after significant pushback. But what would this proposed rule do for coal in Wyoming? It would probably help.
The direct impact of such a FERC rule would be in the East, where nuclear plants in particular are having trouble staying live because of the influx of cheap wind power from the Midwest, said Rob Godby, director of the Center for Energy Economics and Public Policy at the University of Wyoming. Nuclear, like coal, supplies that baseload power Perry wants to reward.
But a subsidy would have an indirect benefit in Wyoming, where coal companies are facing declining coal use in other states. It could keep some power plants that buy Wyoming coal operating longer, Godby said in an email.
This a boost for coal and nuclear plants in other competitive markets, he said.
The American Coalition for Clean Coal Electricity came out in favor of Perry’s action.
“The coal fleet has large stockpiles of coal that help to ensure grid resilience and reliability,” said CEO Paul Bailey. “We look forward to working with FERC and grid operators to quickly adopt long overdue market reforms that value the coal fleet.”
However, the proposal is being fought from the left and right, from the American Wind Energy Association to the American Petroleum Institute to economists.
One issue that virtually every opposing voice raises is that Perry’s own department just published a report that undermines the excuse of a vulnerable grid. The grid is operating as it was designed — to provide reliability and low cost to consumers, the study states.
“It’s a solution in search of a problem,” said Trevor Houser, partner with the Rhodium Group.
The policy research firm found that fuel supply was responsible for only about one ten-thousandth of lost customer hours over the last five years.
“If you want to improve reliability, there is a lot you can do at the Department of Energy; almost none of that has to do with fuel supply,” Houser said. “It’s about making our distribution system (power and transmission lines) more resilient … that’s what causes the vast majority of power outages in the U.S.”
Rep. Frank Pallone, D-NJ, criticized Perry’s proposal in a hearing Thursday before the House Committee on Energy and Commerce, saying it had “serious flaws” and questioning Perry’s agenda.
He requested an accounting of taxpayer dollars spent crafting the proposal and minutes from staff meetings.
“At the end of the day, killing off competitive electricity markets just to save generation assets that are no longer economical will lead to higher prices for consumers,” Pallone said.
In response to the question of whether this would cost ratepayers, Perry responded with a question of his own:
“What’s the cost of freedom?”