President Trump Orders “Immediate Steps” to Support Coal and Nuclear Resources in Latest Chapter of Grid Resiliency Saga

President Trump “has directed Secretary of Energy Rick Perry to prepare immediate steps” to stop the retirements “fuel-secure power facilities,” according to a statement from the White House Press Secretary.  This is the latest development in a series of efforts to have the federal government prevent the retirement of coal and nuclear baseload generation.

Back in September 2017, Secretary Perry submitted a proposed rule to FERC that would have required RTOs and ISOs to compensate fuel-secure resources for the reliability and resiliency benefits they provide.  FERC, however, did not adopt that proposed rule, although it did open a separate proceeding to examine grid resiliency issues.  More recently, in March 2018, FirstEnergy Solutions Corp. requested that DOE issue an emergency order under Section 202(c) of the Federal Power Act to require PJM to enter into contracts providing full cost recovery for certain nuclear and coal-fired generators with a 25-day onsite fuel supply.  DOE has opened an unofficial comment period for all Section 202(c)-related comments, but it has not yet acted on FirstEnergy’s request.

While the most recent White House Press Secretary statement offers few details, it was issued after a 40-page draft DOE memo was first reported on by Bloomberg.  The memo builds upon arguments for supporting fuel-secure resources for resiliency and national security purposes that were raised in the context of the DOE proposed rule and FirstEnergy’s Section 202(c) request.  It attempts to more precisely define the term “resiliency,” something FERC found DOE failed to do in the earlier proposed rule, explaining that resiliency is the “ability to withstand high-impact events,” such as attacks or natural disasters.  The memo suggests that DOE should act to delay the retirement of fuel-secure resources while it continues its analysis of the comprehensive resilience needs of the U.S. electric generation system.

As the source of DOE’s legal authority to delay the retirement of coal and nuclear resources, the memo relies upon Section 202(c) of the Federal Power Act and Section 101 of the Defense Production Act of 1950.  The Defense Production Act authorizes the President, or the Secretary of Energy acting by delegation from the President, to “require the allocation of, or the priority performance under contracts or orders (other than contracts of employment) relating to, materials, equipment, and services in order to maximize domestic energy supplies” based on certain findings.  DOE has not created a website describing its use of Section 101 of the Defense Production Act, as it has for Section 202(c) of the Federal Power Act, and there are only a few examples of its use.  In 2001, during the California Energy Crisis, the Secretary of Energy issued an emergency order under the Defense Production Act to require natural gas sellers to sell to PG&E under existing contracts in order to ensure that natural gas plants could generate electricity.  The Obama Administration used the Defense Production Act to invest in the production of jet and naval biofuels.

DOE has yet to take official action on President Trump’s direction to take “immediate steps” to prevent the retirement of coal and nuclear resources.  Nevertheless, a range of entities, including PJM, Sierra Club, and a group of energy industry associations, have already voiced their opposition to any such action.

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DOE Issues Request for Information on Improving Efficiency, Reliability, and Flexibility of Existing Coal-Based Power Plants

Last week, DOE’s Office of Fossil Energy issued a Request for Information (RFI) seeking information on the development of advanced technologies that could improve the overall performance, reliability, and flexibility of the nation’s coal-fueled electricity generating units (EGUs).  The RFI comes after DOE opened an informal comment period in response to FirstEnergy Solutions Corporation’s request for DOE to issue a Federal Power Act Section 202(c) emergency order to require PJM to provide full cost recovery to certain coal-fired and nuclear-fired generators.

DOE’s inquiry covers three areas: (1) advanced technologies for efficiency improvements at full- and/or part-load operations; (2) advanced technologies for improvements to EGU reliability, availability, and maintainability; and (3) advanced technologies for improved operational flexibility.  The RFI explains that it seeks this information in order to ensure that existing coal plants continue to provide low-cost, reliable electricity in the face of increasing integration of intermittent resources like wind:

Accommodating the intermittent, non-dispatchable nature of [variable energy resources] such as wind has resulted in a transformation in how the existing fleet of US power plants is operated, with plants originally designed to provide baseload electricity now being operated as load-following and/or back-up to intermittent resources. The ability for power plants to be operated flexibly is becoming increasingly important. Coal plants initially designed for baseload operations are now being subjected to sub-optimal operating conditions that are leading to decreased overall efficiency and, if subject to prolonged and rapid cycling, are expected to become less reliable with increased risk for unplanned outages.

Responses to the RFI must be submitted electronically to DE-FOA-0001937@netl.doe.gov with the subject line “DE-FOA-0001937 – RFI” no later than 8:00pm (ET) on June 22, 2018.

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FERC Considering Revisions to Pipeline Certificate Policy

Last month, FERC issued a Notice of Inquiry seeking information as it explores revising its policy statement on the certification of new natural gas transportation facilities.  The Certification of New Interstate Natural Gas Pipeline Facilities Statement of Policy that is currently in effect was issued by FERC in 1999.

FERC is specifically asking for feedback on whether (and how) it should adjust:

  • Its methodology for determining whether there is a need for a proposed project;
  • Its use of eminent domain and other issues related to landowner interests;
  • Its evaluation of environmental impacts; and
  • Its certificate processes, including pre-filing, post-filing, and post-order issuance.

FERC points to a variety of changes that have occurred since it issued its currently effective policy, including dramatic increases in natural gas production, flows on pipelines becoming bidirectional or reversing, and a closer relationship between natural gas and electric generation as natural-gas-fired generation becomes more prevalent.  FERC also notes an “increased interest” regarding its evaluation of greenhouse-gas emissions associated with a proposed project, as well as both suggestions to relax and strengthen FERC’s environmental reviews.

FERC recently extended the deadline for comments to July 25, 2018.  Comments may be submitted in FERC Docket No. PL18-1-000.

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Lab Releases Report Regarding Impacts of High Penetration of Variable Energy on Wholesale Electricity Pricing

The Lawrence Berkley National Laboratory has issued a report entitled Impacts of High Variable Renewable Energy Futures on Wholesale Electricity Prices, and on Electric-Sector Decision Making. The report provides a qualitative examination of various demand-side and supply-side electric infrastructure and program decisions that may change due to higher penetrations of variable renewable energy (VRE).  It notes that many of these decisions are “based on historical observations or assume a business-as-usual future with low shares of VRE” and that the authors’ “motivating question is whether certain electric-sector decisions that are made based on assumptions reflecting low VRE levels will still achieve their intended objective in a high VRE future.” The decisions addressed include, among other things:

  • What kind of demand response services are most cost-effective?
  • How efficient are different retail rate designs?
  • How large of an incentive is needed (if at all) to ensure revenue sufficiency for existing nuclear plants? Is it cost-effective to increase their flexibility?
  • What are the impacts of alternative water flow regimes in hydropower relicensing?

The report also provides simulation results for market conditions in the Southwest Power Pool, New York ISO, California ISO, and ERCOT regions in 2030 based on four penetration scenarios: (a) a low VRE scenario in which each market’s respective wind and solar generation levels equate to their 2016 levels, (b) a high wind scenario with 30% wind and 10+% solar, (c) a balanced scenario with 20% wind and 20% solar, and (d) a high solar scenario with 30% solar and 10+% wind. The modeling finds, among other things, that with the higher VRE penetration scenarios the average annual hourly wholesale energy prices decrease and price volatility increases in each market, especially under the high solar scenario.

A free webinar on the findings will be held on May 23 at 1:00 P.M. EDT/10:00 A.M. PDT.

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EPA Releases Memorandum Outlining Changes to NAAQS Review Process

Last week, EPA Administrator Scott Pruitt released a Memorandum setting out changes to the process by which EPA reviews and sets National Ambient Air Quality Standards (NAAQS).  The procedural changes—dubbed a “Back to Basics” approach—are intended to “help EPA meet its statutory obligations consistent with [its] commitment to cooperative federalism.” Pruitt’s Memorandum also builds on a White House Memorandum released last month that directs EPA to ensure efficient and cost-effective implementation of the NAAQS program, especially with respect to permitting decisions for the construction of industrial and manufacturing facilities.

Pruitt’s Memorandum directs EPA and the Clean Air Scientific Advisory Committee (CASAC) to adhere to the following principles:

  1. Meet Statutory Deadlines. EPA and CASAC are directed to look for opportunities to streamline the NAAQS review process to ensure that new standards are timely set at five-year intervals.
  2. Address all Clean Air Act Provisions for NAAQS Reviews.  EPA will provide a standardized set of key questions to CASAC to frame the entirety of the NAAQS review process, including questions designed to elicit information about the health, welfare, social, economic, and energy effects of NAAQS standards.  The Memorandum acknowledges that under Whitman v. American Trucking Associations, Inc., 531 U.S. 457 (2001), EPA may not consider the cost of implementation when reviewing and revising NAAQS.  The Memorandum suggests that the Administrator may still take into account welfare, economic, and energy effects of NAAQS standards, because the Clean Air Act does not require EPA to establish NAAQS at a zero-risk level, but rather at a level that reduces risk to sufficiently protect public health with an adequate margin of safety: “The selection of any particular approach to providing an adequate margin of safety is a policy choice left specifically to the Administrator’s judgment.”
  3. Streamline and Standardize the Process for Development and Review of Key Policy-Relevant Information.  EPA’s Integrated Science Assessments, Risk and Exposure Assessments, and Policy Assessments should focus on policy-relevant science and on studies, causal determinations, or analyses that address key questions related to the adequacy of NAAQS.
  4. Differentiate Science and Policy Considerations in the NAAQS Review Process.  EPA should establish a clear distinction between the purely scientific findings of the Integrated Science Assessment and the wider range of policy concerns that the Administrator must consider when reviewing NAAQS.
  5. Timely Implementation of Regulations and Guidance.  When a NAAQS is revised, EPA should, where appropriate and consistent with law, also provide implementation regulations and guidance as well as technical information to assist state co-regulators in developing approvable plans to implement and maintain the NAAQS.
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