Guest essay by Eric Worrall
Secretary of Energy Rick Perry has defended proposed subsidies for coal and nuclear power, claiming they are required to “rebalance” the market after the abuses under the Obama Presidency. In my opinion subsidising fossil fuels and nuclear is just as wrong as subsidising renewables.
Rick Perry: DOE’s Coal, Nuclear Proposal Is ‘Rebalancing the Market’
Perry doubles down on arguments that the NOPR will protect Americans.
LACEY JOHNSON NOVEMBER 02, 2017
Energy Secretary Rick Perry said a proposed rule to subsidize coal and nuclear plants is “rebalancing the market” to correct for the Obama administration’s support of renewable energy.
They “clearly had their thumb on the scale toward the renewable side,” said Perry, who spoke about his energy policy priorities with Meet the Press moderator Chuck Todd and Axios CEO Jim VandeHei at an event in Washington, D.C. on Thursday.
The DOE’s request to the Federal Energy Regulatory Commission (FERC) would upend decades of energy market policy by guaranteeing cost recovery for power plants with 90 days of fuel supply on-site — something that only nuclear power, a few hydropower sites, and some larger coal power plants can provide.
“If you can guarantee me that the wind is going to blow tomorrow, if you can guarantee me that the sun’s going to get to the solar panels…then I’ll buy into that. But you can’t,” said Perry.
The notice of public rulemaking, or NOPR, implies that there is a looming threat to grid reliability due to coal and nuclear power plant retirements. Its conclusions are largely based on an incomplete analysis of the 2014 polar vortex, which could have led to blackouts had several coal-fired plants now slated for closure not been available to serve the load.
The move has been widely criticized by clean energy advocates as politically motivated and factually unproven, and has drawn a backlash from major sectors of the energy industry.
…
In my opinion, subsidising coal and nuclear is just as wrong as subsidising renewables, a sure path to more expensive electricity.
The moment the government starts wheeling out subsidies, businesses stop focussing on improving their product or service, because its far cheaper and more cost effective to lobby a few politicians.
What happened to the coal and nuclear industry under President Obama was awful and unjust. But two wrongs don’t make a right.
Given Democrat hostility to fossil fuel, and the identified systemic risks to the system, I would support providing government guarantees of financial compensation to coal and nuclear plant operators, a specified payout if the next government imposes punitive new taxes or even outlaws coal or nuclear power, to counter the sovereign risk to investors of a future green administration expropriating or destroying the value of their assets.
But this should be the limit of government intervention in the market. Anything else risks triggering a major haemorrhage of public money, as fossil fuel operators and nuclear operators are tempted to join renewable operators in gaming the system, demanding ever greater government subsidies or government guaranteed prices in return for agreeing to supply their product.
Government should get out of the energy industry.
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The Democrats were very straight forward, they boasted they were going to destroy the coal industry and were well on their way to doing so . Not a good move for Hillary no matter how much cash Steyer was throwing at the party she bought .
As the economy grows under the Trump administration more reliable power is going to be needed and the giant steps backwards have to be reversed promptly hence the short term need to get supply back on track .
Natural gas $ is historically very low due to fraking and coal has lost much of it’s competitive advantage at least for a while with or without being a Democrat target .
Agree with many above, subsidies to any business is usually going to end badly at least for tax payers .
I would venture to say the issue for coal and nuclear is as much about government policy flip flobs . The
Ontario liberal government for example wasted over $1 billion cancelling valid power contracts and then deleted the audit trail of their crime against the plant builders and the tax payers of Ontario .
The USA should know by now subsidies in all forms are epidemic as a result of the successful lobbyist culture in Washington .
It needs to end .
natural gas destroyed the coal industry.
Natural Gas merely POSTPONED the next Coal Revolution
Eric, if you ‘pay’ fossil fuelled generators above market rates when they use their 90 day stockpile, as a means of ensuring good stockpile management, will you not get the enron effect of power companies, in turn, feigning an outage, so that the stockpile is used and the enhanced rate?
If you pay more for an occurrence, then that is what happens….
However, I suspect this proposal (Perry) is to illuminate the minds of the public to how much money is given to unproductive generating systems.
When the greens say no to this proposal, Perry can say “Okay, stop all subsidies”.
The situation is a bit more delicate than it seems. The set up left by Obama needs to be cleaned out. This isn’t an overnight process. Industry responded to the policies of the government. The corn for ethanol is the most stark example. You can’t just chop off this program. The ethanol industry is huge. It has to go, of course but a government that wants to get elected again has to retire some of this idiocy over time.
The same for renewables. They are there now winding away. Start by making the addition of new renewables and the replacement of spent units having to go it on a competitive basis and wind down the existing support. Leave it to states to subsidize it if they want. Their citizens won’t be happy for long.
In the meantime, during the transitioning to a competitive market, we can’t let the inefficiencies of the existing nightmare to be paid for by the fossil fuel sector. In an earlier saner world, it would be argued that a law suit by the fossil fuel sector against the government for legislating against them and supporting the competition against them was legitimate redress. Perry’s ‘balancing’ policy could be seen in this light.
Agreed Gary that in a perfect world we’d all agree no generator should be subsidised but that ignores the long term contractual obligations these Green airheads have locked in with the unreliables and their rent-seeking owners. They can’t be easily unwound without paying contractual breach compensation so taxpayers are stuck with the lesser of two evils in trying to redress the balance.
Yes, the contractual obligations entered into does make it difficult to undo some of the renewable madness. However, I can recollect some talk of the Spanish authorities getting round this by introducing a new tax for all solar users connected to the grid. This was proposed to counteract over-generous expensive feed-in tariffs.
I don’t know if it ever came to fruition, but this would seem to be a reasonable starting point to compensate for over generous “subsidy” contracts. The tax could be raised incrementally offsetting the costs borne by taxpayers over time.
This would be separate from and not breach the original contracts.
SteveT
Interesting thing subsidies-
http://jmepp.hkspublications.org/2014/01/24/saudi-arabias-fossil-fuel-subsidies-understanding-the-problem/
Yikes. Can of worms. Unpopular as this idea is, it may be necessary. In any case, it does send a shot accross the bow to the bogus Obama-led “Green” energy industry, which unfortunately has infected the entire energy system. I have seen our energy system described basically as a three-legged stool, composed of nuclear, coal, and gas. The anti-nuclear and anti-coal ideologues have unfortunately had a hugely negative effect on those industries. Coal of course has also been hit with fracked gas, tapping into huge reserves of that. But too much reliance on NG is not good. Overall, I think Perry’s idea is worth consideration.
Nuclear has been hurt by cheap gas also. The company I work for has shutdowns scheduled for several of its plants.
Three things come to my mind:
1. The coal and nuclear subsidies will likely come from renewable subsidies so that there is no net change in subsidies. This will hurt states like California most (not exactly big Trump supporters).
2. The states getting the subsidies will not complain.
3. The states that have been receiving renewable subsidies will complain the most because they will have the most to lose.
“In my opinion subsidising fossil fuels and nuclear is just as wrong as subsidising renewables”
That would be my opinion as well, if only the boneheaded attacks of the recent decade hadn’t occurred.
I am for the most part against subsidies, except for I would support a tax subsidy that helps an existing plant meet new guidelines on pollution. In fact, I think it is in the interests of the public to support such incentives. For example, fitting an older coal plant with the latest pollution capture technology helps to stabilize the supply of electricity while meeting newer regulations on nox sox pms, etc. Without such subsidies, you leave the door open to allow Envirowackos to regulate certain energy sources out of existence.
continuing with my example ….. if the Greens are going to cap CO2, thus by default eliminate certain coal fired plants, then the tax payers are obligated to provide the fix for a regulation that was not in place at the time of construction for the plant …. or you grandfather the plant.
One big problem nuclear has is that it’s excluded from Renewable Portfolio Standards (RPS).
http://www.realclearenergy.org/articles/2017/06/20/can_renewables_and_nuclear_co-exist_in_our_clean_energy_future_110237.html
Here’s a state by state summary of renewable portfolio standards and goals:
http://www.ncsl.org/research/energy/renewable-portfolio-standards.aspx
My state, Michigan, has this interesting requirement:
Looks more ambitious than on old Soviet style five year plan — to go from 15% to 35% in four years!
The US subsidizes coal burning when it buys goods manufactured in China with the help of coal generated electricity instead of buying goods made in US with electricity generated from fracked gas.
Regarding RE to supply then look at Scandinavia: http://www.svk.se/drift-av-stamnatet/kontrollrummet/
The only country that runs 97% on RE is Norway, because of all its hydro. Denmark rely heavily on the cables to Norway, Sweden and Germany, and we anyway have to keep fossil powerstations working or ready. Some of them works to make district heating and produces some electricity as a byproduct.
100% renewable is a green dream in the sky, no one can afford it.I do not accept biomass burning as RE in big scale.
“Some of them works to make district heating and produces some electricity as a byproduct” – labeled ‘Decentralised Power Plants’ in my comment (below?). I fully agree with Ferdinandsen’s viewpoints!
Danish power generation and import/export can be monitored in real time here:
https://energinet.dk/energisystem_fullscreen
Translation help with the ‘info box’:
Centrale Kraftværker = Centralised Power Plants
Decentrale Kraftværker = Decentralised Power Plants
Vindmøller= Wind Turbines
Solceller = Solar Cells (PVC)
Nettoudveksling = Net Exchange (import/export)
Elforbrug = (total) Electricity Consumption
CO2-udledning = CO2 Emission
BTW: If you look at the chart you will notice, that the Danish grid very frequently ‘transits’ electricity from Norway and Sweden to (Northern) Germany – as happens to be the case rigt now.
I go with this generally except for one little quibble:
IF something goes wrong… would we rather have a certain the grid collapse within hours … or have a 90 day warning? This is about keeping the lights on and (thanks to Trump) we now have a new yardstick with which to measure hypocrisy. 90 days.
You will hear some impassioned opposition to this… but you must listen for them to give a compelling reason the United States should not strive to have 90 days of electricity production on-hand. They won’t. Because they cannot. So they’ll try to deceive us into thinking it is not important.
There’s no need to subsidize coal and nuclear as backup power. First, stop all subsidies, tax credits, and other deals for non-dispatchable energy. Instead require non-disp power plants to purchase backup power in order to use the electric grid for distribution and pay for any other costs to local electric grids and dispatchable power plants to support non-dispatchable power plants.
It may be theoretically possible to design a nationwide grid to power the country. it doesn’t make any economic sense to send electricity from wind mills off the east coast and in Texas to California if that is what’s needed to make the system work. Half the electric output would be lost trying to balance uneven loads and sudden load changes.
Electrical grids are essentially local for a good reason. It rarely makes economic sense to transport electricity, as opposed to coal, oil, or natural gas long distances because there are serious transmission losses. A tankerful of oil or a natural gas costs only the tiny fraction of the energy for transport.
Does anyone care to try and calculate the internal rate of return to justify battery backup for all non-dispatchable renewals for Puerto Rico for several months of grid down time?
“We need a free market in energy in the worst possible way.”
There is a difference between energy and electricity.
The power industry takes energy and converts it to electricity which is distributed to users via transmission lines.
In a free market, you are free to make your own electricity.
“BTW, wind doesn’t reduce the need for natural gas. Even gas fired plants can’t respond quickly enough.”
Assuming 5% of the power is coming from wind, then 5% is not coming from someplace else. Since nuke plants do not load follow, that leaves coal and natural gas.
The US grid is able to respond to changes in demand and generation.
If MarkW would like to provide a link to how fast power plants respond, I would read it.
Wind in the UK absolutely does reduce the use of natural gas.
As wind ramps up in the UK, gas is turned off.
Take a look here at the charts on how UK electricity demand is being met: see gas drop as wind rises.
(No, UK gas plants are not kept running all the time for when the wind drops: demand and wind prediction is sufficiently advanced to make that not the case)
http://gridwatch.templar.co.uk/
But the truly undependable Wind and Solar are still quite dependant upon having that reliable Fossil Gas back-up
“Gouging is just another way of saying, charging more than I want to pay.”
What MarkW wants is irrelevant.
An example of the way the power market works. If one company has excess power that cost $20/MWh and your power company produces power at $30/MWh, when your power company buys power at a lower cost, it lowers your bill.
An example of gouging is when the $20/MWh is being sold at $100/MWh.
“I find it fascinating how confident you are that even though business people can’t see 10 years into the future, politicians will be able to see 60 years into the future.”
MarkW apparent got it wrong when he read what I wrote.
I have zero confidence in those who do not understand recent past. I said nothing about business people or politicians in the context of 10 and 60 years.
Power companies have responsibilities and plant to meet them. If a new power plant is needed in 10 years, now is not too soon to get started. Power plants often operate for 60 years.
I quite agree. Subsidies to counter-balance the distortions of subsidies or other Government Policy are always a second-best to scrapping the original subsidies.
Ignoring base load requirements in subsidizing an injected political agenda economically forces subsidization of base load requirements as well. An exercise is politics.
“Nuclear Plants are subsidized already.”
Karl is just wrong. Operating nuke plants pay huge amounts of taxes to local, state, and federal governments. These operating costs are more than fuel costs.
I personally have paid huge sums to the same governments.
The nuclear industry also contributes to the trade deficit. Such thing as fuel assemblies and engineering services.