Trump’s Coal Bailout Is Dead
Energy commissioners, including four appointed by the president, unanimously rejected the administration's proposal. EPIC Director Michael Greenstone gives his take.
One of the Trump administration’s most ambitious plans to buoy the struggling coal and nuclear power industries has been shot down.
The Federal Energy Regulatory Commission unanimously rejected a proposal to subsidize coal-burning and nuclear power plants on Monday. Its defeat hands a victory to the motley coalition—of environmental groups, natural-gas companies, free-market advocates, and Democratic state attorneys general—who had opposed the rule and promised to fight it in court.
The 5-0 rejection was all the bitterer for the administration because four of the five commissioners who lead the agency were appointed by President Trump, and three are Republicans.
As proposed, the rule aimed to improve the resilience and stability of the electrical grid. Citing some electricity problems that struck during the “polar vortex”-induced cold snap of 2014, Secretary of Energy Rick Perry proposed that utility companies should pay coal and nuclear plants to keep weeks of extra fuel on hand.
The Department of Energy, which Perry leads, doesn’t have the power to force utilities to follow such a rule itself. But the Federal Energy Regulatory Commission, or FERC, is charged by Congress with regulating interstate electricity sales and some power utilities. Perry asked FERC’s five commissioners to adopt his proposed rule within 60 days.
The plan was always controversial. Critics argued that Perry’s bailout would harm natural-gas plants, slow the growth of solar and wind energy, and introduce new and costly distortions to U.S. energy markets.
They also doubted the logic of the rule, saying that power plants rarely went down because they didn’t have enough fuel on hand. The Rhodium Group, an economics-research firm, found that only 0.00007 percent of U.S. power-outage hours between 2012 and 2016 were caused by a lack of available fuel.
Energy economists and environmental groups also maintained the rule would effectively subsidize carbon-dioxide pollution, which causes global warming. “Doing nothing [about climate change] is already not merited by economics,” Michael Greenstone, a professor of economics at the University of Chicago, said in October. “This is like doubling down.”