(SNL, August 24) – A new government study of the U.S. electricity grid could prove to be a valuable tool in the coal sector’s push to position the fuel as a prime source of grid reliability and resilience.
The U.S. Department of Energy report backs up a major talking point of the coal sector — changing generation portfolios have challenged electricity markets, and the market needs to “evolve to better address resilience.” While the report acknowledges that low natural gas prices and other market factors have accelerated the closure of baseload power plants, it also notes that policy forces have played a role.
The report concludes that closing traditional baseload plants “calls for a comprehensive strategy for long-term reliability and resilience.”
“I think it pretty much met our expectations,” said Paul Bailey, president and CEO of the American Coalition for Clean Coal Electricity, or ACCCE. “The thing we were looking for the most was for the report to highlight the importance of grid resilience. Not just reliability, but resilience.”
Bailey told S&P Global Market Intelligence that the ACCCE believes that the study’s findings will help to “magnify” ongoing efforts to have grid operators and regulators value resiliency of the coal fleet. That could further the organization’s goal of preserving the existing fleet. He said utilities thinking about coal plant retirements should take into consideration that there is now a “good chance” grid operators may soon start valuing coal plants in a way that could make coal plants more economic.
Peabody Energy Corp., the largest private-sector coal mining company in the world, has backed arguments for pausing coal plant retirements.
“This study represents an important first step in examining the complex organism that is the U.S. electricity grid and recommending policy points to preserve affordable, reliable baseload generation from coal and level the playing field in a fuel-neutral manner,” said Vic Svec, Peabody’s senior vice president for global investor and corporate relations.
Peabody President and CEO Glenn Kellow called for a two-year moratorium on retiring coal-fired power plants at a recent coal industry gathering. He predicted a moratorium would be a “natural consequence” of the Department of Energy study and said that after the study was released, Peabody would “be seeking to engage the administration on how to implement the findings of the study.”
West Virginia Gov. Jim Justice said he has been pushing the White House for a $15/ton incentive to burn Appalachian coal for homeland security reasons. A recent report revealed that Murray Energy Corp. has been lobbying the administration to declare a grid emergency to keep coal plants open, a position the company reiterated in a statement applauding the study for acknowledging the importance of coal generation.
“There is, however, much more which must be done in order to ensure low-cost, reliable, and fuel secure electricity in the United States,” a statement from Murray Energy said. “This includes the need for the Department of Energy to immediately invoke Section 202(c) of the Federal Power Act, in order to prevent the ongoing, and irreversible, closure of many coal-fired power plants in America, and the tremendous human and financial costs which will result.”
Opponents and competitors of coal expressed concern that the report could be used to justify advantages for the existing coal fleet to continue to operate.
The Sierra Club, which filed a lawsuit seeking more transparency in the report ahead of its release, said the report’s claims that coal and nuclear plants are needed for grid reliability are “unsubstantiated.” Mary Anne Hitt, director of the organization’s Beyond Coal campaign, said the report was a “shoddy attempt” to prop up coal-fired power plants.
“There is no evidence, in this report or elsewhere, that coal or nuclear plants are vital to our grid’s long-term reliability, or that there will be increasing demand for them,” Hitt said in a statement. “In fact, all trends point in the opposite direction.”
Advanced Energy Economy, a group that promotes a variety of energy issues including natural gas, renewables, energy efficiency and other technologies, said it is glad the report recognizes that grid changes are primarily the result of low-cost natural gas instead of blaming policies that support renewable energy. However, the group said the study “seriously overstates the challenges” associated with new energy sources coming online.
“It also implies that certain power plants now losing out in the marketplace make an irreplaceable contribution to reliability and resilience, which is not the case,” said Graham Richard, CEO of Advanced Energy Economy. “Our nation’s grid operators themselves have said they are facing no difficulty in managing an increasingly diverse set of resources and that they will have no difficulty maintaining reliability as uncompetitive power plants inevitably retire.”