January 31, 2018 Read More →

‘DOE’s Efforts to Save Coal Through Market Intervention Likely Done’

S&P Global Market Intelligence:

The Department of Energy’s days of attempting to meddle in the power markets to benefit fuel sources the administration looks favorably upon probably are over, an attorney with Akin Gump said Jan. 30 during an energy policy briefing on the year ahead.

The Trump administration’s desire to reinvigorate the struggling coal industry is no secret; the subject of ending the so-called war on coal got much attention on the campaign trail and throughout the president’s first year in office.

The coal sector saw its share of the U.S. generation mix diminish from 50% in 2002 to 30% in 2016, and retirements have put coal’s installed capacity share at 26% in 2016, down from 36% in 2002, according to data cited by Chip Cannon, a partner in Akin Gump’s energy regulation, markets and enforcement practice.

In contrast, natural gas’ capacity went from 35% in 2002 to 42% in 2016, and its share of the generation mix rose to 34% from 18% during the same time period. And while renewable energy still has a comparatively small seat at the table, it is “growing at a fairly quick clip,” Cannon said, noting that those developments all have occurred during a time of relatively flat demand growth.

First, Cannon recounted, Energy Secretary Rick Perry in April 2017 called for a power sector review to examine, among other things, whether regulation, taxes and subsidy policies were forcing baseload plants into early retirement and potentially threatening the reliability of the nation’s electric grid.

But a draft of the grid study that was leaked revealed that low natural gas prices, not the increased penetration of renewables as some had maintained, was the primary driver of coal retirements.

DOE made a second attempt to influence the power sector, sending a contentious proposal to FERC the following September seeking market rule changes that would guarantee full cost recovery and a return on investment for certain generators that maintain 90-day on-site fuel supplies, Cannon recalled.

More ($): FERC rejected that notice of proposed rulemaking (FERC docket RM18-1) in a Jan. 8 order.

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