(Note: The writer is addressing the question, “Should the U.S. bail out failing nuclear and wind energy producers?”)
WASHINGTON — It may seem that Americans don’t agree on much these days, but just about everyone agrees that government intervention in electricity markets is a bad idea.
From The Wall Street Journal to the Los Angeles Times, electric grid operators to economic analysts, natural gas producers to renewable energy advocates, Democrats to Republicans — it’s hard to find anyone who supports bailing out unprofitable coal and nuclear plants at the expense of consumers.
But the Trump administration is considering a proposal to do just that.
First, some background. The United States leads the world in natural gas production, and the resource’s ready availability and advantages as a fuel source have made it an appealing choice for electricity providers.
So much so that it’s become the leading source of power generation in the United States, powering nearly one in three homes and delivering a win-win situation for consumers and power generators.
On the consumer side, clean natural gas-supplied power has lowered utility costs for homes and businesses while driving carbon emissions to 25-year lows.
On the power producer side, natural gas has enhanced the reliability and resilience of America’s electric power system.
Bottom line: Natural gas has earned its share in power markets, and those markets are succeeding in providing affordable, reliable electricity to consumers.
It’s a clear case of “if it ain’t broke, don’t fix it.” Only unprofitable coal and nuclear plants, struggling to compete with ascendant natural gas, disagree. Rather than compete fair-and-square in the free market, nuclear and coal companies are seeking bailouts in several states and now at the national level.
U.S. homes and businesses should not have to pay to prop up specific fuel sources, but a new study shows they could be on the hook for up to $17 billion per year – whether in taxes or higher electricity rates — if bailouts move forward.
U.S. manufacturers, who have enjoyed an economy-boosting renaissance thanks to affordable energy, are under no illusions about the impact.
When the Federal Energy Regulatory Commission considered and rejected bailouts earlier this year, a coalition of manufacturers — including the American Iron and Steel Institute, Electricity Consumers Resource Council and American Forest & Paper Association — argued that subsidizing “coal and nuclear generation and their jobs,” would “increase the electricity costs by many millions of dollars for untold numbers of businesses and consumers … putting at risk a far larger number of U.S. manufacturing jobs that face considerable pressure from foreign competition.”
That’s a lot of cost, and at what benefit?
Bailout supporters argue everything from grid reliability to national security as justification for subsidies. But power grid operators themselves have shot down those claims.
PJM Interconnection, which manages power markets in 13 states, has stated: “This is not an issue of reliability … Nothing we have seen to date indicates that an emergency would result from the generator retirements.”
On top of cost increases, forcing operators to make their fuel purchases based on government mandates, not on what’s best for consumers, would set a troubling precedent.
As the Washington Post editorial board recently pointed out, if the Trump administration implements subsidies for coal and nuclear plants, “it would be hard to stop the next Democratic president from, say, using emergency powers to force the purchase of renewables at the expense of coal, oil and natural gas.”
That’s one of many unintended consequences we risk when the government starts picking winners and losers in the market.
America’s power system will continue to rely on multiple fuels — including natural gas, nuclear, coal, hydro, wind and solar for decades.
But it’s the competitive market, not government intervention, that is the best approach to ensure the optimal mix to keep delivering affordable, reliable power to American families and businesses.
Todd Snitchler is Group Director of Market Development at the American Petroleum Institute and a leading expert on environmental regulations. He earned a law degree at Akron University and holds a bachelor’s degree from Grove City College. Readers may write him at API, 1220 L Street, NW, Washington, DC 20005-4070.