Rick Perry’s Coal and Nuclear Subsidy NOPR

UPDATE: On January 8 FERC rejected the DOE NOPR


At the end of September Energy Secretary Perry sent a request to the Federal Energy Regulatory Agency to initiate a Notice of Proposed Rule (NOPR) to create “Grid Resiliency Pricing.” Under the guise of increasing grid reliability and resilience, the Trump Administration is doing nothing more than radically increasing subsidies to uneconomic coal and nuclear generating plants. This is simply an effort to artificially create demand for coal and bail out owners of nuclear generating stations.

The Administration is proposing that “fuel secure” generating stations receive “full recovery of costs” and a “fair rate of return.”  “Fuel secure” is defined as any generating station that maintains a 90 day supply of fuel on site, but might as well say “coal and nuclear generating stations” because those are the only types that can meet the proposed rule criteria.

The NOPR acknowledges that these plants would not be economic under normal market pricing schemes and are therefore subject to premature retirement.

DOE wants coal and nuclear plants to operate under monopoly pricing within what is supposed to be a wholesale electricity free market. Think about that for a moment.  An unabashedly free market Administration wants to impose what amounts to socialized medicine for certain sectors of the economy.

The NOPR alleges that these plants are essential for grid reliability and resiliency because: coal and nuclear plants that would otherwise be retired enhance grid resiliency during extreme weather such as the Polar Vortex of 2014; providing grid resiliency is not valued in wholesale markets and should be; the North American Reliability Council (NERC) agrees with DOE; the DOE staff report on reliability (a failed attempt by the Administration to claim renewable resources were a detriment to grid reliability); and (most importantly) “Congress is concerned.”

Let’s take a look at some of these assertions.

First, the threat of fuel supply disruptions. I give you Exhibit A1:

In actual fact, the greatest threat to grid resiliency from extreme weather is the quality of the transmission and distribution system. A system whose efficiency and resilience contribution could be vastly improved with a much more aggressive implementation of new smart technology.

While NERC may agree in principle that grid resiliency should be valued, the ISO/RTO Council, the organization representing all of North American wholesale power grids, has filed comment that the FERC should not issue the rule for several reasons, including “the NOPR would undermine competitive markets and Is legally Infirm.”2

The authors of the DOE Reliability study offered a few other recommendations that did not end up in the report, including the fact that what constitutes grid resiliency and how all the factors that affect it (such as fuel security) are not well understood and merit considerable analysis before a valid pricing method can be determined.3

Finally, the most important reason for the NOPR needs to be understood and properly characterized.  The DOE document says “Congress is concerned,” referencing a letter from the House Science and Technology Committee, a committee controlled by an extremely partisan group that promotes the interests of fossil fuel industry and unabashedly rejects climate science.

These, however, are the reasons on principle that the NOPR should be withdrawn.  There’s that other factor of cost.  Energy Innovations, LLC, evaluated the costs of implementing the NOPR under four different interpretations of how the pricing could go4, from a conservative estimate that covers the shortfall in cost from wholesale value to operating costs to break even (Reading 1), through to an aggressive case that not only offers full cost recovery but full return on capital and full dispatch even if under normal conditions the unit would not be so dispatched (Reading 4). The following table shows how these 4 interpretations might impact customers in the four regions that would be affected. (PJM = Middle Atlantic, Ohio, VA; ISO-NE =New England; MISO = Midwest; NYISO= New York State)

Source: Energy Innovations, LLC

This NOPR has the potential to significantly increase customer cost and have a dampening effect on the economy for very questionable reasons.


There is a certain irony in this attempt to reregulate from an Adminstration bound and determined to unregulate everything. One can only conclude that this is a hastily cobbled approach to bailout coal and nuclear interests that have found themselves uneconomic in wholesale power markets relative to other technologies. The NOPR ought to be rejected on its face.

If a sincere attempt is to be made to examine the issue of grid resilience and reliability, a much more careful and comprehensive analysis ought to occur.  This analysis needs to give consideration to a number of factors that can affect reliability and new technologies that could enhance reliability and resilience in a much more cost effective manner.

In the absence of pricing methodologies, enormous improvements in resilience and reliability have yet to be obtained through the implementation of smart transmission and distribution technologies on all networks. Rather than burdening customers to simply prop up failing technologies, consider investments in new ones that provide long term solutions.



1 http://rhg.com/notes/the-real-electricity-reliability-crisis

2 Comments of the ISO/RTO Council on the September 28, 2017 Notice of Proposed Rulemaking by the Department of Energy

3 https://www.utilitydive.com/news/silverstein-if-id-written-the-doe-grid-study-recommendations/506274/

4 http://energyinnovation.org/wp-content/uploads/2017/10/20171021_Resilience-NOPR-Cost-Research-Note-FINAL.pdf

Energy subsidies | Levelling the Subsidy Playing Field (Guest Post)

Originally published at JBS News by John Brian ShannonJohn Brian Shannon

By now, we’re all aware of the threat to the well-being of life on this planet posed by our massive and continued use of fossil fuels and the various ways we might attempt to reduce the rate of CO2 increase in our atmosphere.

Divestment in the fossil fuel industry is one popular method under discussion to lower our massive carbon additions to our atmosphere

The case for divestment generally flows along these lines;
By making investment in fossil fuels seem unethical, investors will gradually move away from fossil fuels into other investments, leaving behind a smaller but hardcore cohort of fossil fuel investors.

Resulting (in theory) in a gradual decline in the total global investment in fossil fuels, thereby lowering consumption and CO2 additions to the atmosphere. So the thinking goes.

It worked well in the case of tobacco, a few decades back. Over time, fewer people wanted their names or fund associated with the tobacco industry — so much so, that the tobacco industry is now a mere shadow of its former self.

Interestingly, Solaris (a hybridized tobacco plant) is being grown and processed into biofuel to power South African Airways (SAA) jets. They expect all flights to be fully powered by tobacco biofuel within a few years, cutting their CO2 emissions in half. Read more about that here.

Another way to curtail carbon emissions is to remove the massive fossil fuel subsidies

In 2014, the total global fossil fuel subsidy amounted to $548 billion dollars according to the IISD (International Institute for Sustainable Development) although it was projected to hit $600 billion before the oil price crash began in September. The global fossil fuel subsidy amount totalled $550 billion dollars in 2013. For 2012, it totalled $525 billion dollars. (These aren’t secret numbers, they’re easily viewed at the IEA and major news sites such as Reuters and Bloomberg)

Yes, removing those subsidies would do much to lower our carbon emissions as many oil and gas wells, pipelines, refineries and port facilities would suddenly become hugely uneconomic.

We don’t recognize them for the white elephants they are, because they are obscured by mountains of cash.

And there are powerful lobby groups dedicated to keeping those massive subsidies in place.

Ergo, those subsidies likely aren’t going away, anytime soon.

Reducing our CO2 footprint via a carbon tax scheme

But for all of the talk… not much has happened.

The fossil fuel industry will spin this for decades, trying to get the world to come to contretemps on the *exact dollar amount* of fossil fuel damage to the environment.

Long before any agreement is reached we will be as lobsters in a pot due to global warming.

And know that there are powerful lobby groups dedicated to keeping a carbon tax from ever seeing the light of day.

The Third Option: Levelling the Subsidy Playing Field

  • Continue fossil fuel subsidies at the same level and not institute a carbon tax.
  • Quickly ramp-up renewable energy subsidies to match existing fossil fuel subsidies.

Both divestment in fossil fuels and reducing fossil fuel subsidies attempt to lower our total CO2 emissions by (1) reducing fossil fuel industry revenues while (2) a carbon tax attempts to lower our total CO2 use/emissions by increasing spending for the fossil fuel industry

I prefer (3) a revenue-neutral and spending-neutral solution (from the oil company’s perspective)to lower our CO2 use/emissions.

So far, there are no (known) powerful fossil fuel lobby groups dedicated to preventing renewable energy from receiving the same annual subsidy levels as the fossil fuel industry.

Imagine how hypocritical the fossil fuel industry would look if it attempted to block renewable energy subsidies set to the same level as fossil fuel subsidies.

Renewable energy received 1/4 of the total global subsidy amount enjoyed by fossil fuel (2014)

Global Energy Subsidies 2014. (billions USD). Image courtesy of IISD.

Were governments to decide that renewable energy could receive the same global, annual subsidy as the fossil fuel industry, a number of things would begin to happen;

  • Say goodbye to high unemployment.
  • Say goodbye to the dirtiest fossil projects.
  • Immediate lowering of CO2 emissions.
  • Less imported foreign oil.
  • Cleaner air in cities.
  • Sharp decline in healthcare costs.
  • Democratization of energy through all socio-economic groups.


Even discounting the global externality cost of fossil fuel (which some commentators have placed at up to $2 trillion per year) the global, annual $548 billion fossil fuel subsidy promotes an unfair marketplace advantage.

But instead of punishing the fossil fuel industry for supplying us with reliable energy for decades (by taking away ‘their’ subsidies) or by placing on them the burden of a huge carbon tax (one that reflects the true cost of the fossil fuel externality) I suggest that we simply match the renewable energy subsidy to the fossil subsidy… and let both compete on a level playing field in the international marketplace.

Assuming a level playing field; May the best competitor win!

By matching renewable energy subsidies to fossil fuel subsidies, ‘Energy Darwinism’ will reward the better energy solution

My opinion is that renewable energy will win hands down and that we will exceed our clean air goals over time — and stop global warming in its tracks.

Not only that, but we will create hundreds of thousands of clean energy jobs and accrue other benefits during the transition to renewable energy. We will also lower healthcare spending, agricultural damage, and lower damage to steel and concrete infrastructure from acid rain.

In the best-case future: ‘Oil & Gas companies’ will simply become known as ‘Energy companies’

Investors will simply migrate from fossil fuel energy stock, to renewable energy stock, within the same energy company or group of energy companies.

At the advent of scheduled airline transportation nearly a century ago, the smart railway companies bought existing airlines (or created their own airlines) and kept their traditional investors and gained new ones.

Likewise, smart oil and gas companies, should now buy existing renewable energy companies (or create their own renewable energy companies) and keep their traditional investors and gain new ones.

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