Trump administration moves to keep failing coal and nuclear plants open, citing national security

Key Points
  • The Trump administration is moving to keep coal and nuclear plants open by turning to rarely used federal powers.
  • The administration argues that the plants are necessary in order to protect national security.
  • The move comes after regulators rejected an earlier effort by the Energy Department to subsidize coal and nuclear plants.
Justin Solomon | CNBC

The Trump administration is preparing to keep ailing coal and nuclear plants online, potentially by turning to rarely-used federal powers and justifying the move by arguing that the facilities are critical to national security.

President Donald Trump on Friday ordered Energy Secretary Rick Perry to "prepare immediate steps" to prevent any more of the plants from closing.

"Unfortunately, impending retirements of fuel-secure power facilities are leading to a rapid depletion of a critical part of our nation's energy mix, and impacting the resilience of our power grid," the White House said in a statement.

There is a lot of opportunity in energy: Joe Terranova
There is a lot of opportunity in energy: Joe Terranova

If the administration follows a leaked draft proposal from the Energy Department, that would mean the administration will force electric grid operators to buy power from plants that have become uncompetitive and are at risk of closing. It was not immediately clear whether the White House would take that path.

The plan drew criticism from a broad spectrum of stakeholders, including the organizations that operate the nation's grids and competitive power markets, energy industry groups and environmentalists.

The Administration's draft plan to provide government assistance to those coal and nuclear power plants that are struggling to be profitable under the guise of national security would be unprecedented and misguided
Todd Snitchler
American Petroleum Institute market development group director for the

The unprecedented move essentially amounts to a second attempt to bail out coal and nuclear power plants. Secretary of Energy Rick Perry proposed a rule last year that would require regional markets to compensate coal and nuclear plants for the reliability they provide to the grid. However, a bipartisan group of five regulators unanimously rejected that plan.

The White House memo, made public on Friday, shows the Trump administration is now turning to a familiar strategy: pushing through a policy on the basis of national security. The White House has also invoked that argument to justify slapping tariffs on foreign steel and aluminum and proposing duties on imported automobiles, including against key allies Canada, Mexico and Europe.

"To promote the national defense and maximize domestic energy supplies, federal action is necessary to stop the further premature retirements of fuel-secure generation capacity," the report says.

Coal and nuclear power plants are retiring ahead of schedule, primarily due to competition from natural gas-fired facilities and renewable solar and wind farms.

The plan is to tap Section 202 of the Federal Power Act, which gives the secretary of Energy the authority to keep plants running in times of war or emergency. The department will also cite the Defense Production Act, which gives the president wide-ranging power to "influence domestic industry in the interest of national defense," according to the Congressional Research Service.

The scheme would be in place for two years until a study on the U.S. grid's reliability concludes. During that time, the administration will direct organizations that run the nation's regional grids to purchase enough electric power from generators to prevent them from retiring, decommissioning or deactivating.

The White House and Energy Department did not return multiple requests to verify the authenticity of the draft proposal, which was first reported by Bloomberg News and later posted online.

Reviving the coal industry was a core promise President Donald Trump made to voters, but the long-term trend of coal plant retirements has continued under his watch. Since Trump was elected, 36 coal plants have retired and 30 have announced they will close, according to a count kept by the environmental group Sierra Club.

If implemented, the administration's proposal would bolster Trump's energy industry allies like Robert Murray, the chairman and CEO of coal miner Murray Energy, who asked Perry to invoke emergency powers to keep coal plants from shuttering.

Sec. Perry: Bringing back nuclear energy
Sec. Perry: Bringing back nuclear energy

Getting the U.S. nuclear power industry back on track has also become a priority for Perry. Here, there are also challenges. Two dozen plants that together generate 33 gigawatts of energy across the United States have plans to shutter or will not make money through 2021, according to Bloomberg New Energy Finance.

Several states have recently passed subsidies to keep nuclear power plants online because they produce power without creating climate-warming emissions.

Trump plan criticized

PJM-Interconnection, which operates the grid in all or part of 13 states and Washington D.C., on Friday said there is no threat to its system from planned nuclear plant closures. It warned that Trump's proposal could lead to higher power prices for Americans.

"Markets have helped to establish a reliable grid with historically low prices," PJM said in a statement. "Any federal intervention in the market to order customers to buy electricity from specific power plants would be damaging to the markets and therefore costly to consumers.

Environmental groups came out against the plan immediately.

"This is an outrageous ploy to force American taxpayers to bail out coal and nuclear executives who have made bad decisions by investing in dirty and dangerous energy resources, and it will be soundly defeated both in the courts and in the court of public opinion," Mary Anne Hitt, director of Sierra Club's Beyond Coal campaign, said in a statement.

Industry groups representing oil, natural gas, renewable energy and energy storage sectors also slammed the proposal.

"The Administration's draft plan to provide government assistance to those coal and nuclear power plants that are struggling to be profitable under the guise of national security would be unprecedented and misguided," said Todd Snitchler, market development group director for the American Petroleum Institute, the oil industry's main lobbying group.

Reliability versus resilience

The notion that the United States is in the midst of an electric power emergency is at odds with a grid reliability report produced by the Energy Department last year. The agency concluded, "reliability is adequate today despite the retirement of 11 percent of the generating capacity available in 2002, as significant additions from natural gas, wind, and solar have come online since then."

The White House memo acknowledges that the U.S. grid operates reliably and that most outages are caused by the problems with the network of transmission and distribution lines rather than power plants.

However, it says there are security and resilience concerns raised by "high-impact events cause by state actors, terrorists, or natural disasters" that "go well beyond the conventional bounds of reliability."

At the heart of the argument is an ongoing debate about reliability versus resilience. By reliability, energy analysts typically refer to the ability of the grid to deliver energy under normal circumstances. But resilience refers to the grid's capability to withstand extraordinary circumstances, like a powerful storm.