Why the Trump Administration Should Stop Propping Up Coal

Why the Trump Administration Should Stop Propping Up Coal

© Jim Urquhart / Reuters

On October 25, President Trump advanced Neil Chatterjee as the chairman of the Federal Energy Regulatory Commission (FERC) after Kevin McIntyre, the current chairman, stepped down due to health issues. Chatterjee served as FERC’s acting chairman before McIntyre was named and has extensive experience in energy issues, but this change comes only 10 days after news emerged that the president’s plans to bail out struggling coal and nuclear plants has moved to the backburner.

Chaterjee and others favor bailing out coal and nuclear plants for national security reasons. Yet payouts to coal or nuclear producers are unlikely to make the U.S. electricity supply more reliable or safer than it already is. Rather, efforts to support coal plants waste taxpayer dollars in an attempt to stall coal’s decline.

Coal certainly faces many regulations, but it’s primarily the efficiency of the market putting coal out of business.

Coal continues to lose out to natural gas in electricity markets. In 2007, 28 states relied on coal as their primary electricity source. Now, 11 years later, only 18 states do. Natural gas picked up half of the states that coal lost, largely because it’s cheaper, thanks to innovations in hydraulic fracturing and drilling technologies.

Natural gas is not only cheaper than coal, but it’s also more environmentally friendly. Even though it has its own environmental costs, using gas to replace coal has significantly reduced total US carbon emissions over the last decade.

Although coal is losing out to competitors because other sources are cheaper, the Trump administration has cited the need for a resilient and reliable electrical grid as the justification for proposed subsidies. Resiliency can be understood as the speed at which interruptions in electricity supply are resolved so people are not left without power for long periods of time. Outages are relatively rare in modern electrical grids. More importantly, the causes of power outages are mostly unrelated to specific generation sources.

In fact, an analysis by the Rhodium Group, a research consulting firm that specializes in energy issues, showed that fuel supply issues were responsible for a mere 0.00007 percent of the hours that Americans were without power between 2012 and 2016. As Josiah Neeley, the director of energy policy for the D.C.-based think tank R Street Institute, put it, “There’s certainly not a reliability crisis. And even if there was, the proposed rule doesn’t address any of the issues with reliability that are out there.”

Most interruptions in electricity flows don’t come from a lack of coal to burn, but a break in the lines carrying the power. In their study, the Rhodium Group also found that 96 percent of the hours without power between 2012 and 2016 were caused by problems with the physical infrastructure carrying the electricity. For example, lines may be downed by broken branches during a storm. No matter which fuel generates the electricity, it can’t reach the consumer without reliable transmission.

Not only is support for coal unlikely to make the power grid more resilient, coal and nuclear, like all energy sources, are already on the public dole. For example, from 2011 to 2016, coal received about $3.1 billion in research and development incentives. That’s about $500 million per year given to coal—and that’s only for research and development. From 1950 to 2016, coal received a total of $112 billion in federal energy incentives.

Instead of giving politically favored electricity sources another subsidy, policymakers like Chaterjee should remove artificial support for fossil fuels and encourage competition between energy sources. Coal isn’t losing out solely because of regulation, it’s losing to market competition. Rather than propping up outdated industries with bailouts, policymakers should remove all energy subsidies and let the best sources win out.

Josh Smith is a research manager with the Center for Growth and Opportunity at Utah State University. Camille Harmer is a CGO graduate research fellow at the Center for Growth and Opportunity, studying economics and environmental issues. You can follow them on Twitter: @smithtjosh and @HarmerCam.