Gas-powered generation companies unhappy about administration’s coal and nuclear power bailout plans
From US News
President Trump’s most recent move, an announcement last week that his administration will once again try to prop up ailing coal and nuclear plants, drew widespread condemnation from a diverse array of groups and experts across the political spectrum – including the CEO of the country’s largest nuclear generator, which would stand to gain from the proposal.
The impact, however, would clearly fall most heavily on natural gas, which competes with coal and nuclear plants in electricity markets. And with U.S. electricity consumption having leveled off and even fallen since 2010 from strides in energy efficiency, one power plant’s gain is almost inherently another’s loss.
“If you’re going to support some subset of the market and have them run more than they would otherwise – coal and nuclear, for example – someone else is going to have to give. You’re going to supply the same amount of electrons either way,” says John Larsen, director in the energy and climate practice at Rhodium Group, a research firm. “Any support for coal and nuclear plants means less market share for natural gas in the electric power sector.”
Trump’s policies at times have threatened to harm a natural gas industry that, amid a boom in the cheap and abundant domestic resource, has in many quarters been regarded as the successor to coal and nuclear plants, especially among conservatives who are often more skeptical of renewables like solar and wind.
“I don’t think President Trump is necessarily trying to be specifically anti-natural gas, but the outcome of his actions is certainly turning out that way in some cases,” says Samantha Gross, a fellow in foreign policy focused on international energy and climate at the Brookings Institution, a left-leaning think tank. “He has not been as good for the oil and natural gas industry as he’d like to think he is, because he’s introducing all these uncertainties and challenges that weren’t there before.”
Oil and gas trade groups say the impact of the president’s bailout proposal is already being felt by the companies that own and operate natural gas plants, even as it has yet to be implemented, and even then still faces major legal hurdles.
“You’re seeing things in some jurisdictions where companies that had plants on the drawing board aren’t moving forward as quickly as they could have been,” says Todd Snitchler, group director for market development at the American Petroleum Institute, the industry’s largest lobbying group. “Projects that would have commenced construction or would have hired folks for the development phase of their construction are now waiting to see if it would be a good idea to build that facility.”
Snitchler said the effect of the president’s proposal, if it were fully implemented, would be “immediate and profound” – language reminiscent of the type used to describe the actions of the previous administration, which the trade group regularly accused of declaring war on oil and gas in aiming to address climate change.
The Trump administration, to be clear, has taken steps to support other facets of the gas industry: It’s called for reducing royalty rates for oil and gas wells on public lands, expanding access to protected areas to increase oil and gas drilling, easing environmental reviews and regulations for pipelines and other infrastructure and increasing exports of the two commodities.
Notably, the bailout announcement last week followed on the heels of a Trump’s decision in March to implement a 25 percent tariff on imported steel and aluminum – material that is heavily used in power plant and pipeline projects. It also came amid the president’s regular threats to upend the North American Free Trade Agreement, which could disrupt exports to the sector’s two largest importers of U.S. gas, Canada and Mexico.
Each step has drawn opposition from oil and gas trade groups and executives, which spent more than $36 million on lobbying through the first months of Trump’s presidency, according to data gathered by the Center for Responsive Politics, an 11 percent increase over the same period the year before Trump’s inauguration.
“I don’t think it’s the intent, but the practical effect is that a very pro-fossil fuel administration is handicapping a significant pedestal of its strategy, natural gas,” says Neil Bhatiya, research associate in the Energy, Economics and Security Program at the D.C.-based think tank Center for a New American Security. “If we pull out of NAFTA, it’s a huge disruption to the North American economic relationship – I don’t see how natural gas doesn’t suffer, at least in the short term.”
Steel pipe an uncertain buy now with tariff battle and possible end of NAFTA
The president has yet to take a specific action on NAFTA. Steel and aluminum imports, meanwhile, have yet to hit the quota that would trigger the implementation of the tariffs. However, that threshold is fast approaching, forcing companies to soon decide how they want to plan for new pipeline and power plant
“It’s very difficult to price pipe or steel used for pipelines because there is so much uncertainty in the market,” a representative of an industry trade group writes in an email. “Right now, things are OK, but at some point the market uncertainty is going to catch up. People are going to have to buy pipe if they want to keep upcoming project timelines on track. So the choice then becomes pay more for steel/pipe or delay or cancel projects.”
Bill Siderewicz, founder and president of Clean Energy Future, a Massachusetts-based firm that this month completed a natural gas power plant in Ohio and is scheduled to break ground on two more in the state later this year, says his company plans to meet with its contractor to discuss how the tariffs will affect two more plants the company is also seeking to build in Ohio. Any increase in cost, he says, will ultimately be borne by Ohio ratepayers.
“It reflects itself in the eventual capacity value of the power, so it becomes a pass-through to ratepayers, because it causes by the very nature of it the capacity price to go up,” he says.
The bailout plan for coal and nuclear, though, has attracted the most intense opposition, at least recently. The proposal marks the third time that the Trump administration has tried to aid coal and nuclear plants: In January, the Federal Energy Regulatory Commission, which oversees electricity markets, and includes Trump appointees, voted 5-0 to reject a similar proposal.
Companies that own and operate natural gas plants tell U.S. News that, for now, they’re watching and waiting – and remaining optimistic that this third attempt will also fail.
“We reject vehemently … the ridiculous Trump energy program,” Siderewicz says. “The first thing is to do anything possible to make sure that this policy becomes nothing more than a paperweight.”
