President Trump and the administration have long vowed to revive America as the world’s leading energy producer. To fulfill this promise — as well as unofficial campaign promises — the administration announced in June that it planned to bail out coal and nuclear power plants at risk of being shuttered under the guise of national security, claiming saving these plants would bolster “grid resilience” and promote American “energy dominance.”
Supporting this narrative is a Department of Energy (DOE) memo that leaked earlier this year, which purported the grid advantages of coal and nuclear power plants over other energy sources like oil and natural gas, concluding that these resources are vital to our national security. These advantages included a supposed robustness against cyber-attacks and natural disasters exclusive to coal and nuclear facilities. The memo cited nuclear and coal plants’ ability to store energy instead of relying on transport as a reason they are less susceptible to attacks.
Coupled with the administration’s campaign promises and agenda, the memo was a clear signal of intentions by the White House to move forward with a bailout of energy plants that have been deemed uncompetitive in America’s changing power generation industry. To prevent additional plant closings, the memo ordered grid operators to purchase coal and nuclear power over alternatives.
The safety and security of our nation’s energy industry and power generation is of paramount importance. Playing favorites with our nation’s assets and ordering grid operators to buy electricity from struggling coal and nuclear plants is counterproductive to developing comprehensive solutions to address threats to the grid as a whole.
Fortunately, for the market and taxpayers, reports suggest the White House has “shelved” the proposed bailout, for now. Before government officials determine their next step, it would be wise to consider the economic implications of intervening in the market, notably the increased costs to taxpayers that would result from putting politics before facts and prioritizing certain energy sources over others.
The justification of national security aside, the proposal comes with a large price tag that ratepayers will ultimately pick up on behalf of the administration. One estimate by the Brattle Group concluded the plan could cost taxpayers up to $35 billion a year. Consumers should not be asked to subsidize bailouts for favored industries.
President Trump’s blatant attempt to pick winners and losers with this attempted bailout of costly coal and nuclear plants ironically comes right from President Obama’s playbook. The National Taxpayers Union’s Brandon Arnold recently pointed out the Obama administration provided a $500 million loan guarantee to the failing solar company Solyndra, which pales in comparison to the current proposed bailout price tag.
America benefits from a diverse energy sector that has grown — rather than restricted — our nation’s energy portfolio and generated new options for consumers. Resources like natural gas and oil have put the United States at the forefront of global energy supplies with new renewable energy solutions becoming more commercially viable each year. To remain a leader in grid innovation and diversity, the United States must stand committed to protecting this fuel diversity, rather than undermining it with federal intervention.
The good news is that private industry, state regulators and federal agencies have prioritized the safety and security of power generation facilities.
Private energy companies have improved cyber-defense systems on their infrastructure projects for some time. For example, the oil and natural gas industry recently released a report that outlines the industry’s track record of efforts to develop and widely adopt voluntary cybersecurity guidelines, such as National Institute of Standards and Technology (NIST) Cybersecurity Framework, allowing these companies to effectively communicate cybersecurity issues, benchmark themselves against peers and collaborate to find solutions.
Further, encouraging investment in public-private cooperation will maximize the effectiveness of both private investments and public initiatives, such as the recently announced $28 million awarded by the Office of Cybersecurity, Energy Security, and Emergency Response for research and development of technologies and tools to improve cybersecurity and resilience of the nation’s energy infrastructure.
A basic understanding of free market economics and American energy reserves is enough to dispel the justification of the Department of Energy’s proposed bailout. If the government were to prioritize some electricity sources over others, it would unnecessarily undermine every principle that makes America the world’s most resilient free market economy. As consideration of this proposal continues among our nation’s leaders, it is imperative we keep free market principles in mind and turn our attentions to solutions that will generate collaboration and innovation, rather than intervention.
• Guy F. Caruso is a former head of the U.S. Energy Information Administration.
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