In January 2018, the United States Federal Energy Regulatory Commission (FERC) rejected the US Department of Energy’s proposal on grid reliability and resilience pricing, which would have guaranteed the profits of coal and nuclear power plants in parts of the United States to prevent them from retiring. While proponents of the proposed rule said it is necessary to ensure the reliability and resiliency of the nation’s power grid; opponents call it a bailout for the coal industry. The authors here simulate how the proposed rule would affect energy market outcomess and social welfare, assuming that it does not harm the efficient functioning of markets in ways beyond the subsidization of certain plants, looking at several versions of the proposal that vary how long the policy is in effect, which type of generators qualify (coal, nuclear, or both), and whether the subsidies guarantee profits as in the proposed rule or only the costs necessary for continued operation. In the main scenario, the rule guarantees the profitability of both coal and nuclear units. The full article is available on the Resources website.
May 5, 2017
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