Rick Perry, Coal, and Crony Capitalism

"There is no free market in the energy industry," says the secretary of energy.


Bill Clark/CQ Roll Call/Newscom

Secretary of Energy Rick Perry has ordered the Federal Energy Regulatory Commission (FERC) to save the coal mining industry by massively subsidizing conventional coal-fired electricity generation plants. That's not the way he put it, of course. But Perry's Notice of Proposed Rulemaking on Grid Resiliency amounts to that, argues Steve Huntoon*, former president of the Energy Bar Association.

In "Cash for Clunkers Redux," an article for RTO Insider, Huntoon makes the case that the Trump administration is engaged here in pure crony capitalism, using the excuse that subsidies to uneconomic coal and nuclear power plants are needed to stabilize the electric power grid.

If Perry's policy is enacted, Huntoon predicts that federal subsidies would bring some 71 gigawatts of recently retired power generation back from the dead. He doesn't expect the subsidies to stop there. Piling subsidies on top of already uneconomic power plants will drive down the price of electricity, which in turn will force formerly profitable power onto the dole. Eventually it'll be subsidies all the way down. Huntoon calculates that such subsidies for conventional generation could eventually rise to as much as $88 billion a year, forever. (For comparison, the Institute for Energy Research estimated that federal renewable energy subsidies amounted to $13.2 billion in 2013.)

Would requiring newly subsidized power plants to maintain 90-day supplies of coal and nuclear fuel really increase grid resiliency? The DOE cited the power outages in that occurred during the 2014 polar vortex, which froze the mid-Atlantic states. Yet Huntoon notes that the generation emergencies in question aggregated just 20 hours."What is magic about 90 days (other than being tailored to the average coal plant stockpile)?" he asks.

Furthermore, Huntoon points out, "Here's a fun fact you won't find in [Perry's proposed rulemaking]: Baseload (combined cycle) natural gas plants average lower forced outage rates (4.29%) than baseload coal plants (7.71%), and have about the same as nuclear plants (3.51%). It's these overall forced outage rates that matter—not a single metric like fuel supply on site." Baseload coal plants are more unreliable than other types of power generators.

Disturbingly, it appears that FERC Chairman Neil Chatterjee is receptive to Perry's proposal.

"There is no free market in the energy industry," Perry declared in a recent speech. Over at the R Street Institute, a free-market think thank, energy analyst William Murray countered:

The truth is that free and unfettered price discovery in electricity markets is the most important element in grid resiliency. Perry is involved in a subterfuge, a deception that even someone of his legitimate political skills has trouble pulling off. The administration is in the position of being forced to come up with creative ways to fulfill promises made directly by President Donald Trump to coal mine owners during the election campaign, even at the cost of free markets—a supposed core belief among Republicans and conservatives of all strips.

As I argued when the Secretary of Energy unveiled his subsidy proposal: "Maintaining grid resilience is a real issue, but there is more than a whiff of crony capitalism about Perry's initiative to establish capacity payments for conventional power generators. Better to roll back market distortions than to pile new distortions upon the old."

**Disclosure: I am proud to say that Steve Huntoon has been my friend ever since we met at the University of Virginia as undergraduates. In addition, I was a mid-level bureaucrat at the Federal Energy Regulatory Commission for three years in the late 1970s and early 1980s.*

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  1. “There is no free market in the energy industry,” Perry declared in a recent speech.

    Now, why might that be?

    1. As he is the former governor of Texas, we should take him at his word.

      1. Ok, as a Texan I should let you all in on the joke.

        Our governor has very little power, so we elect idiots as a joke since America sometimes falls for it and elects them President.


  2. Sigh. How about we just stop subsidizing everything? If it’s a good idea, the market will pay for it. If it’s a bad idea let it wither away. The fact that it’s the Trumpian Right now begging for gub’ment dole just goes to show they aren’t any different than the BernieBros Left.

    1. The fact Trump and Bernie largely agreed on several key economic issues should have given people pause.

      1. ^ This.

        I knew a lot of Bernie supporters for whom his opposition to the TPP was absolutely central to their support, and who were skeptical that HRC’s stated opposition to it was sincere.

        When Trump scrapped the TPP on Day One? Crickets.

        1. Not to even mention the fact that both of them are largely for tariffs and could be painted as protectionists, generally and specifically speaking. I would imagine there’s some difference between what tariffs they might have specifically liked or hated, but still they are both for tariffs.

          I suspect that trend will continue into the next election, with whomever promises the most protectionist policies will win.

          1. I suspect that trend will continue into the next election, with whomever promises the most protectionist policies will win.

            Indeed – in Austria right now the “Far Right” and the “Far-Left” are finding they had fewer differences than they had previously thought.

            1. Turns out, they’re rapidly becoming the center. Now that’s a thought to fuel some alcoholism.

  3. We have to correct for the injustice of coal being asked to pay for almost none of the pollution it’s imposed on everyone.

    1. Says the same government that is still subsidizing tobacco while taxing it.

      Pigouvian taxes may make some sense, but when was the last time government made any sense? One hand will tax the pollution while the other will subsidize the energy. The idea that government will in any way be sensible is a complete non-starter.

      I say stop subsidizing them, stop taxing them, and then open them up for torts and actions if they pollute.

      1. Since it’s impossible to prove individual harm against a polluter, leaving it up to the torts system would be heartily embraced by the industry I’m sure. Then no doubt their Republican puppets will do “tort reform” to make sure we can’t actually sue.

        1. “Since it’s impossible to prove individual harm against a polluter government agents should be empowered to pre-emptively assume guilt wherever necessary and extract the amount of funds that said agent sees fit.”

          Fixed it for you.

        2. If torts can’t be made, why did the government squeeze out pollution based torts?

        3. So you are one of those who thinks a government paycheck makes someone wise and clever?

          To wit: private individuals with skin in the game are incapable of proving who the polluters are, especially in legal terms, but disinterested government bureaucrats whose only real interest is staying in power are quite capable of assigning blame and don’t even need to prove it in court.

          Consistency, they name is Tony.

    2. When was the last time there was acid rain in the United States? Oh, wait, you’re talking about CO2. Get the fuck out of here with that.

    3. Tony|10.16.17 @ 2:56PM|#
      “We have to correct for the injustice of coal being asked to pay for almost none of the pollution it’s imposed on everyone.”

      Tell ya what, jackass. Just shut off that computer, your water, your food, and about everything else you consume; it all gets there on the electrical power provided by coal for some time.
      Fuck you and your pathetic ‘I want everything perfect, or I’ll stamp my feet!’

      1. No, no. Tony’s not using that energy. It’s coal that’s doing it all! Evil, evil coal!

  4. It’s funny that the real problem politicians have with nuclear energy isn’t that it’s scary. The real problem is that it’s impossible to manage power output.

    1. Managing nuclear power output is just as easy, if not easier, as managing coal power output. Still scary, but what isn’t in the Age of Trump?

  5. Yeah, reserve capacity is free by its owners to maintain, so why should they get paid for it?

    1. Owners of coal plants are already compensated for providing reserve capacity to the grid through something called “capacity markets” or a reliability pricing model. This has been how competitive power markets assure adequate capacity for years.…..rkets.aspx

      The problem for coal was that natural gas plants also get capacity payments (wind and solar usually can’t) and coal can’t complete against natural gas. Perry’s crony capitalist solution was to introduce a brand new subsidy that’s only available to generators with 90 days of onsite fuel storage. Why 90 days? Well, because natural gas can’t store that much fuel onsite and coal can.

  6. Subsidizing the coal industry is not crony capitalism anymore than subsidizing wind or solar is. Nor does this potentional program resemble the Cash for Clunkers program (which resulted in the destruction of millions of cars that were still useable).

    There are legitimate complaints about this kind of subsidy, but trying to fill the article up with buzzwords does not make a coherent case.

    Here’s a reasonable suggestion. Write an article criticizing all energy subsidies and include these potential subsidies in the list.

    1. There’s a rational reason to tilt the market in favor of wind and solar and away from coal. Try and guess what that is.

      1. Because under the best possible circumstances their power output is sketchy and hard to transport?

        1. On the other hand you don’t have to blow up mountains to acquire their fuel source.

          1. You should really just admit that you don’t really know much about the topic.

            1. But pretending to be smart is all Tony’s got!

            2. I know that your weird little philosophy probably wouldn’t exist if it weren’t for whoring for polluting energy industries.

              1. Oh. I guess he stopped even pretending.

              2. your weird little philosophy

                What philosophy is that?

                whoring for polluting energy industries.

                Like solar and wind?

          2. Bonus Question: Where do the materials and chemicals used to produce windmills and solar panels come from?

            Correct Answer: the ground, you retard.

          3. Tony|10.16.17 @ 3:12PM|#
            “On the other hand you don’t have to blow up mountains to acquire their fuel source.”

            Yeah, it provides nothing all all most of the time and no mountains were harmed in this non-production.
            You seem dedicated to proving that you and the left are a sorry excuse for humanity.

          4. you don’t have to blow up mountains to acquire their fuel source.

            Do you have some kind of quota of ignorant statements you have to make in any given day?

            1. Your sudden extremely selective concern for the environment is touching.

              1. Well, that’s ironic.

              2. Tony|10.16.17 @ 3:51PM|#
                “Your sudden extremely selective concern for the environment is touching.”

                Your constant imbecility is tiring.

              3. Go fuck yourself. I was going door-to-door for Greenpeace while you were playing with He-Man.

                Your concern for the environment is limited to only and exactly what Team Blue tells you to be concerned about. Your lack of actual knowledge about any “environmental issue” whatsoever is quite impressive, actually.

                Which is why you self-righteously declare that solar farms don’t require blowing up mountains when, in fact, they do, you ignorant, ignorant fuckstain.

                1. I take it you’re probably not as huge of a Greenpeace fan these days since they’ve managed to go full retard?

                  World Heritage Site Damaged by Greenpeace

                  I’m pretty sure I’ve mentioned it before to you, but I’d like to see their organization destroyed for that one.

                  1. Yeah – Greenpeace was in the process of jumping the shark when I was involved (late 80s). They were partly responsible for pushing me away from institutionalized environmentalism, as it became increasingly clear that it was largely a bunch of rich kids who were much more concerned with publicizing their own extreme self-righteousness than with actually understanding and addressing environmental concerns.

                    This guy has it about right.

                    1. Rational. Pollution is very, very real which is why I’m always astounded at retards like Tony that want to focus on CO2. Talk about giving countries like China a huge pass.

                      That’s why I mention acid rain, as it’s a type of pollution that usually originates with…coal power generation. It’s actually destroyed a lot of truly irreplaceable statuary, not to mention fucking with the pH of water tables, but it hasn’t been a concern in the United States in a long while as far as I’m aware.

                      It seems people like Tony have really only been on this earth for five or ten minutes. He seems incapable of distinguishing theoretical harms from real ones, and furthermore only ever mentions the imaginary kind of threats rather than, you know, actual one’s all over the planet.

                      Frankly, the 3rd world is responsible for most of the real pollution on this planet but they all want to blame us because we pay out huge amounts of money for them to hopefully stop doing it one day. That’s it. That’s the whole plan in a nutshell.

                      Of course, obviously those countries would rather spend that cash on basically anything except that. So they do, we smile and nod, and continue making those payments. It’s an incentive for them to never clean up the environment.

              4. “Your sudden extremely selective concern for the environment is touching”

                This is what being salty from getting slapped around looks like.

    2. Subsidizing the coal industry is not crony capitalism anymore than subsidizing wind or solar is.

      So you’re saying it is absolute crony capitalism?

    3. This is a dumb suggestion. Bailey is writing about a statement by the Secretary of Energy specifically related to the subsidizing of coal.

      How many articles has Reason done about the negatives of subsidizing wind and solar without explicitly mentioning coal? A couple hundred? Were you in the comments complaining about there being no criticisms of coal subsidies?

      Also, the cash for clunkers language is used by the article Bailey links too. Bailey even goes so far as to explain what the content of the article is, just in case you get confused and think it’s about cars.


    *I apologize for the diminuitive font, but it was the best I could do.

  8. In exchange for its subsidies all Teslas should be required to bear a “powered by coal” plaque.

  9. Rick Perry goes full Rand villain.

    1. Hey – when dogs are eating dogs, you have to do something to stop the madness!

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