During the last administration, the focus for electric utility generation was renewables, primarily solar and wind. Another focus was to retire fossil fuel power plants (primarily coal) that were deemed too expensive to continue running.

With the focus of the new administration being on fossil fuel and nuclear, there is some disagreement over whether fossil fuel power plants slated for shutdown should still be shut down.

A new report published by Grid Strategies, titled “The Cost of Federal Mandates to Retain Fossil-Burning Power Plants,” and published on behalf of Earthjustice, Environmental Defense Fund, Natural Resources Defense Council, and Sierra Club, calls this topic into question.

“Over the last several months, the U.S. Department of Energy (DOE) has attempted to override decisions by power plant owners and state utility regulators to retire uneconomic fossil-fired power plants,” said the report. This analysis quantifies the cost imposed on electricity consumers if DOE continues to mandate that these plants and other fossil-fired power plants slated for retirement remain open.

The report suggests that ratepayer costs could exceed $3 billion per year if DOE mandates that the large fossil power plants scheduled to retire between now and the end of 2028 remain open. “If additional fossil power plants announce or move up their retirement dates in an attempt to obtain the ratepayer subsidies available to plants subject to DOE mandates, the cost could reach nearly $6 billion per year, said the report.

The report added that these large costs are at odds with the stated intent of the Executive Order that directed DOE to issue these mandates, which included meeting the “surge in electricity demand driven by rapid technological advancements, including the expansion of artificial intelligence data centers and an increase in domestic manufacturing” and protecting “the national and economic security of the American people.”

“Increasing ratepayer costs to subsidize uneconomic power plants undermines the competitiveness of U.S. manufacturing and data centers, as well as inflating the electric bills paid by homeowners and businesses,” said the report.

That DOE ordering retiring plants to remain open will increase ratepayer costs is intuitive and inherent. In specific:

– Power plant owners responding to market price signals, or state utility regulators responsible for ensuring utilities are cost-effectively meeting electricity demand, have determined that these plants are neither economic nor needed to maintain electric reliability.

– The state utility commissions of regulated utilities have determined that plants slated for retirement are not economic or needed for reliability through Integrated Resource Plans and other regulatory oversight.

– In deregulated Regional Transmission Organization (RTO) markets, merchant power plant owners cover the cost of operating their plants by selling their output into the market or under bilateral contracts with utilities or other customers under pricing that reflects the market value of that generation. Merchant owners that have decided to retire a plant have determined that the ongoing cost of operating the plant is greater than the revenue it can earn selling its energy, capacity, and other reliability services into the market or to a customer.

– RTOs also have mechanisms to retain plants scheduled for retirement that are needed to ensure local grid reliability, so RTOs have determined that plants slated for retirement are not needed for reliability.

“Thus, DOE mandates are overriding cost-minimizing retirement decisions that have been made by state utility regulators and merchant power plant owners based on extensive information regarding the cost, performance, condition, and need for each plant,” said the report.