Two separate lobbying pushes are underway urging Congress to create new multi-billion dollar tax credits benefiting virtually all coal and nuclear power plants across the United States. The price tags: up to $65 billion for coal and $4.8 billion for nuclear.
My thought bubble: The efforts show the aggressive lengths companies are going trying to survive in a hyper-competitive electricity market while also seeking to take advantage of President Trump’s vows to boost coal and nuclear power, which has Republican backing in Congress. The tax credit proposals, which have not been publicly disclosed, face skepticism from others in the coal and nuclear industries and are sure to face criticism that they’re handouts to legacy energy sources.
Companies and groups involved in the separate efforts, including coal-heavy utility American Electric Power, coal trade group American Coalition for Clean Coal Electricity and nuclear utility Exelon, are working to persuade senators to introduce proposals in the coming weeks that are separate from the broader tax overhaul.
No senator has signaled public support to either effort, according to executives involved and inquiries made to numerous offices. Both measures face long odds, though the coal push is the tougher ask given its bigger price tag and nuclear power’s bipartisan backing. The companies are pushing for the proposals to be included as part of any broader tax-credit extension legislation Congress could take up before the end of the year or, more likely, next year. Executives involved acknowledge their uphill battles.
On coal: “Frankly, this is a novel idea to people who are used to nuclear tax credits and renewable tax credits,” said Paul Bailey, CEO of the coal group. “They’re used to all kinds of tax incentives and credits, but this is the first time anyone has thought about one for the existing coal fleet like this.”
On nuclear: “I think we recognize the challenges that we face,” said David Brown, a lobbyist with Exelon, the U.S.’s largest nuclear operator. “But we also recognize that this is a technology that enjoys bipartisan support and we’re going to continue to educate policymakers and encourage them to support it.”
The tax proposals are different from a Trump administration effort to overhaul electricity market rules benefiting a smaller number of coal and nuclear plants. That effort, underway at the Federal Energy Regulatory Commission, is seeking to ensure the electric grid remains resilient. Coal and nuclear provide continuous electricity and can store fuel on site, unlike most other electricity sources.
Trump is presiding over an arranged marriage between two industries previously at odds. Nuclear power is America’s biggest carbon-free electricity source, and coal is the dirtiest of any electric fuel. They’re now finding themselves awkwardly aligned, with Republicans running government and both industries struggling to remain economically viable as cheap natural gas, solar and wind grab bigger pieces of the electric pie. They’re not collaborating on their lobbying pushes. Each side was either unaware or nominally aware that the other is pushing a tax credit. Here are the gritty details about each tax credit, according to numerous industry officials either backing each proposal or aware of them.
On coal: It’s being pushed by American Electric Power, coal producers Peabody Energy and Arch Coal and the American Coalition for Clean Coal Electricity, a coalition of coal producers and coal-dependent utilities. It would cost between $6 billion and $6.5 billion a year and last 10 years. That’s a little less than the annual combined average cost of wind and solar tax credits extended in 2015, Bailey said.
All coal plants that comply with major Clean Air Act regulations would qualify, which is most if not all coal plants operating today that aren’t already scheduled to shut down.
Bailey said this tax credit is necessary because whatever FERC may do would apply to about 40,000 megawatts of coal. The U.S. coal fleet is six times that. “This tax idea is designed to help the entire coal fleet, and not conflict with what FERC is doing,” Bailey said.
It would allow coal plant operators to recoup half of their fixed operation and maintenance expenses up to a limit of $26 per kilowatt of installed capacity.A spokeswoman for AEP said the credit “would be an interim solution” as the FERC process unfolds. Requests for comment to Arch Coal were not returned. Peabody deferred to the trade group.
On nuclear: Brown, the Exelon lobbyist, says other companies are likely to come out in support of its proposal soon. Early internal estimates of the cost are between $1 billion and $1.2 billion a year. It would be a 30% investment tax credit for capital expenditures at existing nuclear units that would run for four years. Exelon floated a similar version of this tax credit last year, but the issue wasn’t as ripe then as it is today, Brown said, thanks in part to Trump’s elevation of the issue.
Brown said this proposal is necessary because whatever FERC may end up doing would take at least three years. “We see this investment tax credit as a bridge,” Brown said. Exelon may reverse its decision to prematurely close its nuclear plant Three Mile Island in Pennsylvania if Congress backs this measure, according to Brown. Even skeptical officials in the same industry say these proposals face a fighting chance in the longer term given the unpredictable nature of Washington these days. “This year it’s going to be hard to add tax benefits outside tax reform just because there is a cost to anything you do,” said an industry official not involved but aware of both efforts. “But I think anything is in play down the road.”