The Trump Administration's Power-Plant Bailout Won't Boost National Security
Protecting national security is the most important job that a President of the United States is charged with. But the phrase “national security” has tremendous power and should only be used to justify government action when it is absolutely essential.
President Trump is reportedly preparing to direct federal intervention into electricity markets, citing national security as a rationale to subsidize an economically uncompetitive industry: coal-fired power plants. Balancing national security with market freedom is not always simple. There are absolutely times when national security imperatives should drive action in the economic sphere – the need to limit the ability of Chinese electronics giant ZTE to gain a foothold in critical U.S. economic sectors comes to mind. This is not one of those times. Intervening in the power markets to rescue economically failing plants will not make our country safer and cannot be justified on national security grounds.
The president has suggested that subsidizing otherwise failing coal plants is necessary to protect against potential disruption of electricity generation. The administration cites the fact that coal plants tend to keep large supplies of fuel on hand as evidence that they are more reliable. But fuel shortages are an exceptionally rare cause of power outages. One recent study of federal data concluded that fewer than one in a million hours of power failure were due to lack of fuel. Instead, the Department of Energy says that more than 90 percent of power failures are due to problems with transmission and distribution of power from generating plants to customers.
Similarly, the administration argues that the amount of fuel power plants have on site is a hedge against cyberattacks on the energy sector. It’s true that cyberattacks against the power grid are a real and pressing problem. Just look at recent FBI and Department of Homeland Security warnings about Russia’s cyber targeting. But propping up uncompetitive power plants would do nothing to address this threat. It wouldn’t improve cyber security at the subsidized plants themselves and would do nothing to protect us from real cyberattacks against the electric grid like those Ukraine experienced in 2015 and 2016 – also widely thought to have originated in Russia.
The economic case for federal intervention is also off target. The fact is, these plants are losing to the competition. Markets are picking other, cheaper means of generating electricity. The competition is largely coming from natural gas and renewable energy sources like wind and solar. Energy markets are transforming and our electricity system will look drastically different twenty years from now than it did just a couple of decades ago. This is a trend we should embrace – for our economy and our national security.
Just look at the competition. China is investing more in advanced energy than the United States, and the reality is that, right now, we’re in second place. That’s not where we need to be. U.S. leadership is essential to maintaining our advantages in both the military and economic spheres. The bottom line is that we should be doubling down on our investments in cleantech, not subsidizing old, uncompetitive power plants.
Given the price tag - one study estimated the two-year price tag could exceed $34 billion - it is not surprising that opposition to the president’s plan spans the political spectrum. In fact, taxpayer advocates recently wrote a letter urging him not to use the federal government’s power “to prop up individual companies that are dealing with financial difficulties.” Meanwhile, Robert Powelson, a former member of the Federal Energy Regulatory Commission appointed by President Trump, recently warned Congress that the administration’s plans “could potentially ‘blow up’ the markets and result in significant rate increases without any corresponding reliability, resilience, or cybersecurity benefits.”
I agree with Mr. Powelson and worry about the use of national security as a justification for bailing out companies that, plain and simple, can’t compete in the market. If Americans come to believe that presidents will use national security as a rationale to advance political goals, they will be much less likely to accept the real, and difficult, choices we are sometimes asked to make to protect the country. That is a dangerous prospect and Americans should reject the president’s plan.