Recently, President Trump launched his latest scheme to keep imperiled coal and nuclear plants kicking. According to a memo obtained by Bloomberg News, the Department of Energy (DOE) plans to use Cold War-era authorization to require grid operators to buy energy generation from “at-risk” coal and nuclear facilities. News reports have breathtakingly referred to this plan as “nationalization.” In reality, it is just another bailout of a failing private industry.
Just a few months ago, energy regulators denied the Trump administration’s efforts to modify energy markets to benefit coal and nuclear power in the name of grid reliability. The administration is now seeking to use broad powers given to the president in the 68-year-old Defense Production Act to override those decisions. The Act allows the president to either nationalize vital companies or require purchasers to contract with them in order to avert a national security catastrophe.
Trump’s plan uses his authority under this Act to require grid operators to buy enough energy from the plants to stop any “further actions toward retirements, decommissioning, or deactivation” for two years while the DOE conducts additional grid resilience studies.
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The circulated DOE memo argues that coal and nuclear power plants secure grid resilience because they store fuel on site, unlike renewables or gas (a claim disputed by grid regulators), and “too many of these fuel-secure plants have retired prematurely and many more have recently announced retirement.” Therefore, the administration insists, the federal government must manage the decommissioning and “stop the further premature retirements of fuel-secure generation capacity.”
This is crony capitalism at its worst. The proposal was actually put forth by FirstEnergy, a for-profit electric utility in Ohio, in a thinly veiled attempt to get the government to subsidize its failing business model. Unable to compete with increasingly cheaper, cleaner sources of energy such as renewables, energy corporations like FirstEnergy are using their political power to extract a public bailout.
As was the case with the big Wall Street banks 10 years ago, this plan once again exposes the dangerous myth of the supposed superiority of free markets and for-profit, corporate forms of ownership. In reality, corporations have long known that in US capitalism, they can extract as much profit as possible when times are good and rely on the government to protect them against losses when the going gets rough.
A Real Nationalization Plan
In some regards, the Trump administration is right. The United States is facing an energy catastrophe that is likely going to require decisive and dramatic government intervention (and soon).
However, the real catastrophe is climate disruption from anthropogenic carbon emissions, almost entirely due to the very industry Trump is trying to protect. Last year was not only the second-hottest year on record, but the most costly — with damages from natural disasters mounting to $309.5 billion. Fossil fuel companies show no signs of stopping extraction, adding new reserves to their portfolio year-in and year-out, exactly at the moment when our window for action is rapidly closing.
Mark Carney, governor of the Bank of England, estimates that stranded assets put as much as one-third of global wealth, including pension funds, at risk. Rather than saving old and failing fossil-fuel infrastructure, as the Trump administration is proposing, we actually need to hasten their decommissioning process.These companies’ coordinated inaction on climate disruption has also created a financial threat. Their amassing of stranded assets (assets that cannot be burned without locking in disastrous warming) was estimated by Citi Group to potentially amount to as much as $100 trillion, a sum significantly greater than the global losses from the 2007-2008 financial crisis.
A real nationalization plan could be used as a tool to expressly manage a rapid and crucial decline of fossil fuels. To date, policies designed to mitigate climate change have been incremental and piecemeal — afraid to displease fossil fuel companies that bankroll both sides of the political aisle. Instead of subsidizing an extractive and climate-threatening industry, a plan should be developed that puts all fossil fuel infrastructure — from extraction to power plant and anything in between — into public hands. This would remove one of the greatest roadblocks for climate action in United States today.
Shifting away from the state-owned enterprises of the past, a nationalized fossil-fuel industry should harken a new era of public ownership. Participatory planning, transparency and accountable leadership would allow the public to play an active role in transitioning the energy system. Through public ownership, the government would work alongside communities and workers directly affected by fossil fuel extraction to define a plan for a rapid winding down of its dirty assets in a just and equitable way.
This is not as far-fetched as it seems. In the UK, the British Labour Party’s recent manifesto, “For the Many, Not the Few,” pledged to nationalize the grid to fulfill its energy policy principles of energy security, affordability and climate change targets. As Party leader Jeremy Corbyn recently put it,
Transforming the grid will require investment and planning on a scale that is simply not happening under the current system…. We need public ownership and democratic control to make that happen and use the skills and knowledge of the workforce and communities across the country…. In public hands, under democratic control, workforces and their unions will be the managers of this change, not its casualties.
In fact, nationalization could be taken a step beyond the Labour Party’s manifesto, to enable public control across the full supply chain for all fossil fuels. In other words, the US should not only nationalize FirstEnergy’s power plants, but also ExxonMobil’s offshore drilling sites, Murray Energy’s coal mines and Energy Transfer Partners’ pipelines.
A Just Transition
Under public democratic control, the US fossil-fuel industry could strategically divert investments from its dirty assets — consequently managing the decline of fossil-fuel supply — into green assets, expanding the creation of new large-scale projects, such as offshore wind.
Not only could this help the United States accelerate renewable energy, it could create pathways for good-paying jobs. Particularly, it could help to ensure that 80,000 coal mine workers and many others involved in the fossil-fuel industry (who Trump claims to be eager to help) get the fair and equitable chance for employment they deserve in an industry that does not destroy their health.
Keeping unburnable carbon in the ground while at the same time scaling up renewable sources of energy so as to not disrupt supply and ensuring jobs and investment for fossil-fuel-reliant communities is going to require a serious and well-managed transition plan. Public ownership of fossil-fuel companies can help make that process easier to navigate and more accountable to the public.The Tennessee Valley Authority (TVA) was created through the New Deal to invest in the impoverished Tennessee Valley region and provides an example for larger-scale energy generation that could be invigorated with a 21st century public ownership. While far from perfect (including on ecological grounds), the TVA employed thousands of people, and could be a model for a just transition that includes renewable energy and democratic participation. The publicly run company still operates today, providing energy to municipally owned utilities and millions of residents in the region.
It is time to move beyond crony capitalism’s attempts to extend the lifetime of a dying industry and toward a real democratic nationalization plan that will make way for a system based on renewable energy.