Last year, virtually all new electricity generation in the United States came from natural gas and renewables like solar and wind.
At first glance it appears these energy sources are winning the marketplace, but that’s hardly the whole story.
Yes, the shale revolution has led to an abundance of low-cost natural gas, and the prices of solar and wind energy have continued to fall. But electricity markets are being manipulated by out-of-market subsidies and mandates. Tax credits and renewable portfolio standards are making a mockery of true competition.
The result is a loss of a startling number of coal plants — nearly 40 percent of the U.S. coal fleet since 2010. And much of the nuclear power fleet is in financial trouble as well.
The loss of these baseload coal and nuclear power plants shouldn’t be dismissed. It is startling to realize that keeping an existing coal plant in operation is almost always actually cheaper than building either a new combined-cycle natural gas plant or solar panels and wind turbines.
A case study last year of three coal plants at risk of prematurely closing in the Mid-Atlantic’s PJM grid found that keeping them operating would be 15 times less expensive than replacing them with new sources of generation.
The electricity markets serving large portions of the U.S. are not functioning as they should. Missing is any consideration of the value in maintaining a diverse mix of fuels, including coal, or the value that baseload electricity from coal provides in ensuring reliability and giving voltage support to the electric grid.
These are the unrecognized values of coal. They are not given any monetized value in regional auctions of wholesale electricity. But they exist nonetheless.
The upshot of this is that the U.S. is losing its dispatchable energy diversity, the mix of power sources that can ramp up power at the flip of a switch. Coal, nuclear and natural gas plants can do this. Wind and solar generation, dependent on the cooperation of the weather, cannot.
At the same time, overdependence on natural gas and its extensive and sometimes constrained pipeline network could quickly become problematic.
As additional coal and nuclear plants close, there will be less of an energy balance on the grid. A loss of fuel diversity portends trouble for consumers. Should we have a spell of bad weather that reduces the usefulness of wind and solar energy, there will be a need for additional natural gas to make up for a shortage of renewables.
As demand for gas generation grows, electricity prices could soar — and, if current trends persist, coal and nuclear power won’t be able to be of much help.
To deal with this situation, Congress should consider creating a strategic electricity reserve. Power supplies from the reserve would be weighted toward baseload coal and nuclear power — and made available when energy markets cannot meet the demand for electricity and prices spiral upward.
The current balance of fuels on the grid should not be taken for granted. While the clock is ticking, there’s still time to preserve fuel diversity, along with the highly reliable and affordable power it provides. But without action, however, the loss of baseload power will make maintaining a dependable electricity system that much harder.
What’s important to recognize is this: the amount of coal-fueled generating capacity likely to shut down in the next few years will depend on whether federal and state governments and regional electric grids address — and correct — distortions in the electricity system. Absent meaningful changes, such as establishing an electricity reserve, the tilt toward natural gas and subsidized solar and wind energy will have profound effects far beyond the loss of coal mining jobs. It could usher in an era of very expensive energy.
See the article here.
- On April 23, 2019