The energy crisis emanating from Europe is a wakeup call for policymakers about the importance of energy security and the delicate balancing act required by the energy transition. Europe’s energy policy missteps are now proving an invaluable example of a path best avoided. Overreliance on Russian energy, lack of dispatchable fuel diversity and a rushed pivot to a renewable future that isn’t yet within reach is a dangerous combination that offers clear lessons for those willing to listen.
And some are listening. There is recognition in Washington that Russia’s invasion of Ukraine and the shockwaves cascading across energy markets require an energy policy rethink. There’s bipartisan support for something akin to an energy abundance agenda that pushes forward increased domestic production of traditional fuels, expansion of critically important energy infrastructure and redoubled efforts to deploy renewable capacity. Yet, the pragmatism and awareness of a needed rethink has not made its way to the U.S. Environmental Protection Agency (EPA).
At the CERAWeek energy conference in Houston last week, where the conversation centered on energy security and the need for increased domestic energy production to calm volatile global markets, EPA Administrator Michael Regan came with a very different message: prepare for a torrent of new regulations designed to accelerate the closure of the coal fleet.
Regan pretended to be almost blissfully unaware of the energy crisis in Europe or the escalating grid reliability and affordability crises coming to a head here in the U.S. There was one thing and one thing alone on his mind: carbon emissions-reduction targets.
While EPA hasn’t even offered a new carbon reduction plan – and the bounds of EPA’s regulatory authority is under consideration by the Supreme Court – Regan is aiming to use a range of EPA authorities to advance the administration’s agenda. As he said, if utilities look at the suite of rulemakings coming their way and, “you get an expedited retirement, that’s the best tool for reducing emissions.”
Regan – who is charged with leading the EPA but whose plans have him acting as a de facto Secretary of Energy – is committed to a path that is alarmingly similar to the very one taken by Europe, a path that has left it woefully energy insecure and energy poor. Racing ahead to close well operating coal capacity and dismantle dispatchable fuel diversity is a mistake we know we shouldn’t make. Yet, this is exactly what the EPA is boasting it wants to do.
Making the Same Mistakes
Camouflaged behind the danger of reliance on Russian energy is another warning from Europe: don’t eliminate fossil fuel supply and generating options before you can reliably, securely and affordably replace them. Europe’s waning investment in its own natural gas supply and, notably, its rush to close its coal capacity before building a reliable alternative have left it painfully exposed to exorbitant gas prices. The cost of wholesale natural gas in Europe is 20 times what it was a year ago and power prices 10 times above their pre-crisis levels.
Europe’s energy insecurity – and energy costs – would likely be very different if it had maintained its coal fleet as a bridge in the energy transition. Doing so would have provided a far more diverse dispatchable energy mix, a more secure supply of energy and deprived Russia of the leverage and economic resources it’s using to wage war.
Europeans are now pivoting back to coal and reopening closed coal plants as a near-term solution, with coal consumption in Europe up 50% in just the last few weeks.
America’s Affordability Crisis
While the U.S. is not facing the same kind of energy crisis bringing Europe to its knees, inflation and soaring energy prices here are producing biting pain—pain sharpest in states most reliant on natural gas. The price of natural gas delivered to the nation’s power plants more than doubled in 2021.
As The Wall Street Journal reported this week, surging U.S. natural gas prices have come just as the U.S. has emerged as the world’s largest gas exporter. With demand for U.S. gas higher than ever, there’s no sign of relief on the horizon. For Hector Ruiz, a fiber-optic engineer in upstate New York, he had never paid more than about $500 a month for gas and electricity. A doubling of gas prices meant his bill last month was just shy of $1,000.
The grid operator for New England recently explained that colder weather, higher demand and spiking natural gas prices “converged in January to push wholesale electricity prices to their highest levels since February 2014.” That bitter cocktail is already having a debilitating effect on consumers. According to a consumer advocate, there’s now more than a half billion dollars in utility accounts past due by more than 90 days just in Massachusetts.
New York and Massachusetts are prime examples of the dangers of a poorly managed energy transition. Both states have eliminated their coal capacity, locking consumers into dependence on natural gas while they struggle to build and site renewable energy replacements.
In other parts of the country that still have significant coal capacity, those plants picked up market share last year, serving as a price shock absorber and shielding consumers from the full brunt of rising gas prices. Accelerating the closure of those plants – as EPA administrator Regan wants to do – will only deepen the nation’s energy affordability problems.
As the nation struggles to site, build and integrate renewable capacity and the infrastructure needed to get it to consumers, dismantling the fuel diversity that underpins grid reliability and affordability is a mistake we simply can’t afford to make. As the National Mining Association’s president and CEO told Fox Business this week, “turning off well-functioning coal plants is like selling your house and moving into one that has not been built yet. That’s where we are with European electricity markets, and here in the United States. This needs to be done thoughtfully and carefully over time.” In other words, Administrator Regan, not accelerated independent of today’s realities.
- On March 16, 2022