American Manufacturers Warn Against Coal Retirements
U.S. natural gas prices have tripled in a year, and promises of its abundance are now being replaced by growing concerns of scarcity as demand outpaces interstate pipeline capacity. Supply chokepoints and regional price premiums are emerging across the country and it’s a problem poised to get far worse as more essential coal generating capacity is pushed off the grid.
The Industrial Energy Consumers of America (IECA) – representing manufacturing companies with $1.1 trillion in annual sales and over 12,000 facilities nationwide – warns in a new letter that its members are facing ever-growing natural gas scarcity along the Eastern seaboard due to a lack of interstate natural gas pipelines. These manufacturers are being starved of the gas they need or being forced to pay exorbitant prices to secure it.
The IECA recognizes that new pipeline projects aren’t going to materialize in the near-term to alleviate the problem and is calling for two actions to address the shortage. First, it’s asking for the Biden administration to deploy the Defense Production Act to accelerate pipeline construction and, second, it wants assistance from East Coast governors to intervene at the state level to delay the planned closure of coal capacity in order to free up gas pipeline capacity for manufacturing.
As IECA points out, 59 coal plants are scheduled for closure along the route of the one major interstate gas pipeline that runs up the eastern seaboard. Should those plants close as scheduled, they’re likely to be replaced by further reliance on natural gas for power generation adding 10 billion cubic feet a day in new demand to an already oversubscribed transmission system.
What IECA is spelling out – and what remains criminally overlooked – is the importance of balance and fuel diversity to any energy system. The U.S. coal fleet not only provides more than 20% of the nation’s power, it’s also an essential hedge to overreliance on one dispatchable fuel.
Awakening to a New Reality
The shale honeymoon is over. U.S. gas production is now struggling to respond to growing demand – both domestic and overseas – as the U.S. has emerged as the world’s largest LNG exporter and new gas transmission infrastructure is not being added in parallel.
The once rock-bottom natural gas prices that defined the shale glut are gone. Market fundamentals are begging for fuel diversity to alleviate pressure on gas supply but the coal fleet –for decades an essential hedge to natural gas price volatility – is handcuffed. Instead of responding to price signals to carry more, coal plants continue to be pushed into early retirement by state and federal regulatory pressure. The U.S. Environmental Protection Agency has made it abundantly clear it’s stacking up a suite of regulations to force utilities to accelerate plant closures despite soaring gas prices, surging electricity prices and the ongoing reverberations of the global energy crisis.
Renewable energy additions are only adding more complexity to an alarming situation. Can wind and solar power be counted on to deliver during periods of peak demand? The answer as of today – with the required transmission infrastructure years away and energy storage in its infancy – is a resounding “no.” Further, markets are struggling to deliver resource adequacy as the forces shaping the entry and exit of essential resources exist largely outside of market fundamentals. That’s especially true for the loss of fuel-secure, dispatchable coal power.
America’s new energy reality is a self-imposed grid reliability and affordability crisis of our own making. The race to push the nation’s coal fleet into retirement is a disaster that grid reliability experts, consumer advocates and now manufacturers see as negligently dangerous. We can responsibly and reliably reach our energy future but doing so requires building on the shoulders of the generating capacity and fuel security our energy mix currently possesses, not casting it aside.
- On December 14, 2022