The year is coming to a close but, before the ball drops and we ring in 2024, it’s worth looking back on the energy stories and themes that shaped 2023 and coal’s role in them. Globally, coal demand hit an all-time high while at home – despite ever-louder warnings about imploding grid reliability – the U.S. Environmental Protection Agency (EPA) has charged ahead with a regulatory blitz to accelerate coal plant closures. A growing gap is opening between the promised energy system of tomorrow and the on-the-ground reality of actually siting and building it. With electricity demand now surging, the U.S. is showing every sign of bungling the energy transition. Here are several posts that captured the year and provide a sense of where things are heading. Thanks for reading!
THE U.S. GRID IS RUNNING ON EMPTY
Last Christmas, millions of Americans faced the threat of rolling blackouts and in several states the threat became a startling and very unwelcome reality. The initial after action reports left the gas fleet – and gas system – with a serious black eye. Not only did gas plants fail to operate at startling numbers when called upon, but they faced alarming fuel shortages. PJM, which serves more than 65 million people from New Jersey to Illinois, saw 23% of its generating fleet shutdown on Dec. 24. Natural gas plants accounted for 70% — or 32 gigawatts – of the nearly 46 gigawatts of outages. The gas system’s vulnerability to winter weather has now become a top-tier concern of the regulators at the North American Electric Reliability Corp. In their recent long-term reliability assessment they wrote, “Reducing risks to electricity supplies in extreme hot and cold temperatures requires generating resources that are up to the task. However, natural-gas-fired generators, natural gas fuel supplies, and wind resources (which are becoming increasingly common) have proven vulnerable and unable to meet demand during winter storms over the past decade.”
FERC TESTIFIES TO THE IMPORTANCE OF THE COAL FLEET
In May, all four Federal Energy Regulatory Commissioners testified in front of the Senate Energy and Natural Resources Committee on the challenges to grid reliability. Their concern and warnings couldn’t have been clearer. Commissioner Mark Christie said, “the United States is heading for a reliability crisis. I do not use the term ‘crisis’ for melodrama, but because it is an accurate description of what we are facing.” Even Chairman Willie Phillips, appointed by President Biden, said, “I am extremely concerned about the pace of retirements we are seeing of generators which are needed for reliability on our system. NERC and the grid operators have warned us about this.” Senator Joe Manchin asked each commissioner “do you believe it’s possible to eliminate coal today or in the near future, and still be able to maintain a somewhat reliable system?” Chairman Phillips answered, “It would not.” Commissioner Danly answered, “No. Coal is required… and it would be impossible… to replace it.” Commissioner Clements answered, “Right now, today, no.” Commissioner Christie answered, “Coal is more reliable than gas. We need to keep coal generation available for the foreseeable future.”
A PLAN TO BREAK THE GRID
EPA rolled out its sweeping climate rule – the so-called Clean Power Plan 2.0 – in mid-May and in its crosshairs is the generating capacity that meets 60% of the nation’s power. Should the EPA get its way, today’s coal and gas fleets will be largely disassembled nearly overnight, posing a remarkable threat to a grid already in crisis. While the EPA has tried to cast the plan as full of flexibility and long lead times for utilities, it will force plant owners to make decisions almost immediately about the future of their plants and the adoption of technologies that – despite EPA’s claims otherwise – are nowhere near ready for commercial, cost-effective deployment. National Mining Association president and CEO, Rich Nolan, observed, “Each one of the rules coming from the Biden administration’s EPA is designed to make it impossible for states and utilities to make decisions based on the merits of what keeps the lights on and electricity inflation low, forcing them to make decisions solely based on the EPA’s desire to end coal powered generation in the United States.”
CHINA DOUBLES DOWN ON RENEWABLES AND COAL
What can the U.S. learn from China in managing the energy transition? More than you might think. China is charting its own course that is a clear rejection of the West’s emissions reduction first, grid reliability last approach. China has watched Europe’s energy crisis, along with our unfolding grid reliability crisis, and seen enough of the challenges of managing intermittent power to know that underinvesting in a bridge to the future is a recipe for disaster. Beijing is instead fully leaning into an abundance agenda, seeing no conflict with both leading the world in the deployment of renewable energy and rapidly expanding – not just maintaining – the world’s largest coal fleet. China is on track to double its wind and solar power capacity by the end of 2025, potentially adding 371 gigawatts of wind and 379 GW of large-scale solar power capacity over the next two years. China is also adding 370 GW of new coal capacity. President Xi Jinping laid out how China’s energy transition would differ from the West by following “the principle of building the new before discarding the old.”
STUMBLING OUT OF THE BLOCKS
With the perilous state of the nation’s electricity supply increasingly in the spotlight, the Biden administration has attempted to justify its regulatory blitz on the coal and gas fleets by pointing to what it hopes will be a lightning-fast renewable energy buildout. According to the administration’s narrative, the Inflation Reduction Act (IRA) and its largess to the renewable sector are a cure-all for the grid’s woes, filling power supply gaps and slashing the cost of regulatory compliance. But that narrative is quickly falling apart. Rather than surging ahead, the great buildout can’t seem to get out of first gear. Permitting challenges abound. And where policy support was supposed to be some kind of silver bullet, supply chain challenges, inflationary pressure and sky-high interest rates are proving a far taller hill to climb than anyone in the administration wants to admit.
THE POWER DEMAND SURGE
There is a quiet revolution upending the trajectory of our energy future. For all the extraordinary challenges inherent with trying to stand up a renewable-dominant energy mix nearly overnight, perhaps none is beginning to loom as large as the breakneck speed electricity demand is growing all over the country. Speculation about the impact that electrification, reindustrialization and big data might have on power demand is settling into an incredible reality. In wildly different states with wildly different industries and economic engines, power demand is exploding, and the U.S. electricity grid and our power supply are woefully unprepared. The case for building on the shoulders of the existing coal fleet – not trying to dismantle it for unproven and unbuilt solutions – is growing ever-stronger.
On December 27, 2023