We have written about this several times in the last few weeks and applaud the United States Department of Energy for recognizing the problem and working diligently to address it. DOE’s Grid Reliability Report Sounds the Alarm: Opportunities for Investors in a Strained Energy Landscape.
Below is a post from Doug Sheridan on LinkedIn. We highly recommend following Doug.
Are you from California or New York and need a tax break?
The WSJ Editorial Board writes, the reliability of the US electrical grid is in trouble. A new Energy Dept report projects potential power shortfalls in 2030, as 104 GW of baseload power retires in the next five years. Shortfalls will exist even if that production is replaced, as expected, with 209 GW of the mostly solar and wind generation under development.
Americans would lose power in 2030 for an average of 34 days, assuming typical weather conditions. If heat waves or storms stress the grid, outages could reach 55 days. Even without plant shutdowns, Americans would lose power for 11 days amid demand growth. The shortages would be worse where demand is growing fastest, owing to AI data centers and renewables displacing coal and gas.
How can this be? The answer is the IRA turbo-charged subsidies for wind and solar in ways that distorted energy investment. Because the subsidies can offset more than 50% of a project’s cost, solar and wind became more profitable to build than new gas plants. The credits enable wind and solar to artificially underprice coal and gas plants.
Any wonder solar, wind and batteries—which also qualify for IRA subsidies—are projected to make up 93% of new utility-scale electricity capacity this year? Coal, nuclear and gas plants are still needed to back up solar and wind, but they can’t make a profit running only some of the time. Thus, many have been closing, jeopardizing grid reliability.
The renewable lobby claims new gas plants can’t be built in time to meet rising power demand. Ergo, the argument goes, taxpayers must subsidize wind and solar to meet electric demand. But why do wind and solar need subsidies? There will be a market incentive to build wind and solar anyway.
It’s true there’s a shortage of new gas turbines owing to surging global demand. But turbine manufacturers are expanding production, and the phaseout of the IRA tax credits will provide them with more certainty to make investments in new capacity.
Turbine makers expanded production in the early 2000s as demand for new gas plants rose, but they were left with excess capacity when demand weakened—in part because federal and state favoritism encouraged utilities to procure power from solar and wind in lieu of gas.
Meanwhile, the claim that the renewables reduce electric rates is contradicted by experience. Wind and solar must be backed by peaker gas plants or batteries, which cost more than three times as much as baseload power. Renewables also cause price spikes during shortages, and they require more transmission investments to balance fluctuations in loads and frequencies. All of this is why Texas’s residential power prices have risen some 40% over the last seven years.
The best way to make the grid reliable again is to let supply and demand work in energy markets without the distortions of mandates and subsidies. The GOP budget bill takes a step in that direction that should be welcomed.
So, of the 200 GW planned for grid expansion, only about 22GW is nuclear and natural gas. We know that nuclear is years out from impacting the amount we need to stabilize the grid, so that leaves natural gas and coal to stabilize the grid. We will see in the coming months more proof that the Net Zero energy policies are an economic disaster, and you will see as we have mentioned in the past a biforcation in markets. Those being successful in growing economies are ditching Net Zero policies, while those going bankrupt and deindustrializing are doing so through Net Zero policies.
