Energy

Summer Will Be Brutal On Wallets — And Hurtful To Decarbonization


It’s not yet Memorial Day, and temperatures across the Mid-Atlantic region are unrelenting. Expect those digits to rise even more over the summer months — not just there but throughout the United States. So says the North American Electric Reliability Council, which just released its 2022 Summer Reliability Assessment.

The council, known as NERC, oversees the electricity infrastructure. And while every summer has sweaty days, this one will require multiple showers a day. That means more electricity and water usage — commodities that may be in short supply.

Therein is the dilemma: the latest Intergovernmental Panel on Climate Change is equally dire, saying that human-induced climate change leads to heatwaves, wildfires, and droughts. Indeed, the world will endure several climate hazards if it doesn’t limit its use of fossil fuels and prevent temperatures from increasing more than 1.5° Celsius or 2.7° Fahrenheit.

Juxtapose this scenario next to the high prices that consumers worldwide are paying to heat their homes and fill up their cars. In the United States, natural gas has risen from $2 per million BTUs to nearly $9 for the same unit. Now that the gas is used to cool homes, demand — and prices — will remain high. At the same time, it is a Herculean task to build a pipeline. And in Europe, those prices hit $37 per million BTUs — caused by a confluence of events, including supply chain issues, poor energy planning, and wind energy deficits.

Can climate change and energy insecurity be reconciled? The solution is an artful path forward and not a case of throwing caution to the wind.

“The supply chain issue and inflation are for real,” says Arshard Mansoor, chief executive of the Electric Power Research Institute, during a conference hosted by the United States Energy Association, in which this journalist was a panelist. “While these may be temporary issues, the United States plans to reduce its carbon emissions by 50% economy-wide by 2030.”

But resolving the climate crisis is a perpetual problem. Consider that 100-year floods are occurring more frequently. Witness the one in Germany last year. Or the wildfires in Australia. Or those in the western United States. At the same time, if the energy transition is not done right, it could do irreversible harm. And that means keeping natural gas plants online — even if they are only operating during peak periods.

“Most likely, we have to come up with a construct to keep the gas and coal plants operating, even if they are producing very little energy,” says Mansoor. “If the public thinks we are going too fast, and if it’s not done right, this will make us go too slow.” He points to the United Kingdom, where households had paid $150 a month for electricity and gas, which could spike to $350. “Make sure we are keeping an eye on affordability. We haven’t made that equation work yet.”

Keeping it Real in the U.S.

The electricity regulator, NERC, says that the midwest and west will get hit especially hard this summer. They may have to go through brownouts. The Midcontinent Independent System Operator could face the harshest conditions: the demand in that 15-state region that serves 42 million people jumped 1.7% compared to last year. That is compounded further by supply chain chokepoints, leading to product shortages and shipping delays.

The Midcontinent system operator, which is the grid’s traffic cop, is at risk because it may not have enough reserves to meet those challenges. It is the entity that calls up power sources and directs them to where they need to be, and it might be 5,000 megawatts short. It’s like being devoid of savings if your car needs a new engine while your house needs a new AC unit.

Undoubtedly, battery storage will help — the devices that can harness wind and solar electrons and distribute them when the weather is not agreeable. But thus far, the high cost has kept them from providing the insurance that resource managers need. Consumers will have to turn up their thermostats and sweat it out.

“We are decarbonizing quite quickly and I’m worried about doing that right as we wait for these new technologies to become commercially viable — things like batteries,” says John Bear, chief executive of the Midcontinent Independent System Operator, at the conference. He says that while utilities are adding solar and wind power, they are retiring “thermal units” that could step up if the sun doesn’t shine. He adds that natural gas plants can’t get pipelines built in certain parts of the country.

“We are just below our reserve margin which is not where we’d like to be,” Bear says. “When it’s not windy, we need to move other controllable resources to where they need to go. It’s just a matter of facilitating the right playing field.”

Most U.S. investor-owned utilities have net-zero goals — made possible by the falling cost of wind and solar energies. But the move to electrify the economy works to their advantage. And some of the early adaptors are CenterPoint Energy

CNP
, Duke Energy

DUK
, Edison International

EIX
, Exelon

EXC
Corp, PPL

PPL
Corp., Sempra Energy, and Xcel Energy

XEL
.

Will there be Relief?

President Biden’s aim is to produce 80% clean energy by 2030 and 100% by 2035, generating $23 trillion in the process. Utilities are at the heart of the both the problem and the solution: they contribute about 39% of all CO2 emissions in the United States.

To be clear, getting to net-zero does not mean the abolition of fossil fuels; instead, it means offsetting their emissions. Electrification is critical: today, 20% of all energy used in homes and industry is electric, says EPRI’s Mansoor. But that number could potentially be as high as 60% in 2050. The grid must be modernized or expanded to manage the increased demand: four times more renewables and an electric transport sector, which is now responsible for 30% of all CO2 releases.

Electrifying everything may be good for power companies. But it also requires them to invest more in the wires needed to transport electrons. Andres Carvallo, chief executive of CMG Consulting, spoke at the conference and points to the move to electric vehicles: 280 million vehicles are registered in the United States. If they all magically ran on electricity, it would require 28,000 megawatts.

Thankfully, there is time to modernize the infrastructure. Only a small percentage of electric vehicles are entering the market. But more and more carmakers are promising to phase out the internal combustion engine and produce primarily electric vehicles. Those cars could comprise as many as 5-in-10 sales by 2035. The money consumers spend filling up their gas tanks will get reduced as a result — at least $1,000 a month.

Global citizens are feeling the heat in terms of higher energy prices. And while the economic transition may be painful, it has the potential not just to avoid a climate breakdown but also to return money to people’s wallets. The change, however, has to be well-considered — not one that hopes for the best.

“This needs to be done in a very well integrated, calculated, and methodical way,” says Carvallo. “Otherwise, we start having serious brownouts like we are having in Texas.”

Summer cooling bills will jump because of higher temperatures and greater demand. And it’s not helped by reserve shortages, droughts, and wildfires. Energy bills and climate change are pitted against each other, and policymakers are walking a fine line. But their discussions must center on the speed of the energy conversion and not on whether to avoid the tough drive ahead.



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