Who wins, the millionaires who invested in RE because it saves tax, Warren Buffett are you reading this. Who loses, the suckers who see the cost of subsidies in their bills every month. Prince of Thieves all right, stealing from the poor to give to the rich.
We can only hope that the Trump administration continues to drive a stake through the heart of every net-zero mandate. either that, or the blue states with those mandates will find their populations shrinking even faster than they currently are as people flee for somewhere with a working and stable grid
Anything labeled 'net zero' drives us in the absolute opposite direction. Therefore, the only correct statement about 'net zero' is that it makes net zero sense. But I hope noone will have to freeze before that is widely accepted.
Thank you EBBs. Surely one has to hand it to those involved, that persistent and successful lobbying for a flawed and potentially ruinous approach to power generation, that in the process creates a taxpayer-funded feeding trough, is one hell of an act.
Isaac and Mitch, thank you for highlighting key messages in this report. A few perspectives to share:
Significant uncertainty - As you pointed out in your comments, there are a lot of different factors that influence grid risk over the next 5 to 10-years; the ill-advised electrification programs may not meet their objectives; electric vehicles sales will almost certainly be lower than anticipated, especially since all major U.S. car manufacturers have written off their ~$50B investment; data center and AI load may be lower given the absence of a clear line of sight to profitability and potential for significant improvements in energy efficiency.
There is additional uncertainty to layer-on from the generation side. Given the ill-advised vision to move to 100% clean generation, there is significant peaking capacity from 40+ year old gas turbines with significant reliability risks. In addition, as the initial solar and wind resources move past mid-life, it remains to be seen how they perform from a reliability and cost effectiveness perspective. The performance and financial forecasts for a few projects I’ve reviewed were very optimistic.
Value of investments that provide low cost and risk optionality – Given the significant load uncertainty, we believe that low risk and low-cost projects are attractive to our leadership given the optionality they provide. In our mind, any project that involves extending and or re-utilizing an existing resource is significantly less risky than a greenfield project, especially for gas turbines given the current lead-times (not that OEMs intend to meet delivery schedules – liquidated damages are a drop in the bucket to OEMs with current pricing leverage). In addition, these projects can often be executed with much lower capital costs. This lower initial capital cost not only enhances competitiveness with alternate resources but also provides leadership the flexibility to pivot away from the project in the future if the anticipated load does not materialize.
Projects that provide optionality:
a) Extension of an existing coal plant – provides a very low risk, dispatchable resource at a moderate incremental capital cost (elevated due to the need to make-up for reduced, “harvest mode” capital investment). An added benefit is the essentially fixed fuel cost with the extended coal contract
b) Conversion of a coal plant to natural gas – very low initial overnight capital cost compared to gas turbines, especially if the cost of gas lateral is omitted. Provides a much-needed peaking resource with demonstrated reliability with less than a 3-year lead-time.
I attended a Public Service Commission hearing this past week where the subject was PacifiCorp joining the CAISO Extended Day Ahead Market. Rocky Mountain Power (subsidiary of PacifiCorp, which is a subsidiary of Berkshire-Hathaway Energy, which is a subsidiary of Berkshire-Hathaway) wants to join this EDAM for reasons not entirely clear to me. The benefits appear small, although they can be stated in a manner to make them appear very large.
However, as one might guess, there is a lot of curtailed midday solar energy in the CAISO, and the EDAM presents opportunities to make use of this curtailed energy. Obviously, the immediate result of this will be to further reduce the capacity factor of the broader energy system within the EDAM footprint. Coal plants seem to me to be particularly at risk in this.
It is difficult to demonstrate which factors contribute to high retail prices of electrical service because there are so many and often unique to particular jurisdictions. However, if one takes only the nine states that EIA categorizes as "coal powered" and look at the state energy system's capacity factor versus retail price, a simply linear regression explains 50% of the variance, and suggests that for each 10% reduction in capacity factor retail prices will rise by 2.07 cents per kWhr. FERC may be ringing the alarms, but their policies are enabling the problem.
As one might guess the renewable industry trade groups had representation among the intervenors in this case. I found it ironic that a statement from one witness for a renewables trade group, whose members collect Federal Tax subsidies I should add, had this to say about their endorsement of the EDAM...
"The rules governing the design of a day-ahead market, which FERC approves, directly contribute to the competitive environment by facilitating a level playing field for generation resources."
The essential first steps in increasing natural gas generation are increasing natural gas production and transmission capacity. Lawsuits and state government actions have been very successful in blocking gas transmission system expansion.
The LTRA included a map that identified the drivers of load growth across regions of the United States. You’ll notice that data centers are major factors in most regions of America. Data centers increase the peak electricity demand on the power grid by 224 gigawatts (GW), or 29 percent, in the summer and 245 GW, or 35 percent, in the winter over the next decade. Pursuantly, Would excluding them from the grid be the solution?
A data center proposed to be built by Tallgrass in Southeastern Wyoming will build its own energy infrastructure "behind the meter" allegedly. It will start with 1.8 GW of capacity and expand to a proposed maximum of 10 GW. In comparison the entire energy load in Wyoming is not much greater than 1 GW.
Even though this is allegedly separate from the grid, the two will be coupled in some manner through the natural gas pipeline system. We are making some of the same mistakes that led to the energy crisis of the late 1960s and 1970s which was over reliance on petroleum liquids, this time by becoming overly reliant on natural gas.
It apperars to be a potential solution that all of the parties are considering. Others include curtailable or interruptible service to data centers, supported by standby generators.
I keep seeing MISO as being the worst off in terms of retirements but I never see the split of MISO north and south. As a resident of Louisiana where natural gas and heavy industry are king, I don’t see us being near the shit sandwich that is MISO north. Can you provide any insight here?
Who wins, the millionaires who invested in RE because it saves tax, Warren Buffett are you reading this. Who loses, the suckers who see the cost of subsidies in their bills every month. Prince of Thieves all right, stealing from the poor to give to the rich.
Wires aren’t as sexy as windmills…
I beg to differ 😉
We can only hope that the Trump administration continues to drive a stake through the heart of every net-zero mandate. either that, or the blue states with those mandates will find their populations shrinking even faster than they currently are as people flee for somewhere with a working and stable grid
Can only agree. What we need is on-shore, reliable, energy dense power generation:
https://www.wildhorsewisdom.xyz/p/horses-like-running?r=31a4ti&utm_campaign=post&utm_medium=web
Anything labeled 'net zero' drives us in the absolute opposite direction. Therefore, the only correct statement about 'net zero' is that it makes net zero sense. But I hope noone will have to freeze before that is widely accepted.
Solar is neither cheap nor reliable and the "EREV" solution will lead to people freezing to death.
So nope, we need to impose en environmental and grid reliability taxes on solar and wind, so they become the niche solutions they deserve to be.
Great stuff, as always, from the always-reliable and entertaining EBBs.
I live in one of those highest-risk (red) areas, in a motorhome. It has a generator capable of powering the entire house. I keep the gas tank full.
I'm ready for the SHTF. And it the blackouts get too prolonged, I can just move.
Obviously, the solution is just to turn wind and solar up to 11.
Ha ha! And then use new math to extract the information you want, not the actual data. 🚫
Thank you EBBs. Surely one has to hand it to those involved, that persistent and successful lobbying for a flawed and potentially ruinous approach to power generation, that in the process creates a taxpayer-funded feeding trough, is one hell of an act.
Isaac and Mitch, thank you for highlighting key messages in this report. A few perspectives to share:
Significant uncertainty - As you pointed out in your comments, there are a lot of different factors that influence grid risk over the next 5 to 10-years; the ill-advised electrification programs may not meet their objectives; electric vehicles sales will almost certainly be lower than anticipated, especially since all major U.S. car manufacturers have written off their ~$50B investment; data center and AI load may be lower given the absence of a clear line of sight to profitability and potential for significant improvements in energy efficiency.
There is additional uncertainty to layer-on from the generation side. Given the ill-advised vision to move to 100% clean generation, there is significant peaking capacity from 40+ year old gas turbines with significant reliability risks. In addition, as the initial solar and wind resources move past mid-life, it remains to be seen how they perform from a reliability and cost effectiveness perspective. The performance and financial forecasts for a few projects I’ve reviewed were very optimistic.
Value of investments that provide low cost and risk optionality – Given the significant load uncertainty, we believe that low risk and low-cost projects are attractive to our leadership given the optionality they provide. In our mind, any project that involves extending and or re-utilizing an existing resource is significantly less risky than a greenfield project, especially for gas turbines given the current lead-times (not that OEMs intend to meet delivery schedules – liquidated damages are a drop in the bucket to OEMs with current pricing leverage). In addition, these projects can often be executed with much lower capital costs. This lower initial capital cost not only enhances competitiveness with alternate resources but also provides leadership the flexibility to pivot away from the project in the future if the anticipated load does not materialize.
Projects that provide optionality:
a) Extension of an existing coal plant – provides a very low risk, dispatchable resource at a moderate incremental capital cost (elevated due to the need to make-up for reduced, “harvest mode” capital investment). An added benefit is the essentially fixed fuel cost with the extended coal contract
b) Conversion of a coal plant to natural gas – very low initial overnight capital cost compared to gas turbines, especially if the cost of gas lateral is omitted. Provides a much-needed peaking resource with demonstrated reliability with less than a 3-year lead-time.
I attended a Public Service Commission hearing this past week where the subject was PacifiCorp joining the CAISO Extended Day Ahead Market. Rocky Mountain Power (subsidiary of PacifiCorp, which is a subsidiary of Berkshire-Hathaway Energy, which is a subsidiary of Berkshire-Hathaway) wants to join this EDAM for reasons not entirely clear to me. The benefits appear small, although they can be stated in a manner to make them appear very large.
However, as one might guess, there is a lot of curtailed midday solar energy in the CAISO, and the EDAM presents opportunities to make use of this curtailed energy. Obviously, the immediate result of this will be to further reduce the capacity factor of the broader energy system within the EDAM footprint. Coal plants seem to me to be particularly at risk in this.
It is difficult to demonstrate which factors contribute to high retail prices of electrical service because there are so many and often unique to particular jurisdictions. However, if one takes only the nine states that EIA categorizes as "coal powered" and look at the state energy system's capacity factor versus retail price, a simply linear regression explains 50% of the variance, and suggests that for each 10% reduction in capacity factor retail prices will rise by 2.07 cents per kWhr. FERC may be ringing the alarms, but their policies are enabling the problem.
As one might guess the renewable industry trade groups had representation among the intervenors in this case. I found it ironic that a statement from one witness for a renewables trade group, whose members collect Federal Tax subsidies I should add, had this to say about their endorsement of the EDAM...
"The rules governing the design of a day-ahead market, which FERC approves, directly contribute to the competitive environment by facilitating a level playing field for generation resources."
Level playing field, indeed.
The essential first steps in increasing natural gas generation are increasing natural gas production and transmission capacity. Lawsuits and state government actions have been very successful in blocking gas transmission system expansion.
The first rule of holes is to stop digging.
Unless you’re digging mass graves.
The LTRA included a map that identified the drivers of load growth across regions of the United States. You’ll notice that data centers are major factors in most regions of America. Data centers increase the peak electricity demand on the power grid by 224 gigawatts (GW), or 29 percent, in the summer and 245 GW, or 35 percent, in the winter over the next decade. Pursuantly, Would excluding them from the grid be the solution?
A data center proposed to be built by Tallgrass in Southeastern Wyoming will build its own energy infrastructure "behind the meter" allegedly. It will start with 1.8 GW of capacity and expand to a proposed maximum of 10 GW. In comparison the entire energy load in Wyoming is not much greater than 1 GW.
Even though this is allegedly separate from the grid, the two will be coupled in some manner through the natural gas pipeline system. We are making some of the same mistakes that led to the energy crisis of the late 1960s and 1970s which was over reliance on petroleum liquids, this time by becoming overly reliant on natural gas.
Especially it coal country, where the shipping expenses are reasonable.
It apperars to be a potential solution that all of the parties are considering. Others include curtailable or interruptible service to data centers, supported by standby generators.
Sobering, even to sobered drinkers.
Being modernly post modern; have generator then woodstove. Then sterno, and lots of blankets.
As some have noted, data centers/AI may build their own supply. This would relieve strain on grids. How do you see this evolving?
I keep seeing MISO as being the worst off in terms of retirements but I never see the split of MISO north and south. As a resident of Louisiana where natural gas and heavy industry are king, I don’t see us being near the shit sandwich that is MISO north. Can you provide any insight here?
Thanks for the great reporting as always, EBB.