It’s quite clear by now that the early
ambitious goals of the energy transition are more aspirational than realistic.
Despite years of increased deployment of wind and solar, that deployment in many
places is not even keeping up with energy demand growth. Thus, coal and natural
gas demand are increasing rather than decreasing. It is now 2023, a mere 7
years from ambitious goals planned for 2030. Europe has been ravaged by being overleveraged
on Russian gas which had to be sanctioned due to the invasion of Ukraine.
Underinvestment in natural gas projects and resulting declining production,
slowdowns in power grid transmission buildout due to public opposition, and
underperformance of wind and solar have led to soaring natural gas and
electricity prices. Coal use has increased even as coal prices have risen
significantly. In other places hydroelectric power has underperformed due to
droughts. These issues have revealed important snags in the plan to decarbonize
quickly.
The US passed an infrastructure bill as
well as the inaptly named Inflation Reduction Act which is set to spend
hundreds of billions of dollars on decarbonization. I predict that much of that
spending will occur not in the near-term but years into the future. Some
reasons for this include continued supply chain disruptions, inflated project
costs, high lithium, critical minerals, and metals prices, very slow regulatory
signoffs and permitting times, and lack of uptake of EVs due to increasing costs
and concerns about reliability.
Those who are demanding a fast energy
transition are simply out of touch. It is clear by now that fossil fuels,
including coal, will be needed years and decades into the future at significant
volumes. It takes time to integrate renewables onto electric grids that must
provide backup sources of power to accommodate demand peaks that don’t match
generation. Inefficient and expensive load following natural gas combustion
turbine plants are necessary to balance increased grid penetration of
renewables.
As we saw in Texas in 2021 and in the
territories of Duke Energy and Tennessee Valley Authority in the Southeastern
US in December 2022, even fossil fuel plants and gas transmission compressors are
subject to freeze-offs if not adequately weatherized. Decreased seasonal wind
output in Texas as well as inadequate weatherization of those assets also contributed
to power shortfalls. To ensure grid reliability, reserve capacity has to be
increased with redundancy. Even in the power plant rich PJM Interconnection
region there were calls to reduce energy use. Very high natural gas prices in
California and the Pacific region are due in part to low natural gas storage
levels in those regions. This may be offset somewhat with increased
hydroelectric output due to the recent heavy rains. Importing power from nearby
regions can sometimes work to alleviate supply problems. However, when extreme weather
events are regionally widespread like the cold spell this past December and the
extreme heat in California and nearby regions in August 2020, that is not
possible. The problem with ERCOT in Texas in February 2021 was also exacerbated
by the power system being inadequately designed to import energy.
The US northeast typically turns to high
emissions fuel oil for winter reliability. This often triggers air quality alerts
due to the particulates, or soot. The EPA is set to announce lower allowable limits
to soot from the current 12 micrograms per cubic meter to somewhere between 8
and 11 micrograms per cubic meter. That means more dangerous air quality alerts
during cold snaps where fuel oil and coal are burned. Of course, inadequate natural
gas pipeline capacity is the reason for this increased fuel oil usage. In recent
times air quality has improved in places like New York City due to increasing natural
gas hookups that have replaced much more expensive fuel oil. Such replacement
is a no-brainer. However, calls to ban new natural gas hookups threaten to
derail the continuation of the switch from fuel oil to natural gas.
Planned buildout of offshore wind is one
solution to Northeast power reliability that is being pursued. However, this
buildout is proceeding slowly as is the needed buildout of transmission lines
to carry that wind power. The Biden Administration has a stated goal of 30GW of
US offshore wind power by 2030, all off the east coast. Currently only 42MW of offshore
wind are in production in those waters. The average capacity factors of wind
are about half of the average capacity factors of natural gas. Capacity factor
refers to the rate of utilization of the asset. Thus, as a rule of thumb 30GW
of offshore wind generation would be equivalent to 15GW of natural gas generation.
In addition, the natural gas is dispatchable, and combustion cycles can be ramped
up and down quickly, while wind is subject to hourly, daily, and seasonal intermittency
and unpredictability that requires backup. Seasonal variability can be extreme.
Other issues that can slow offshore wind development include a lack of local component
manufacturing and supply chains and section 27 of the 1920 Jones Act which
requires American ships with American crews to deliver components. American
ships of the size required to transport the large components are in short
supply. At least one ship is being built, ports are being expanded to accommodate
offshore wind buildout, and US manufacturing of blades is in planning. A few of
these wind projects are set to begin construction in 2024. If we assume these turbines
will be 12MW with the highest capacity factors, then about 2500 of these Eifel
tower-sized structures anchored to the ocean floor will be required to get to
30GW capacity.
UN
Secretary General Antonio Guterres and others have repeatedly called for no new
fossil fuel development and financing. However, fossil fuels have consistently
made up 80% of world energy production. These calls should be seen as purely
aspirational since they are wholly impractical, even more so considering recent
geopolitical events. Such demands are undermining our ability to supply needed energy,
particularly in places like Africa where basic access to modern energy systems
is sorely needed to help alleviate poverty.
The notion of replacing reliable and
predictable generation with unreliable and unpredictable generation, or
replacing full time generation with part time generation, will require back-up
generation in the form of gas combustion turbines and likely more fuel oil
generation. Batteries and other energy storage are not a viable economic solution
for backup power except for niche uses under certain circumstances.
The plan to run high volume transmission
lines from Canadian hydroelectric plants (to be backed up by fuel oil when
needed) to New England and New York was scrapped due to public opposition. It's
only a matter of time before a major winter blackout event in the area. The
most sensible thing to do is build out a few natural gas pipelines from nearby
Northeastern Pennsylvania and build some highly efficient combined cycle
natural gas plants. That is not likely due to many years of state government supported
activist opposition to any and all natural gas projects.
In the US southeast coal plants once
scheduled for retirement will stay online longer. Otherwise not enough natural
gas will be available due to pipeline constraints. The cancelling of the Atlantic
Coast Pipeline and the long delay and continued uncertainty of the Mountain
Valley Pipeline will ensure that continues to be the case. We have a way to
decarbonize smartly, and that way involves replacing coal and fuel oil with
natural gas.
I am still seeing articles saying the natural
gas shortage in Europe is an opportunity to build more wind and solar. The hype
and hypocrisy around wind and solar has caused and is causing real economic damage
to those who believe they will solve energy problems. They can solve some problems,
but they create other problems with grid integration, and they make power systems
more unreliable.
I am not against wind and solar. I have a grid-tied
solar array on my house. It reduces electric costs nicely in the summer but is
essentially useless in the winter. I am also not a climate change denier at
all. It is certainly a real problem and we do need to decarbonize, but at a
much slower rate and in much smarter ways. In any decarbonization scenario the power
grid needs to be greatly expanded and upgraded. A large amount of electricity
transmission capacity needs to be added. Currently, there are supply chain
issues with parts like transformers and metals for wires. Even though some of this
expansion is included in the recent bills, it will not happen fast. There will
be public opposition. There will be permitting and regulatory slowdowns as
well.
The bottom-line is don’t get your hopes up
for any great decarbonization progress by 2030. There will be some progress but
there will also continue to be a need to drill more natural gas wells, to build
more natural gas power plants, to lay more natural gas pipelines, and to build
out more LNG export capacity.
References:
Offshore Wind in the
Eastern United States by Katie Segal and Henry Lee, December 2021. Harvard
Kennedy School, Belfer Center for Science and International Affairs.
List of offshore wind
farms in the United States. Wikipedia. 2023.
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