Prepare for Blackouts, Rolling Brownouts and Skyrocketing Electrical Prices

by McQ | November 14, 2008 3:25 pm

Forbes warns us[1]:

If you think runaway oil prices are upsetting, just wait for what’s in store for electricity. Similar forces are in play. Demand is rising fast; supply is not. The cost to get coal and natural gas out of the ground is going up, and to that expense must be added the cost of the carbon permits that Congress and the presidential candidates are contemplating. Environmentalists are getting power plants scotched. China is sucking up energy. Leave such dynamics in play long enough, and price spikes in electricity follow. But that’s just the beginning. We may be facing brownouts (voltage reductions) and even rolling blackouts.

By as early as next year our demand for electricity will exceed reliable supply in New England, Texas and the West and, by 2011, in New York and the mid-Atlantic region. A failure of a power plant, or a summer-afternoon surge in the load, could make for a blackout or brownout. “There really isn’t any excess in the system,” says Rick P. Sergel, chief executive at the North American Electric Reliability Corporation (NERC).

Price shocks are already a part of the system says the article:

Price shocks are already occurring. In May, long before peak summer demand, the wholesale price of juice jumped twofold in Texas, to $4 per kilowatt-hour, 25 times the average retail rate in the country. Prices exceeded the allowed rate of $2 for seven days and threatened the viability of power resellers who contracted to deliver cheap rates to consumers. New Yorkers may suffer a summer of price discontent if regulators are right about peak wholesale prices jumping by up to 90%.

In the past few years, in dozens of utility regions such as Georgia, Louisiana and Ohio, price hikes have ranged from 20% to 80%. Overall, the cost of electricity, which declined (in real dollar terms) for the last two decades of the 20th century, has been relentlessly tracking up since 2001.

We hear alot about our dependence on foreign oil and how we need to cut back. But our demand for petroleum based products has only risen 15% since the 1973 oil embargo. Electricity, on the other hand, has seen an increase of 115% in the same timeframe.

So how is that demand increase being addressed? Not very well:

Right now the nation has 760 gigawatts of power plants to meet current consumption, with another 154 in reserve capacity to maintain grid reliability. But in fact only 10 gigs is truly excess capacity. The other 144 is utterly essential to keep lights on when unexpected demand arises from heat waves, outages or maintenance downtime. That reserve will begin to shrink quickly. NERC estimates that over the next decade 135 gigawatts of new capacity will be needed to meet the growth in consumption. But right now plants producing a total of 57 gigawatts are planned.

To begin with, with only 57 gigs planned, we’re well behind the power curve – pun intended. Even if we saw those 57 gigawatts of power come on line we’d still have a demand for 78 gigawatts more. That means the 10 gigs we now have in excess would be gone and we’d still have a deficit of 68 gigawatts in the system.

The fastest, and probably most economical way to address this deficit isn’t any of the vaporware being peddled at the moment as “the future”:

Renewable sources will not cover the growth in demand. While wind is gaining ground (and now supplies 1% of power), hydro’s share (7%) is shrinking as dams are dismantled. Solar, at 0.01%, is an inconsequential contributor.

90% of our grid is now powered by coal fired, natural gas and nuclear power. By far the largest segment is coal – 60% I believe. So obviously the fastest and most economical way to address the deficit is coal.

But, apparently, because of “environmental concerns”, the government plans on hobbling coal’s ability[2] to address the rising demand for power:

About 100 proposed coal-fired power plants in the USA may be required to limit their greenhouse gas emissions after the Environmental Protection Agency was blocked Thursday from issuing a permit for a proposed Utah plant without addressing the issue of global warming.

The EPA’s appeals board said the agency didn’t adequately justify its decision last year not to require controls for carbon dioxide emissions when it tentatively issued a permit for Deseret Power Electric Cooperative’s planned coal plant near Vernal, Utah.

The panel sent the case back to the EPA’s regional office to determine whether CO{-2} constraints are required. It said it recognizes “this is an issue of national scope that has implications far beyond this” permit.

The ruling has a far-reaching impact on dozens of coal-fired power plants awaiting permits. At the very least, it will delay by several months issuance of those permits, says Justin Hutt, a Washington, D.C., lawyer who represents utilities.

Coupled with the delay will be the immense cost associated with meeting limits set by the EPA. The power companies have two choices – allow themselves to be bankrupted as promised by Obama in his discussion with the SF Chronicle editorial board, or pass the cost on to the consumer through utility rates.

Of course utility rates normally have to be approved by a government board and government boards, like the Public Service Commission here in GA, are usually not open to $4 a kilowatt-hour rates, even if that is what it costs a coal fired plant to produce it under the limits imposed (nuclear is the answer but also unfavored, and the vaporware being pushed as an alternative isn’t anywhere near ready).

So it is decision time for power companies – address the coming deficit with a relatively quickly built but unfavored answer which has the potential to bankrupt them when they try to recover the cost of implementing the “clean” technology or don’t build and let the demand quickly outstrip the supply and allow price to ration the available electricity across and under-supplied grid.

Given the obstacles being imposed by government, I certainly know what my decision would be. And of course, this is precisely the result[3] Obama said his plan would bring.

[Crossposted at QandO[4]]

  1. warns us:
  2. the government plans on hobbling coal’s ability:
  3. precisely the result:
  4. QandO:

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