The energy transition is happening. But how it proceeds, at what speed, and with what guard rails remains to be seen. The importance of managing this transition carefully, responsibly, and not sacrificing the reliability and affordability of our power supply can’t be overstated.
Unfortunately, included in the House Reconciliation bill now working its way through Congress is a $150 billion proposal that could turn already emerging reliability and affordability concerns into a full-blown crisis.
This proposal is an incentive program on steroids that aims to reshape the nation’s electricity mix in just nine short years. Sen. Joe Manchin of West Virginia, likely the key vote on whether the plan, as proposed, becomes law, has already expressed deep reservations. He has said, “We are going to leave ourselves in a situation by 2030 that we are not going to have reliability.”
At a recent Senate Energy and Natural Resources Committee hearing with the Federal Energy Regulatory Commission, which regulates the nation’s electricity markets, Manchin’s concerns were hardly put to rest. In fact, two commissioners warned the proposed path forward would make energy cost increases and reliability issues “inevitable.” Commissioner James Danly went so far as to say the proposal drops an “H-bomb” into the middle of electricity markets, later adding, “consequences will be profound, disruptive, and incalculable.”
Danly is hardly the only energy regulator, expert, or policymaker to express concern over the speed of the energy transition and the threat it poses to a grid unprepared for it. The CEO of the North American Electric Reliability Corporation, which directly oversees the reliability of the grid, warned of generating capacity shortfalls this summer and added, “I know that operators and planners are working very, very hard to preserve reliability, but they’re continually asked to do so and manage your grid under more and more challenging conditions.”
Following tragic blackouts in Texas this past February, rolling blackouts in California and much of the Western U.S. this summer and last, the reliability of the nation’s grid is already showing signs it needs shoring up, not a push over the edge.
Poor planning and a failure to value dispatchable fuel diversity and security provided by the nation’s mix of coal, nuclear, and natural gas plants is screaming out for caution. Anyone unconvinced of the potential danger of racing ahead with an accelerated transition need only look across the Atlantic.
Europe’s accelerated pivot away from traditional sources of power to heavily subsidized renewable energy, and overreliance on natural gas as a bridge fuel, is spiraling towards economic catastrophe. There are well-founded concerns Europe won’t have the energy supplies it needs to keep the lights on, homes warm, and industry operating this winter.
Tight energy supplies have already meant record natural gas and electricity prices. Wholesale electricity prices in Germany have jumped 60 percent this year. In Spain, electricity prices are double what they were just two years ago before the pandemic shaved power demand. And in Britain, rising fuel prices, buffeted by weeks of low wind generation, have meant utilities have already raised electricity rates twice this year.
The alarm that is sounding to proceed with caution and ensure energy policy doesn’t sabotage the affordability and reliability of our energy supply is deafening. Now, more than ever, energy policy is in desperate need of careful planning and thoughtful debate. Hitting the accelerator on a policy that undercuts grid reliability while driving up energy costs, especially on those that can least afford them, is the exact opposite of building back better. As we still fight to emerge from the pandemic and the economic turmoil it has wrought, the last thing Americans need is an energy crisis of our own making.