Bring On the Electricity Cost Crisis!


Francis Menton

In a post earlier this week, I celebrated the adoption by New York State of its Scoping Plan that tells us how we are going to accomplish the great transition to 70% “renewable” electricity by 2030 and zero-emissions electricity by 2040. The summary is: “just build a lot of offshore wind turbines and batteries.” Unfortunately, nobody seems to have done the basic arithmetic to see whether the prospective facilities will suffice to supply enough electricity to meet demand at all times. But then, this Scoping Plan is the product of the Important People, and why do the Important People need to trouble themselves with such minutiae? After all, they have a planet to save.

What that prior post did not consider was the likely cost to New York consumers of trying to buy electricity in a future at times when the wind is calm, the sun is dark, and fossil fuels have been suppressed. How high might the cost go when everybody has to bid at the same time for the small amounts of hydro or nuclear that may remain?

It turns out that three members of the Climate Action Council (propounders of the Scoping Plan) dissented from issuance of the Plan. One of those, a guy named Gavin Donohue, is at least partially alert to the consumer cost issue. His statement dissenting from the Scoping Plan can be found here. Among other things, he had this to say on the cost issue:

It is irresponsible to put out a plan to achieve the CLCPA’s goals while at the same time preventing New Yorkers from understanding the impact on their energy bills and the economy. We are in a period when electricity bills are expected to increase by 30-40% and the Plan’s lack of mentioning on how it will impact ratepayers is disappointing and a missed opportunity. The Plan lacks an independent, transparent, unbiased, comprehensive consumer cost impact analysis and quantification of the expense that will ultimately be borne by New York’s residents through increased fees, taxes, and energy bills. For the past two years, I have asked for this cost analysis.

Lack of consideration of potential consumer cost impacts is “disappointing” and a “missed opportunity.” That’s certainly a polite way of putting it. More accurate would be completely incompetent and irresponsible.

Not that it is necessarily straightforward to figure out what these future costs might be. The fundamental problem is that this future fantasy almost-all-renewable system requires some kind of full backup, which may only be called on occasionally, but when called on the need will be desperate and the price could get bid up to unimaginable heights.

How high might those heights be? While it’s impossible to put any definitive limit on it, we can get a very good idea of how the process plays out by looking at what’s going on in Europe right now. In its righteous battle to drive down carbon emissions, Europe has closed most of its coal plants, banned fracking for oil and gas, and otherwise suppressed almost all fossil fuel infrastructure except some pipelines from Russia. Trading Economics gives the most recent price for wholesale natural gas on the European market as 82.97 EUR/MWH. By the way, that’s down from prices over 100 EUR/MWH, and as high as 350 EUR/MWH (briefly) over the last six months. The most recent U.S. price is $5.12 per MMBTU. I come up with a factor of about 3.4 to convert from MMBTU to MWH, and the dollar and euro at close to par, so the comparison is about $17/MWH for the U.S. to $83/MWH for Europe. Europe’s fossil fuel suppression has resulted in a price about 5 times as high as the U.S. price.

And thus there is a consumer energy cost crisis currently raging in Europe — something that you read almost nothing about over here. The solution that the Europeans have come up with is to provide massive subsidies to enable consumers (and also businesses) to pay for their energy bills. A Brussels-based think tank called Brueghel has come out with a chart of the subsidies that the various European countries have agreed to pay (updated to November 29):

Germany, the European champion of the energy transition, is spending over 7% of GDP on these subsidies, and that’s just so far.

So, New York, when the same process plays out for you, are you going to spend the same 7% or so of GDP to shield the consumers from the real prices, or are you going to let the electricity and heat bills go up by a factor of three — or five?

Read the full article here.

via Watts Up With That?

December 27, 2022 at 12:38AM

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