Issue No. 20


In today’s issue:

  • A member of the Consumer Product Safety Commission causes an uproar when he calls for banning gas stoves — as some cities in California already have, and as New York state is contemplating. The actions raise major reliability concerns.
  • The Energy Department issues a report saying the U.S. lost tens of thousands of jobs and billions of dollars when it killed the Keystone XL Pipeline.
  • In Europe, the U.S. energy industry has stepped up to substitute its gas for Russia’s, thanks to new pipelines and LNG terminals.
  • To meet its zero-emission goals, Google wants to see the Southeast move to competitive power markets, not a failed monopoly arrangement.
  • The Biden administration a proposed a rule to force defense and NASA contractors to calculate and disclose climate-change costs.
  • The New York Times claims deregulation raises electricity prices, but is it really “deregulation”? And are prices actually higher in competitive markets? The facts tell a different story.

Turning Up the Heat on Gas Stoves: The Implications of a CPSC Commissioner’s Proposal Raises Major Reliability Concerns

At a time when Americans are worried about the reliability of their supply of electricity and heating, officials in Washington and the states are turning their attention to another scourge: gas stoves. You heard right. Richard Trumka, Jr., a member of the Consumer Products Safety Commission (CPSC) on Jan. 9 called for a ban on the stoves, calling them “a hidden hazard” to both human health and the environment.

“Products that can’t be made safe can be banned,” Trumka said. He added that the commission should also consider imposing new emissions standards.

The remarks ignited a strong reaction. Among many quick to react, Rep. Jeff Duncan (R-SC), a member of the House Energy and Commerce Committee, joked that the proposal constituted a “power grab” by the President. “Gas stoves are the next thing the Biden Administration is coming after,” he tweeted. “Washington bureaucrats should have no say in how Americans prepare their dinner.”

The White House quickly clarified that the CPSC is an independent agency and that President Biden “does not support banning gas stoves.” Still, the chairman of the commission, Alexander Hoehn-Saric, made remarks that could be considered ominous. He explained that, while “research indicates that emissions from gas stoves can be hazardous,” the commission is not planning to ban gas stoves. Instead, he said the CPSC is “looking for ways to reduce related indoor air quality hazards,” adding:

This spring, we will be asking the public to provide us with information about gas stove emissions and potential solutions for reducing any associated risks. This is part of our product safety mission — learning about hazards and working to make products safer.

There’s no doubt that the White House has an animus toward natural gas. As an incentive to switch, the Inflation Reduction Act offers a $840 rebate on electric appliances.

In June, the Los Angeles City Council City Council passed a motion that would ban most gas appliances in new residential and commercial construction in the city. The Council cited an effort to combat climate change. Berkeley and San Francisco have already issued bans, and the state of California will prohibit new gas-powered heaters, water heaters and furnaces as of 2030.

The Biden Administration last year “filed an amicus brief with the Ninth Circuit Court of Appeals supporting” the Berkeley ban, the Wall Street Journal wrote in an editorial. “The departments of Justice and Energy argued that cities and states should be able to exercise police powers to prohibit the use of ‘dangerous or unsafe items.’ Why would the federal government weigh in on a local regulatory case, if not for ideological climate solidarity?”

In her State of the State Address on Jan. 10, New York Gov. Kathy Hochul backed a ban on the sale of fossil fuel based heating equipment beginning in 2030 for single-family homes and smaller buildings and 2035 for larger and commercial buildings,” Politico reported. Four out of five homes in the state have gas heating.

Politico explained that, “if a gas furnace failed or needed a replacement after that date, it would have to be with an electric or other non-combustion system.” Although the proposal does not include gas stoves, the Governor does support ending their use in new construction starting “in 2025 for small buildings, including single-family homes, and 2028 for larger ones.”

Where does the Governor think electricity in her state comes from? “Natural gas-fired power plants account for almost three-fifths of New York’s [electric] generating capacity,” according to the U.S. Energy Information Agency; nuclear power accounts for one-fourth. In addition, gas stoves represent just 3% of total natural gas use in the home. More than 20 times as much gas is used for heating.

In addition, anyone who has ever used electric stoves is aware of how hazardous they can be. Electric heating elements stay on many minutes after they are turned off and are known to be more of a fire hazard than gas, with a death rate 3.4 times higher. An earlier Wall Street Journal editorial on Jan. 10 stated:

The International Study of Asthma and Allergies in Childhood, the most comprehensive global study to date, found “no evidence of an association between the use of gas as a cooking fuel and either asthma symptoms or asthma diagnosis.” The real hazard isn’t gas stoves but how people use them. Not that this distinction matters to the CPSC, which has a long history of targeting products such as window blindsIKEA dressers, and Peloton treadmills because of accidents that are the fault of customers.

Perhaps the greatest danger of the commotion over gas stoves is that it distracts attention from the serious threats posed by the lack of reliability of electricity. In considering safety, the CPSC should take into account the perils of power interruptions that can last for weeks. Right now, we don’t have the luxury to play games arguing about electric stoves. The combination of a potential increase in electrification across more and more facets of America’s economy, along with supply constraints, will cause massive strains on the electric grid – and the result could be a major problem for reliable electricity.

Who Can Find the Costs of the Keystone XL Cancellation?

Perhaps the best-known pipeline that was never built, Keystone XL, was the subject of a study looking at the impacts of President Biden’s decision to kill the project on his very first day in office. The study was required as part of the bipartisan Infrastructure Investment and Jobs Act.

The study, which was completed in December and quietly released, found that the project would have created between 16,149 and 59,000 jobs and have had a positive impact of $3.4 to $9.6 billion. A statement issued by Senators Steve Daines (R-MT) and Jim Risch (R-ID) condemns the Biden administration for cancelling the pipeline, noting “The Biden administration finally owned up to what we have known all along—killing the Keystone XL pipeline cost good-paying jobs, hurt Montana’s economy and was the first step in the Biden administration’s war on oil and gas production in the United States.”

Fox News article on Jan. 10 pointed out that four unions representing workers who would have worked on the pipeline  “were silent this week when asked about a recent federal report showing the significant economic consequences of shutting the project down.”

Not responding to Fox’s requests were the Laborers International Union of North America, the International Brotherhood of Teamsters (IBT), the International Union of Operating Engineers and the United Association of Union Plumbers and Pipefitters (UA). The four unions had reached an agreement with the pipeline’s operator, the Canadian company TC Energy in August 2020 to represent thousands of project workers.

“The Keystone XL pipeline project will put thousands of Americans, including Teamsters, to work in good union jobs that will support working families,” Jim Hoffa, the former general president of the IBT, said after the agreement was announced. “We believe in supporting projects which prioritize the creation of good jobs through much-needed infrastructure development.”

Searching for the study on the Energy Department’s website proved an impossible endeavor, but Sen. Daines posted it on his website. It is disappointing that some in the administration chose to try to bury the report rather than being transparent with the public about the effects of killing the project.

The study begins by reminding us, “The Keystone XL (KXL) pipeline extension was proposed by TransCanada (now TC Energy) as an 875-mile pipeline project that would extend from the Canadian border at Morgan, Montana, to Steele City, Nebraska.” The study continues:

The pipeline was originally proposed in 2008 to increase the capacity of the company’s existing Keystone Pipeline System and allow for the delivery of up to 830,000 barrels per day (bpd) of crude oil from the Western Canadian Sedimentary Basin (WCSB) in Canada and the Bakken Shale Formation in the United States to Steele City, Nebraska, for onward delivery to refineries in the Gulf Coast area….

TransCanada’s original KXL pipeline proposal also included a southern segment from Cushing, Oklahoma, to the Gulf Coast area, where it would have connected with existing pipeline infrastructure from Steele City, Nebraska, to Cushing, Oklahoma. The Cushing-Gulf Coast portion (Cushing MarketLink) is now an independent project and began operations in January 2014.

To put the pipeline’s capacity in perspective, remember that the U.S. uses 19.9 million barrels of oil per day, so Keystone XL would by itself have transported more than 4% of that amount.

U.S. Energy Industry Is Replacing Russian Natural Gas in Europe

The invasion of Ukraine and the subsequent reduction in Russia’s exports of natural gas to Europe have caused a serious supply imbalance in Europe, which relies heavily on gas for its electric grid. But the United States has come to the rescue with greatly increased shipments of liquefied natural gas (LNG) from export terminals from Louisiana, Texas, and Pennsylvania. Those terminals are being reached through pipelines that are nearly at full capacity.

Despite skepticism a few months ago, America’s robust energy industry has found offsetting the decline in Russian gas a task it can accomplish. The U.S. is now sending more than 60% of its LNG exports to Europe, which has displaced Asian markets as the top destination. Starting in July, the U.S. began supplying more gas to Europe by ship than Russia does by pipeline. For example, gas from Louisiana’s Calcasieu Pass LNG export terminal on Jan. 3 landed at a new LNG import terminal in Wilhelmshaven, Germany, with its first shipment being “enough to supply around 50,000 German households with energy for one year.”

An article in Foreign Policy by Yale academics Jeffrey Sonnenfeld and Steven Tian on Jan. 19 carried the headline: “The World Economy No Longer Needs Russia: With alternative sources in place, Putin’s attempt at blackmailing Europe on energy has failed.” The authors note that this has been an unseasonably warm winter, but Europe has been saved not just by demand but by supply:

Far from freezing to death, Europe quickly secured alternative gas supplies by pivoting to global LNG. This included an estimated 55 bcm [billion cubic meters] from the United States, two-and-a-half times more than prewar U.S. exports of LNG to Europe. Coupled with increases in supply from renewable sources, nuclear, and, in the interim, coal, these alternative supplies have reduced Europe’s dependence on Russian gas to 9 percent of its total gas imports.

These exports come despite rising use of natural gas in the U.S. itself. Consumption hit a record of 141 billion cubic feet on Dec. 23 in the midst of a cold wave, beating the old high of 137.4 bcf, according to the EIA. Meanwhile, because of strong supply, spot gas prices at the Henry Hub slid from $10 per million British Thermal Units this summer to just $3.11 per million BTU in mid-January.

“Europe is now assured sufficient energy supply well into 2024 at a minimum, providing enough time for cheaper alternative energy supplies—both renewables and bridge fuels—to be fully onboarded and operating within Europe,” write Sonnenfeld and Tian. “This includes the completion of an additional 200 bcm/year in LNG export capacity by 2024—enough to fully and permanently replace Russia’s 200 bcm/year gas exports once and for all.

Google Wants Competitive Power Markets in the Southeast So It Can Meet Emissions Goals

The technology giant Google is charging that “its goals for carbon-free power are impeded by state-regulated utilities, particularly in the Southeast, that lack a competitive market,” the New York Times reported on Dec. 20.

“This is personal for me,” said Jamey Goldin, an energy regulation lawyer at Google, at a May conference in Atlanta. According to Times reporter Peter Eavis:

He said he had grown up on a ridge overlooking Plant Bowen, a coal-fired power plant northwest of Atlanta owned by Georgia Power, the dominant electricity utility in the state, and then directed his comments at a lobbyist for the utility’s parent company, also on the panel: “Y’all got a lot of coal running up there, a lot of smoke going up in the air.”

“Overturning the system that puts nearly all power generation in the Southeast in the hands of utilities like Georgia Power would “get a lot more renewable energy online and a lot of that dirty power offline,” Mr. Goldin added.

South Carolina passed a law in 2020 to explore setting up the kind of power market that Goldin and Google want. The Times called the move “remarkable because of the influence the utilities have in state capitals.” Tom Davis, a Republican state senator in South Carolina who spearheaded the bill, said the current regulatory system financially rewarded utilities even when they messed up. “It’s not incentivizing them to go out there and try to find somebody who’s built a better mousetrap and can generate power more cheaply,” Eavis quoted him as saying.

Google and other tech firms want to “dismantle a decades-old regulatory system in the Southeast that allows a handful of utilities to generate and sell the region’s electricity – and replace it with a market in which many companies can compete to do so. Such markets exist in some form in much of the country, but the Southeastern utilities are staunchly defending the status quo.”

Another solution, advanced by Caroline Golin, Google’s global head of energy market development and policy, at a legislative hearing in July, is for South Carolina to break out of the Southeast utility system and join PJM, the regional transmission organization (RTO) which currently serves Virginia, Kentucky and tiny parts of North Carolina, but no states in the deep South. “We can be a model for the rest of the region, and actually be a model for the rest of the country,” she said, according to the Times article.

Google, Meta, Microsoft and Apple, among others, have made eliminating their carbon emissions a prominent corporate goal — and have set deadlines in the near future. Google wants to buy enough carbon-free electricity to power all its data centers and campuses around the world without interruption by the end of this decade.

Advocates for clean energy solutions are finding common ground with firms that are providing power in competitive markets, where RTOs and independent system operators (ISOs) are reducing emissions faster and deeply than monopoly regions. University of Texas-Austin engineer Dr. Joshua Rhodes and three colleagues authored a study in 2021 for the Energy Choice Coalition that substantiates this case.

The authors found:

  • Markets promote innovation and new technology adoption.
  • In general, the design of energy markets favors technologies like wind and solar that have very low (near zero) marginal costs, which make them more likely to be dispatched, as compared to plants that have higher marginal costs, such as coal.

More specifically, they calculated that “ISO regions have reduced their power sector CO2 emissions by about 35% from 2005 levels while non- ISO regions have reduced their power-sector CO2 emissions by about 27% over the same period.” And “ISO regions deployed almost 80% of all utility-scale renewable generation capacity, despite only accounting for about 67% of all existing power plant capacity, of all types. “

In addition, “ISO regions have seen stronger growth in distributed solar PV, increasing by about 214% versus non-ISO regions at 199%, since the U.S. Energy Information Administration began keeping track in 2014.”

Climate War Comes to the Pentagon and NASA

A proposed new federal rule titled, “Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk,” requires contractors to the Defense Department, NASA, and the General Services Administration to disclose Scope 3 emissions, which, according to the Environmental Protection Agency, “are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain.” Scope 1 and 2 emissions are those generated at the contractors’ own facilities and from the electricity and heating they use.

Wall Street Journal editorial on Dec. 7, with the headline “The Pentagon Marches Off to Climate War,” explained:

For example, weapons manufacturers would have to quantify and disclose the amount of CO2 generated from their own facilities; manufacturers that produce steel, computer chips and motors used in their weapons; propellants and fuel; and even munition storage areas. It’s unclear if CO2 emissions will influence procurement decisions.

The rule, which would also apply to non-defense contractors like pharmaceutical, shipping and tech companies, requires thousands of companies doing business with the government to “publish an annual climate disclosure and develop ‘science-based targets’ to reduce greenhouse gas emissions in alignment with the goals of the 2015 Paris agreement,” said the Journal editorial. In other words, Washington is using its considerable leverage as a buyer of goods and services to force contractors to zero out emissions on a politically imposed schedule.

The term, “science-based targets,” is set of guidelines written by an environmental NGO, World Resources Institute. Such outside special interest groups have found voice and power in the Biden Administration, pushing a climate agenda into all areas of the federal government.

Daniel Kochan, a law professor and director of the Law and Economics Center at George Mason University’s Antonin Scalia School of Law, wrote in The Hill on Jan. 12:

Don’t get confused. The current climate disclosure, inventory and targeted behavior change regulations from DoD, NASA and GSA are not coming from agencies that have the authority to control pollution. The agencies here are imposing substantive environmental mandates even though they are not agencies with substantive environmental rulemaking authority. 

He points out, “When there is a regulatory cause de jour, there is a natural tendency for even the most specialized, technical federal agencies to overreach. They see a perceived crisis or public fear as cover under which they think they can and should expand their authority, without respecting their limited statutory mandate. Climate change has often been such a catalyst for unmoored regulatory activity. And it is again.”

The reporting burden, not to mention the burden of changing manufacturing processes, will be heavy – especially on the energy sector, which is a major contractor to DoD and NASA. “Biden’s new mandate on contractors,” said the Journal, “adds green politics and costs to weapons.” This is a point that we expect will be made during the comment period on the proposed rule, which ends Feb. 13.

Does ‘Deregulation’ of Electricity Raise Prices?

On Jan. 4, the New York Times trotted out a familiar meme: that “deregulation” has raised electricity costs. Economist Michael Giberson, PhD, a senior fellow in energy at the R Street Institute, issued a biting response on Twitter, saying that the Times article “is making a really odd argument, and doing it badly.”

About a quarter-century ago, Dr. Giberson explained, states began moving away “from a regulated monopoly industry structure to a regulated market-based industry structure.” The term “deregulation” is not correct. Both kinds of delivery systems are regulated. The difference is that one system uses market forces to set prices.

The article blames higher costs on added grid spending and blames it on market-based providers, but, as Dr. Giberson writes, “The article actually explains good reasons for added grid spending including connecting customers to distant renewable resources and hardening the grid against consequences of a changing climate. Neither one of these things are ‘deregulation.’”

The Times reporter writes that “retail electricity costs in the 35 states that have partly or entirely broken apart the generation, transmission and retail distribution of energy into separate business have risen faster than rates in the 15 states that have not deregulated.” But a previous study by Wayne Winegarden, PhD, of the Pacific Research Institute, which publishes this newsletter, found that, to the contrary, “Competitive markets reduce energy costs.” For his 2021 report, Dr. Winegarden used EIA data that showed, for example, that wholesale prices in competitive markets, including New England and New York, dropped substantially between 2015 and 2020. He added:

The price benefits are widely shared by states with retail choice as well. Four of the five states with the lowest price increases between 1996 and 2020 (Pennsylvania, Illinois, New Jersey, and New York) and five of the ten states with the lowest price increases (plus Texas), were competition states. Alternatively, the ten states with the largest increases in retail electricity prices were all monopoly states (Hawaii, Wisconsin, Kentucky, Idaho, Washington, Alaska, Montana, Minnesota, Wyoming, and Oregon).

He also cited studies by J. Chen (“Evaluating Options for Enhancing Wholesale Competition and Implications for the Southeastern United States” Duke Nicholas Institute Policy Brief, March 2020) and C. Clack and colleagues (“Technical Report: Economic & Clean Energy Benefits of Establishing a Competitive Wholesale Electricity Market in the Southeast United States” Vibrant Clean Energy, August 2020) that supported those findings.

Another common argument from monopoly-power advocates is that market-based providers don’t perform well in weather emergencies. In fact, the opposite is true.

The late December storm named Elliott was the fifth major winter event in the last 11 years, according to the North American Electric Reliability Corporation (NERC). But both Duke Energy and the Tennessee Valley Authority, which serve nearly 20 million customers between them, had to order controlled outages to manage demand. NERC and the Federal Energy Regulatory Commission (FERC) announced on Dec. 28 that they will hold an inquiry into how power companies handled the storm. They stated in a release:

Although most of these outages were due to weather impacts on electric distribution facilities operated by local utilities, utilities in parts of the southeast were forced to engage in rolling blackouts and the bulk power system in other regions was significantly stressed.  

Said the Washington Examiner: “Duke’s outages in North Carolina and South Carolina made up about a third of the 1.7 million service disruptions during the peak” of the Christmas weekend storm. According to the Tennessean newspaper, “TVA had to reduce strain on its grid as demand for energy ran nearly 35% higher than expected on a typical winter day. At the same time, a few of its coal and gas energy facilities were down because of the freezing temperatures.”

“To ensure reliability,” said Utility Dive,” the U.S. Department of Energy allowed the Electric Reliability Council of Texas and PJM Interconnection to waive some emissions standards and run generators at their maximum capabilities.”

Todd Snitchler, president and CEO of the Electric Power Supply Association, concluded: “The data is still coming in, but if you take just the raw information that’s available, New York, New England and PJM managed to successfully get through the severe weather without having rotating outages or blackouts, which I think is very positive.”

Transfers of capacity between grid operators were what kept the lights on in other parts of the country. Power flowed “out of PJM through MISO and then into the other regions in the southeast,” said Snitchler.

At one point, about 3,000 MW of power were “flowing out of PJM through MISO and then into the other regions in the southeast.” PJM is the regional transmission organization (RTO) serving 13 states, including Pennsylvania, New Jersey and Maryland. MISO (Midcontinent Independent System Operator) manages the flow of electricity across 15 states and the Canadian province of Manitoba.

“If there weren’t those megawatts available to be wheeled to other parts of the country, what would that have meant in the way of successful grid operation,” Snitchler said.  “I would hesitate to speculate, but I can’t imagine it would be a positive outcome.”

At a recent conference sponsored by FERC, Nelson Peeler, an executive of Duke Power first argued that competitive markets don’t work, then had to admit that his own company could not perform up to par and had outages during Elliott.

A project of the Pacific Research Institute, the Energy Reality Report provides news and analysis on policies, markets, and technology trends that affect our nation’s ability to power American homes and businesses with reliable low cost energy.

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