Issue No. 22


In today’s issue:

  • The leading regional transmission organization, PJM, issues a blockbuster report warning that fossil-fuel power plants are being retired so quickly that reliability of electricity is in jeopardy.
  • A federal jury convicts the former Ohio House Speaker and Republican Chairman in a scandal involving a toxic and familiar mix: monopoly utilities, corrupt politicians, and mismanaged nuclear power.
  • The Vice Chair of the House Energy and Commerce Committee calls for enhanced energy infrastructure to increase national security and economic growth.
  • With H.R. 1, House Republicans make energy production their top priority, with steps like permitting reform. The bill faces strong opposition in the Senate, but parts may pass in a compromise.
  • The Biden Administration approves the Willow Project, a prime target of some environmentalists, but puts other parts of Alaska off limits to drilling.
  • EIA study projects significant declines in emissions as renewable generation rises through market forces. ‘Net Zero’ by 2050 and similar targets appear highly unlikely.

PJM Report Points to ‘Increasing Reliability Risks

new report Feb. 24 from PJM, the regional transmission organization (RTO) that coordinates the movement of wholesale electricity in 13 states and the District of Columbia (mainly in the Mid-Atlantic), carries the innocuous title, “Energy Transition in PJM: Resource Retirements, Replacements & Risk.” But the report is a blockbuster, prompting a Wall Street Journal editorial a few days later with a more appropriate headline: “S.O.S. for the Electric Grid.”

PJM is the largest grid operator in the nation, and it exports energy to grids of its neighbors in the Midwest and Northeast.

Its report points to “increasing reliability risks” as power plants that use fossil fuels “are retiring at a rapid pace” while demand for electricity “is likely to continue to increase from electrification coupled with the proliferation of high-demand data centers in the region.”

According to Politico, “PJM’s report calls for increased urgency in reforming the lengthy process for connecting to the grid as well as possible changes to market rules to ensure regions have enough capacity to meet rising power demand.”

The mismatch between plant retirements and rising demand is exacerbated because “PJM’s interconnection queue is composed primarily of intermittent and limited-duration resources.” So, says the report, “we need multiple megawatts of these resources to replace 1 MW of thermal generation.”

The report is a cautionary tale about government’s rush to transition from fossil fuels to renewables, a process often being driven by ideology and fantasy rather than science and facts. The report concludes:

The projections in this study indicate that the current pace of new entry would be insufficient to keep up with expected retirements and demand growth by 2030. The completion rate (from queue to steel in the ground) would have to increase significantly to maintain required reserve margins.

As the Wall Street Journal’s editorial board writes, “That’s a delicate way of saying that you can expect shortages and blackouts.”

PJM forecasts “40 GW of projected generation retirements by 2030, which is composed of: 12 GW of announced retirements, 25 GW of potential policy-driven retirements and 3 GW of potential economic retirements. Combined, this represents 21% of PJM’s current installed capacity.” To put 40 GW of generation in perspective: It’s enough power to light up 30 million homes.

By “policy-driven,” PJM means that utility companies are shutting down fossil-fuel power plants under federal and state pressure and through their own climate-related commitments. Examples include New Jersey’s rules for cutting CO2 emissions, the targeted phase-out of coal and natural gas generation in Illinois, net-zero-carbon commitments by companies in Virginia and North Carolina, and an EPA “Good Neighbor Rule” that demands stringent restrictions on nitrogen oxides that will lead “unit owners [to] not make that investment and…retire approximately 4,400 MW of units instead.”

According to the Journal editorial:

The report doesn’t say this, no doubt owing to political reticence, but the conclusion is clear. The left’s green-energy transition is incompatible with a growing economy and improving living standards. Renewables don’t provide reliable power 24 hours a day, 365 days a year, and the progressive campaign to shut down coal and gas plants that do will invariably result in outages.

During an arctic air blast this past December, PJM ordered some businesses to curtail power usage and urged households to do the same. PJM narrowly avoided rolling blackouts as some generators switched to burning oil. But what will happen when those power plants shut down? A power shortage at PJM has the potential to cascade across much of the U.S.

The PJM report, said the editorial, is the latest evidence that “the force-fed energy transition to renewable fuels is destabilizing the U.S. electric grid, but is anyone in government paying attention?”

That’s a good question. We should be hearing from Willie Phillips, the new acting chairman of the Federal Energy Regulatory Commission (FERC), whose mission is ensuring reliability. We should be hearing as well as from other federal and state officials and from legislators.

High-Level Convictions in Ohio Scandal Reveals Dangers of the Utility-Politician-Nuclear Plant Nexus

A federal jury on March 9 convicted Larry Householder, the former Speaker of the Ohio House, and Matthew Borges, the former chair of the Republican Party in the state, of participating in a racketeering conspiracy involving what the U.S. Attorney’s Office for the Southern District of Ohio called “nearly $61 million in bribes paid to a 501(c)(4) entity to pass and uphold a billion-dollar nuclear plant bailout.” The two convicted politicians face prison terms of up to 20 years.

Last year, Akron-based FirstEnergy Corp. agreed to pay a massive fine.

The U.S. Attorney’s Office continued:

According to court documents and trial testimony, from March 2017 to March 2020, the enterprise traded millions of dollars in bribery campaign donations in exchange for Householder’s and the enterprise’s help in passing House Bill 6. The defendants then also worked to corruptly ensure that HB 6 went into effect by defeating a ballot initiative to overturn the legislation.

House Bill 6 provided FirstEnergy Solutions with “more than $1 billion from Ohio ratepayers to bail out its Davis-Besse and Perry nuclear plants in Northern Ohio,” wrote HB 6 was described by Vox as “the worst energy bill of the 21st century.” It not only bailed out the nuclear plants but also created a surcharge that would raise electricity costs for all residents and businesses in Ohio. After the news emerged about the corruption scheme, Ohio Governor Mike DeWine signed a bill that repealed HB 6.

DeWine also repealed a “decoupling” provision that allowed FirstEnergy to collect substantial bills from customers even in years when demand is down. In addition, the repeal bill ordered refunds for money already collected.

FirstEnergy Solutions was founded in 1997 as a subsidiary of FirstEnergy Corp., which operates monopoly utilities in six Mid-Atlantic and Midwest states. FirstEnergy Solutions emerged in 2020 from bankruptcy with a new name.

The Columbus Dispatch reported that “two key players, Former FirstEnergy Solutions lobbyist Juan Cespedes and Householder’s political adviser Jeff Longstreth, took plea deals and testified” against the convicted politicians. The Dispatch added:

The U.S. Department of Justice could arrest others whose names peppered the seven-week corruption trial. In July 2021, FirstEnergy admitted it bribed Householder and top utility regulator Sam Randazzo and agreed to pay a $230 million fine. To date, neither Randazzo nor executives from FirstEnergy or FirstEnergy Solutions, now called Energy Harbor, have been charged with any crime.

Webinar on Energy Policy Highlights Need for Better Infrastructure

Rep. Kelly Armstrong (R-ND) was among the speakers March 14 at a webinar on U.S. energy policy sponsored by Grow America’s Infrastructure Now (GAIN), a coalition of businesses, trade associations, and labor groups that share an interest in creating jobs and boosting national security through the development of energy infrastructure. Rep. Armstrong is vice chair of the House Energy and Commerce Committee. North Dakota ranks 48th among the states in population but seventh in energy production, ahead of such states as Louisiana and Colorado.

Also speaking at the webinar were Major General (ret.) James “Spider” Marks; Brigham McCown, former administrator of the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA); and former Oklahoma Corporation Commissioner Patrice Douglas.

Rep. Armstrong’s keynote address focused on North Dakota’s critical role in the U.S. energy sector, the importance of domestic energy independence to national security, and solutions for challenges to energy production and distribution.

Permitting reform is one of his top priorities, said Rep. Armstrong. A particular problem, given North Dakota’s close relationship with Canada, is deficiencies in cross-border permitting. “There are four or five other cross border permitting projects that are on hold,” the Congressman said, “because, when you have a ten-year project, two presidential elections in between it and a politicized permitting process, it’s pretty hard to raise capital.”

The permitting bottleneck has seriously harmed energy investment, which, in turn, means less domestic production and weaker national security, especially now, with war raging in Ukraine.

By introducing the Lower Energy Costs Act as H.R. 1 in this session of Congress, House Republicans have demonstrated the importance they place on permitting reform. H.R. 1, which is expected to come to a vote in the House at the end of March, makes extensive changes to the current permitting regime (see below).

As part of a deal for his vote in favor of last year’s Inflation Reduction Act, the White House and Senate Majority Leader Chuck Schumer backed a permitting reform proposal introduced by Sen. Joe Manchin (D-WV). Among other changes, it would have set targets on the length of environmental reviews under the National Environmental Policy Act (NEPA) and granted FERC more authority to site the transmission lines that are needed to connect wind and solar generation to areas where demand is high. But permitting reform failed to pass.

In his comments at the GAIN webinar, Rep. Armstrong emphasized the importance of an all-of-the-above energy approach, noting he often invites people to Dickinson, N.D., where visitors will find wind farms, ethanol plants and a proposed biodiesel plant, all within 20 miles of his home.

He also warned against a rushed energy transition. “We have to be talking about baseload power,” he said, using Europe, especially Germany, as a recent example of ideological failures in energy policy. Rep. Armstrong added, “Slow down. Don’t let policy outpace technology.”

Rep. Armstrong also stressed the need for the U.S. to be involved in energy exploration and production around the world. He referred to his upcoming trip to Guyana, a small South American nation (population 750,000) that is expected to be enriched by several new oil discoveries, saying, “Will U.S. companies be involved, or will we cede that area to the Chinese and Iranians?”

Calls by environmentalists to stop U.S. involvement in projects such those in Guyana ignore the reality that nations like China would simply take our place, weakening our own national security, Rep. Armstrong said.

General Marks added, “Look at the region. You have Venezuela and you have Colombia. You have a lack of U.S. influence in that part of the world. But you have no lack of interest from Russia or China. This is an area where the U.S. needs to be very active.” Marks also asserted that if the U.S. is not “energy independent, we become unreliable partners globally.”

With H.R. 1, House Republicans Make Increased Domestic Energy Production Their Top Priority

We referred above to H.R. 1, the comprehensive legislative package from House Republicans that aims to bolster U.S. energy independence and lower costs. Over the last decade, U.S. energy consumption has risen 3%, but energy production has jumped 23%. Nearly the entire increase is the result of new technologies – hydraulic fracturing and horizontal drilling – that allow more efficient extraction of natural gas and oil. Renewable energy production also rose, but (not including nuclear power) it is still only 12.5% of total U.S. production. Coal has been declining, and in 2020, was eclipsed by renewables.

However, there is growing concern that government and corporate policies are pushing the transition to renewables too vigorously and that infrastructure for fossil fuels is being depleted well before wind and solar can take their place.

H.R. 1, says Republicans, is an attempt to restore the balance. It combines bills that have been approved and have strong support among Republicans. It was sponsored by Majority Leader Steve Scalise (R-LA) and co-sponsored by Energy and Commerce Chair Cathy McMorris Rodgers (R-WA), Natural Resources Chairman Bruce Westerman (R-AR), and Transportation and Infrastructure Chairman Sam Graves (R-MO).

In a statement on March 14, Scalise said that “voters gave Republicans the majority in Congress to stop this radical anti-American energy agenda, and to take action that will lower prices, and House Republicans listened.” Scalise added that the intention of the bill is to “cut red tape and increase energy production here at home so we can lower energy costs and stop our dependence on hostile foreign countries for our energy and minerals.”

In a summary of the bill, Speaker Kevin McCarthy (R-CA) stated, “The Biden Administration has spent two years discouraging American energy production and putting critical infrastructure projects through endless permitting delays. These misguided policies have increased costs for every American and weakened our national security – and made the rest of the world more reliant on dirtier energy from Russia and China.”

The bill would prohibit bans on hydraulic fracturing, repeal a $6 billion natural gas tax, and require the Department of Interior to allow lease sales on federal land and in waters. The legislation would also repeal restrictions on the export or import of liquefied natural gas (LNG) and prevent states from blocking interstate infrastructure projects. It also would limit presidential power to take actions like President Biden’s order on his first day in office to kill the Keystone XL pipeline and, as we noted earlier, streamline permitting reviews for energy projects under the NEPA.

Several of the co-sponsors pointed to the rise in energy prices, blaming the increase on supply restrictions. The “war on energy,” said McMorris Rogers, “is making life unaffordable for the hardworking people of this country.” Since President Biden took office, crude oil prices (West Texas Intermediate Crude) have risen from $53 a barrel to $75. Natural gas prices (Henry Hub) soared from $2.65 to nearly $9 by last August, but have since settled down to roughly the same levels as January 2021.

According to Politico, the Senate is likely to reject the bill: “Senate Majority Leader Chuck Schumer on [March 15] dismissed House Republicans’ energy package, calling it ‘as bad and partisan as it gets’ and a ‘nonstarter.’” Still, the legislation could become the basis for negotiations to ease permitting for both clean energy and fossil fuel projects and perhaps for other changes in energy policy.

Biden Administration Approves Willow Drilling Project But Puts Millions of Acres in Alaska Off-Limits

In a decision that surprised many observers, the Biden Administration approved the Willow drilling project in Alaska on March 13. The $8 billion project, led by ConocoPhillips, has the potential to produce 600 million barrels of oil over 30 years (with a peak of 180,000 barrels per day). The project, which the energy company says will create 2,500 construction jobs and 300 permanent jobs, was backed by Alaska’s elected officials and most groups of indigenous peoples, including the Alaska Federation of Natives.

Democratic Rep. Mary Peltola, who is herself the first Alaska Native to win a seat in the House, explained, “I campaigned on getting Willow done because I knew we needed it.” She added:

We must reverse Alaska’s economic decline. Today, the Biden Administration made the right choice and put real energy progress over absolutism. I’m also thankful for the strong bipartisan effort from Alaskans, including organized labor and our entire state legislature. Now, we can show the world what an energy bridge to the future looks like.

At the same time as the Willow approval, President Biden announced what the New York Times called “sweeping restrictions on offshore oil leasing in the Arctic Ocean and across Alaska’s North Slope in an apparent effort to temper criticism over the Willow decision and, as one administration official put it, to form a ‘firewall’ to limit future oil leases in the region.”

The Willow project will take place on 499 acres within the National Petroleum Reserve-Alaska, but new rules from the Interior Department will block oil and gas leases on more than 13 million of the 23 million acres that form that reserve, which is about 200 miles north of the Arctic Circle. The reserve is the country’s largest single expanse of pristine land.

In a press release, the Department of the Interior played down the Willow project itself with the headline, “Interior Department Substantially Reduces Scope of Willow Project: Drill Pads Reduced by 40%; ConocoPhillips to Relinquish Rights to 68,000 Acres of Existing Leases.” The release stated, “In his first year, President Biden protected more lands and waters than any president since John F. Kennedy.” 

The restrictions, however, did not stop environmentalists from denouncing the Willow decision, and two separate coalitions of organizations sued the Administration. A March 15th report in The Hill said:

The litigation accuses the administration of insufficiently assessing how the endeavor would affect the surrounding indigenous community and endangered species. Representatives for the nearby village of Nuiqsut made similar allegations in public comments in January, saying they were not given the opportunity to meaningfully participate in the feedback process.

The Washington Post’s Timothy Puko wrote March 17 that killing Willow has been “a top priority for climate activists. They are pushing to reduce fossil-fuel consumption as a way to cut the emissions that cause climate change, and have tried to stop major investments like this as a way to push the world away from oil. This project is especially vulnerable to public intervention because it is on federal lands and requires federal permits to go forward — and Biden had promised to end new oil drilling on federal land.”

Indeed, on March 21, Biden set aside a half-million acres of land in Texas and Nevada as national monuments, immune from mining and drilling.

But Sen. Sheldon Whitehouse (D-RI) called the overall Alaska decision by the White House “a net negative…. I think it’s a little late in the climate crisis to be striking balances. I think we’ve got to really try to solve the problem.” Whitehouse ranks fourth in seniority on the Senate Committee on Environment and Public Works.

On the other side of the aisle, Sen. Dan Sullivan (R-Alaska), another Environment Committee member, pushed the White House to approve the Willow project, but was unhappy with the rest of the decision:

The fact that this Willow [approval] comes with the announcement of future legally-dubious resource development restrictions on Alaska lands and waters is infuriating and demonstrates that the Biden Administration’s unprecedented lock-up of our state will continue.

In recent months, perhaps in part because of the dislocations caused by the war in Ukraine, President Biden appears to have come to the realization that the U.S. is not meeting its energy production potential. But his stance, as he showed with his Alaska decisions, is ambiguous at best — despite a near-consensus that fossil fuels must provide a bridge to renewables. “We’re still going to need oil and gas for a while,” Biden said in his State of the Union Address on Feb. 7. A short time later in the speech, he added, “We’re going to need oil for another decade.”

As we wrote in Newsletter No. 21: “Now, Biden is urging energy companies to make major investments. But with the window shutting in 10 years?” We quoted Brigham McCown, the former head of the PHMSA and now a fellow at the Hudson Institute, as Tweeting last month: “We’re [going to] need Fossil Fuels for a lot longer than a decade but no company would deploy capital with that timeline. Build a hotel but you have to tear it down in 10 yrs. Silly.”

EIA Energy Outlook Finds Renewables Generating Capacity Growing and Emissions Dropping Significantly

Speaking of the timeline to clean energy: The U.S. Energy Information Administration (EIA) on March 16 released its “Annual Energy Outlook.” One of the most important conclusions is that carbon dioxide emissions will continue to fall significantly. By 2030, they will be 25% to 38% below 2005 levels. Policy makers should take note that these changes are occurring largely because of market forces, not government fiat. Despite the optimistic projections, the EIA report sees Net Zero and other aspirational targets as highly unlikely to be met.

Other highlights:

  • Renewables generating capacity is growing. Solar, which is currently insignificant as a source of electricity, will reach 1 trillion kilowatt hours by 2030. Solar and wind will generate a majority of U.S. electricity by 2050.
  • Energy intensity (that is, the amount of energy use per household) will fall dramatically over the next 30 years.
  • Market share of electric light-duty vehicles will double between now and 2040 to about 18% but then level off.
  • The U.S. will remain a net exporter of petroleum products from now through at least 2050, with liquefied natural gas leading the way

Resources for the Future, a non-profit, hosted an event on the day the report came out at which EIA Administrator Joseph DeCarolis and Angelina LaRose, assistant administrator for energy analysis, explained the data. DeCarolis said that the Administration has a target of zero emissions for the electric-power-generating sector by 2035, but the EIA’s projection is for a decrease of 54% to 81% below 2005 levels, depending on assumptions. DeCarolis also said that “Net Zero by 2050…we all know is clearly an ambitious target.” The EIA forecast in the study has total energy-related CO2 emissions dropping 20% to 45% by 2050 compared to 2005. While upbeat, the report should inject a dose of reality into discussions of the pace of renewable uptake.

Interestingly, both of these projections are below a White House executive order in 2021 that directs the U.S. to decrease its net greenhouse gas emissions by 50% in 2030 and then net zero by 2050. So implicitly, we have a federal agency – the EIA within the Department of Energy – and one whose mission is to produce unbiased energy data, publicly acknowledging that President Biden’s emissions reduction goals are objectively unrealistic. Policymakers and officials on both sides of the aisle should understand this key takeaway as it determines future energy and climate policy.

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