Issue No. 35

  • The April 8 eclipse sharply depleted solar power, but natural gas filled the gap.
  • Grid operators worry about higher demand for electricity at the same time dispatchable energy generation is being retired.
  • The EPA issues aggressive new emissions rules for existing coal plants and new gas plants.
  • Concern rises over the voracious demand for energy from Artificial Intelligence data centers.
  • Federal judges and the U.S. Senate move to block new Biden Administration highway rules forcing states to encourage electric vehicle use.
  • Oil prices are rising, so plans to buy more oil for the Strategic Petroleum Reserve are delayed. Instead, more sales are in sight.

Solar Energy Falls Sharply in the April 8 Eclipse, But Natural Gas Picks Up the Slack

A story that was largely lost in all the excitement of April 8 was the effect of the total solar eclipse on the generation of energy. The response to the eclipse by grid system operators provided an important lesson: Renewables need help from traditional, dispatchable energy sources.

The Verge reported on the morning of the event:

All 50 states will experience some degree of disruption to solar power generation during the eclipse, according to the National Renewable Energy Laboratory (NREL). It forecasts a whopping 93 percent peak power reduction from solar panels within the Texas grid, where the solar eclipse will first cross into the US before slicing a diagonal path across the nation toward Maine. Peak power reduction is expected to reach 71 percent within the eastern power grid and 45 percent in the western grid.

The Energy Information Administration (EIA) reported that the eclipse would block sunlight to facilities generating 84.8 gigawatts (GW) of electricity nationwide. Battery storage of solar power has increased from 0.6 GW during the last solar eclipse in 2017 to 15.4 GW today, but that still isn’t enough to rely on stored solar when the sun is blotted out.

Texas was most affected, losing 8.9 GW of solar capacity during the height of the eclipse, from 12:20 to 3:07 pm Central Daylight Time, according to the Electric Reliability Council of Texas (ERCOT). Texas depends on solar. It’s the second-leading energy source in the state at midday.

So how did Texas fare during the eclipse? Natural gas came to the rescue. As the EIA reported:

Like the rest of the country, natural gas-fired generation largely offset the lost solar generation in ERCOT, replacing approximately 80% of the lost solar on April 8. According to EIA’s Hourly Electric Grid Monitor, which measures the grid response over a broader time interval than the data pulled directly from ERCOT, natural gas-fired power plants generated an additional 6.2 GW on April 8 between 1 p.m. CT and 2 p.m. CT, the hour when totality took place, to replace the lost solar generation. Coal and other sources—mostly battery storage—each produced an additional 0.8 GW to offset the loss.

As you can see from the chart below, solar generation (yellow) dipped sharply at noon, but natural gas (brown) filled much of the gap.

Texas wasn’t alone. Grid operators across the nation prepared for the drop in solar generation and relied mainly on natural gas to pick up the slack. 

“We anticipate gas being the most likely solution as the eclipse is very predictable, and every grid has the gas infrastructure to meet this demand event,” said Harry Woods of Solcast, as quoted by Utility Drive on April 4. (Solcast offers solar irradiance data and forecasting.)

Woods added, “The work done ahead of time to understand how the eclipse would impact the regional power system was crucial to a smooth operating day.”

The director of ISO New England, which manages that region’s electric grid, said, “The work done ahead of time to understand how the eclipse would impact the regional power system was crucial to a smooth operating day.” The Connecticut Mirror reported:

So with the sun mostly covered in Connecticut and some parts of New England experiencing totality, what happened to the thousands of homes and hundreds of schools that run on solar power? Short answer: Nothing….

In its review of the effects of the eclipse, the grid operator stated, “ISO New England system operators accounted for the sudden drop-off of solar resources by dispatching other generators, namely natural gas and hydroelectric resources. The ISO’s market software determined which resources to dispatch, based on the results of the region’s Day-Ahead and Real-Time energy markets.”

The eclipse episode showed how natural gas (and, to a lesser extent, other energy sources) interact with renewable energy to power the electric grid. Pressure to rely on renewables has increased in recent years, but natural gas will continue to play a critical role in keeping the lights on.

Grid Executives ‘Face New and Unprecedented Challenges’ From Higher Demand for Electricity Amid a Shift to Renewables

At a recent conference sponsored by the Electric Power Supply Association (EPSA), executives of the U.S. regional power grids warned that “they face new and unprecedented challenges as energy demand grows and the industry takes on the enormous shift to carbon-free electricity,” E&E News reported on April 4.

Richard Dewey, CEO of the New York Independent System Operator, pointed out that power demands from data centers — driven largely by Artificial Intelligence computing (see below), electric vehicles, and home heating — will rise while the state’s backup cushion of generation from traditional sources is being depleted.

In addition, the Bipartisan Infrastructure Law and CHIPS Act are leading to a boom in clean manufacturing, which is also leading to more demand for power.

“I don’t know what fills that gap in the year 2032,” Dewey said. “It feels like that’s a long way away, but that’s like tomorrow.” Dewey did not choose 2032 at random. It’s the year New York’s backup-generation resources will be gone. It also coincides with the Biden Administration’s target date for having EVs represent more than half of U.S. vehicle purchases. Currently, EVs account for just 7.6% of sales.

Those concerns were echoed by Gordon van Welie, chief executive of ISO New England, who said, “We have a lot of issues that have to be solved and, we do not control the pace of the transition. It’s happening, and we are running like crazy” to keep up.

Pablo Vegas, CEO of ERCOT in Texas, cited new studies of rising demand for electricity, which could require 25,000 megawatts of new generation capacity in five or six years. “That’s like adding another whole Dallas-Fort Worth to the state,” Vegas told the EPSA conference.

New high-voltage power lines take five years to plan and build on average, and a lot of the new power demand from factories, data centers, and oil and gas development is coming faster than that, Vegas said. “The big question is, OK, if we’re going to add 25 gigawatts [of demand] over the next five years, what’s going to serve it?”

In an opinion piece in Utility Dive on April 15, Todd Snitchler, CEO of EPSA, the conference sponsor, wrote, “For the first time in decades, power demand is growing rapidly across nearly every part of the country.” And, at the same time….

A mixture of economic conditions and state and federal policies is pushing dispatchable energy resources like natural gas into rapid premature retirement, while adding significant uncertainty to investment decisions in new resources. This uncertainty is making those decisions increasingly difficult, no matter how much the grid needs them to support weather-dependent resources like wind and solar.

Snitchler calls for a “major rethinking.” He wrote, “It is time for a reality check. The ‘energy transition’ is a misnomer. The U.S. requires an energy expansion that incorporates every tool we have at our disposal to deliver more power at lower emissions, both reliably and cost effectively.” He added:

This shift in perspective needs to happen now. States are seeing power demand growth that has not been seen for 40 years and policymakers want more. Failure to respond to the situation as it exists can only lead to bad outcomes.

The danger was also reflected in a March hearing of the Subcommittee on Economic Growth, Energy Policy, and Regulatory Affairs of the U.S. House Oversight and Accountability Committee. At the hearing, titled, “The Power Struggle: Examining the Reliability and Security of America’s Electrical Grid,” lawmakers discussed “how Biden Administration actions to rapidly expand electric-power demand while simultaneously reducing baseload capacity make the electrical grid less stable, less affordable, and more vulnerable to threats.”

James P. Danly, former chairman of the Federal Energy Regulatory Commission (FERC), stated, “The United States has its welfare dependent upon continuous and stable electricity at reasonable prices at a time when load requirements are growing. The demand is going up, and it’s going up at an accelerating pace.”

During his opening statement at the hearing, Travis Fisher, director of Energy and Environmental Studies at the Cato Institute, said, “It’s not too late to stop the coming energy crisis, because it’s a crisis caused by unwise policies, and we can reform them.” Fisher pointed to three such policies:

  • The Environmental Protection Agency’s “tailpipe emissions rule,” which “seeks to ensure that by 2032, two-thirds of new vehicles sold will be electric,” thus placing “immense stress on the power grid.” (See section below.)
  • Clean Power Plan 2.0, which “mandates two technologies that are not adequately demonstrated: carbon capture, and green hydrogen.” (Also see below.)
  • The Inflation Reduction Act (IRA) with its production tax credits that “reward electricity production from unreliable sources and distort market signals that keep reliable power plants running.”

In an op-ed in the Washington Times on April 17, Snitchler wrote that the IRA subsidies are “driving incentives toward weather-dependent renewable generation and nascent technologies — like hydrogen and carbon capture and storage (CCS) — that have not reached a sufficient scale to provide customers with reliable and affordable energy.” He added:

While these resources are already or will soon be important assets to the grid operations, policymakers have largely ignored the impacts on the existing dispatchable resources imperative to reliability. Compounding the issue are the proposed EPA regulations that will require some fossil-fired generation to either blend hydrogen or use CCS to comply with GHG emissions thresholds. The real-world impact of this regulation is an acceleration in premature retirements of the dispatchable gas-fired generation essential to maintaining reliability.

We reported in our Newsletter No. 34 that a new report from Grid Strategies titled ‘The Era of Flat Power Demand is Over,’ sounds the alarm about the grid infrastructure’s lack of preparedness as near-term electricity demand forecasts increase. The report, which has received broad coverage, begins by noting that “the nationwide forecast of electricity demand shot up from 2.6% to 4.7% growth over the next five years, as reflected in 2023 filings.”

The North American Electric Reliability Corporation (NERC) has been warning of a looming reliability crisis and, for the first time, identified government policy as a contributing factor. PJM Interconnection, the grid operator for much of the Middle Atlantic and industrial Midwest regions, estimates that “about 24 GW to 58 GW of thermal resources — or 12% to 30% of the PJM Interconnection’s installed capacity — are at risk of retiring by 2030 without a clear source of replacement generation.” Most of the retirements are the result of federal and state policy.

EPA Issues Stringent New Emissions Rules for Existing Coal and New Gas Plants. Is Biden Administration Doubling Down?

We reported in our last newsletter that the Environmental Protection Agency (EPA) “announced it was delaying its power plant rules for existing natural gas facilities until after the November elections.”

In May 2023, the original EPA directive, dubbed Power Plan 2.0, targeted three different kinds of plants: existing gas, existing coal, and new gas. The agency said it was postponing rules for existing natural gas-powered plants, an apparent concession to critics and a signal that the Biden Administration was concerned about the fallout from stringent regulations that would almost certainly lead to shutdowns of plants around the country.

But on April 25, the EPA finalized rules for existing coal and new gas plants, and the decision turned out to be “one of its most significant climate actions to-date,” said CNN. Far from backing off, the EPA seemed to double down.

In a press release, the EPA stated:

The final emission standards and guidelines will achieve substantial reductions in carbon pollution at reasonable cost. The best system of emission reduction for the longest-running existing coal units and most heavily utilized new gas turbines is based on carbon capture and sequestration/storage (CCS) – an available and cost-reasonable emission control technology that can be applied directly to power plants.

The regulation calls for reductions of 90% by 2039, “one year earlier than the agency had initially proposed,” reported the New York Times. “The compressed timeline was welcomed by climate activists but condemned by coal executives who said the new standards would be impossible to meet” because capture and sequestration technology has not advanced enough to be practical.

By leading to the closure of plants that cannot comply, the new rules risk exacerbating the impending reliability crisis cited by those energy executives, as well as many regulators and researchers.

Jim Matheson, chief executive officer of the National Rural Electric Cooperative Association, which supplies electricity to many of the nation’s rural and suburban communities, reacted by saying, “This barrage of new E.P.A. rules ignores our nation’s ongoing electric reliability challenges and is the wrong approach at a critical time for our nation’s energy future.”

Quoted by the Associated Press (AP), Rich Nolan, CEO of the National Mining Associated stated that, through its new rules, “the EPA is systematically dismantling the reliability of the U.S. electric grid.”

Todd Snitchler, CEO of EPSA, issued a statement condemning the rule for placing “significant restrictions on new natural gas power plants at a time when reliability experts including the Federal Energy Regulatory Commission, the North American Electric Reliability Corporation, and nearly all of the grid operators, are flashing warning signs about the loss of dispatchable capacity during a time of surging electric demand.” He added:

The almost certain result will be higher prices, diminished reliability, and even increased emissions, by stymying investment in new, highly efficient natural gas facilities to displace older, higher emitting, and/or more expensive resources.

The new rule will face opposition from many in Congress. Republican Sen. Shelley Moore Capito of West Virginia, a state that is a major producer of coal and natural gas, immediately issued a statement that said, “With the latest iteration of the illegal Clean Power Plan 2.0 announced today, President Biden has inexplicably doubled down on his plans to shut down the backbone of America’s electric grid through unachievable regulatory mandates.”

She added, “To protect millions of Americans, including energy workers, against executive overreach that has already been tried and rejected by the Supreme Court, I will be introducing a Congressional Review Act resolution of disapproval to overturn the EPA’s job-killing regulations announced today.”

According to E&E News, the Administration rushed to complete the rules before May so that they will not “become vulnerable to reversal by a Republican-controlled White House and Congress under the Congressional Review Act,” to which Capito referred. “Such an action would not only kill the Biden administration rule but make it impossible for future administrations to promulgate a similar rule without new congressional authorization.”

While coal drew nearly all the attention, the rule also increased targeted existing gas plants. “Under the regulations, reported NPR, “existing coal and new natural gas-fired power plants that run more than 40% of the time would have to eliminate 90% of their carbon dioxide emissions, the main driver of global warming.” According to a report in the Washington Post on April 9, the EPA had originally envisioned applying the 90% rule only to natural gas plants that operated 50% of the time.

Plants that are expected to retire by 2039 would face a less stringent standard but still would have to capture some emissions. Coal plants that are set to retire by 2032 would not be subject to the new rules. 

The new standards went beyond carbon dioxide emissions reductions. The AP reported:

The rule was among four measures targeting coal and natural gas plants that the EPA said would provide “regulatory certainty” to the power industry and encourage them to make investments to transition “to a clean energy economy.” The measures include requirements to reduce toxic wastewater pollutants from coal-fired plants and to safely manage coal ash in unlined storage ponds.

Concern Rises Over Demands on Electricity From Artificial Intelligence Computations

In our last newsletter, we raised the danger of Artificial Intelligence (AI) becoming an enormous consumer of electricity. We cited a peer-reviewed analysis in the journal Joule of AI electricity use, published in September, which noted that NVIDIA alone will be shipping 1.5 million AI server units per year by 2027.

“These 1.5 million servers, running at full capacity, would consume at least 85.4 terawatt-hours of electricity annually — more than what many small countries use in a year, according to the new assessment.” At the higher end, use could reach 134 terawatt-hours, or 134 billion kilowatt-hours, “between a fifth and a quarter of total U.S. electricity demand by 2030.” reported on April 10: “The more information they [AI computing facilities] gather, the smarter they are, but the more information they gather to get smarter, the more power it takes,” said the chief executive of Arm, a chip design company owned by Japan’s SoftBank.

The change is happening now. “By some estimates,” said a Vox article on March 29, “data center electricity use is on track to more than double by 2026…. The world is hungry for BTUs and watts.”

There is growing recognition – and alarm – over the effects of AI on the grid. On March 28, the Wall Street Journal published an editorial headlined, “The Coming Electricity Crisis,” which warned that “Artificial-intelligence data centers and climate rules are pushing the power grid to what could become a breaking point.” The piece noted:

Georgia Power recently increased 17-fold its winter power demand forecast by 2031, citing growth in new industries such as EV and battery factories. AEP Ohio says new data centers and Intel’s $20 billion planned chip plant will increase strain on the grid. Chip factories and data centers can consume 100 times more power than a typical industrial business.

Utility Dive reported, “Excluding China, AI represents 4.3 GW of global power demand today and could grow almost five-fold by 2028…. Of that demand, 30-45% is estimated to be in the United States.” 

Pablo Vegas, the CEO of ERCOT, the Electric Grid Reliability Council of Texas, raised concerns about the $800 million facility for AI computing in Temple, Texas, that Meta (the former Facebook) is planning. Electricity use in Texas will be skyrocketing as a result of these and other data centers, said a Houston Chronicle article on April 18.

The boom in AI will almost certainly mean that natural gas, coal, and nuclear power will be necessary to meet the increase in demand. But, as we have seen above, it does not appear that federal and state regulations – which will lead to the closure of existing power plants and probable insurmountable obstacles to new ones – are keeping step with the new developments in technology.

“We are subtracting dispatchable [fossil fuel] resources at a pace that’s not sustainable, and we can’t build dispatchable resources to replace the dispatchable resources we’re shutting down,” said Federal Energy Regulatory Commissioner Mark Christie, quoted in the Wall Street Journal editorial.

Renewables like wind and solar will not be able to fill the gap so quickly. The Journal also quoted Ernest Moniz, President Obama’s Energy Secretary, as saying, “We’re not going to build 100 gigawatts of new renewables in a few years.”

Toby Rice, chief executive of EQT, the country’s biggest natural gas producer, said that meeting AI demands “will not be done without gas.” Rice was quoted in a Financial Times piece, which also quoted Doug Kimmelman, founder of Energy Capital Partners (ECP), a large owner of power-generation assets: “Gas is the only cost-efficient energy generation capable of providing the type of 24/7 reliable power required by the big technology companies to power the AI boom.”

Senate Votes to Block Federal Rules to Encourage Electric Vehicles on State Highways

The EPA in March issued its final rule for vehicle emissions, a regulation whose effect will be to facilitate a rapid shift from gasoline- to electric-powered vehicles. The New York Times called it “one of the most significant climate regulations in the nation’s history.”

But the Biden Administration wants more regulations to encourage EV use. The Federal Highway Administration (FHWA) proposed a rule to require state transportation agencies to measure greenhouse gas emissions (GHG) emissions on the national highway system and set targets for declines. The FHWA called the rule “essential” to meeting the Administration’s target of net-zero emissions by 2050.

Two federal judges recently ruled the FHWA rules unlawful, but the ruling could be reversed on appeal, so on April 10, the U.S. Senate passed a resolution, 53-47, that would nullify the state highway regulations.

Voting with all 49 Republicans to kill the regulations were three Democrats – Sens. Joe Manchin (WV), Sherrod Brown (OH), and Jon Tester (MT) – as well as Independent Krysten Sinema (AZ), a former Democrat. Manchin and Sinema are retiring, and Brown and Tester face difficult re-election races in November.

President Biden pledged to veto the resolution if it is sent to him, and Republicans “would almost certainly be unable to muster the votes needed to overturn a veto,” Reuters reported.

The White House released a statement arguing that the rule was “a common-sense, good-government tool for transparently managing transportation-related GHG emissions and informing transportation investment decisions.”

Reuters reported:

The FHWA has noted it did not mandate how low targets must be and instead gave state transportation departments flexibility to set targets that were appropriate as long as the targets aimed to reduce emissions over time. The agency said it would assess whether states make significant progress toward achieving their targets but the rule does not impose penalties for those who missed their targets.

Still, on March 28, U.S. District Judge James Wesley Hendrix said he agreed with a lawsuit filed by the state of Texas claiming the rule was unauthorized. In a separate lawsuit filed in Kentucky by 21 states, a federal judge in April came to the same conclusion. Reported WEKU, a Kentucky National Public Radio station:

In a summary judgment, U.S. District Judge Benjamin Beaton decided that the Biden administration rule to set climate targets for vehicles was beyond the administration’s scope. He called it “arbitrary and capricious.”

Sen. Shelley Moore Capito (R-WV) agreed that the FHWA lacked authority to write the rules and said the vote is “a clear message to the administration that we will continue to hold them accountable for executive overreach.” Sen. Kevin Cramer (R-ND) called the regulations “fundamentally unworkable,” particularly for rural communities.

Meanwhile, Crapo and Manchin are among the Senators seeking to block the EPA’s tailpipe emissions rule from going into effect. In a press release, Crapo said, “The Biden Administration’s rule on tailpipe emissions sets unrealistic and unachievable standards that go too far at restricting vehicle choices for American families and pushes our country toward a greater dependence on China.”

A bill sponsored by Crapo “prohibits the Environmental Protection Agency from finalizing, implementing, or enforcing the rule titled Multi-Pollutant Emissions Standards for Model Years 2027 and Later Light-Duty and Medium-Duty Vehicles. Among other provisions, the rules include more stringent standards for greenhouse gases and criteria pollutants for light-duty vehicles and medium-duty vehicles. The standards phase in over model years 2027 through 2032.”

As we reported in our Newsletter No. 34:

Last year, Americans purchased 1.2 million electric vehicles (EVs) – a record, but still just 7.6% of total U.S. car sales. The target for 2032 under the new [tailpipe] rule is that 56% of new cars be full EVs, with an additional 16% being hybrids.

Besides the concerns about freedom of choice and China that Crapo raised, the rapid shift to EVs required by the tailpipe rule could increase electricity demand beyond the capacity of the electric grid.

As Oil Prices Rise, White House Postpones Plans to Refill the Strategic Petroleum Reserve – and Instead Withdraw More Oil

Oil prices are rising – a fact that could spell trouble for the Biden Administration in an election year. Brent Crude prices reached $91 a barrel on April 4, the highest level since October 2023. Since then, prices have fallen. They were $83 on April 23, but that is still much higher than the COVID-depressed $53 when President Biden took over.

Axios reported, “The big picture: Average gas prices are up 24 cents per gallon over the last month to $3.63, per AAA, and summer driving demand typically puts more upward pressure on costs. Pump prices are directly visible to consumers, but higher fuel costs also make taming inflation harder.”

The violence in the Middle East, including tit-for-tat attacks by Israel and Iran, is clearly playing a role. In a commentary for the Center for Strategic & International Studies on April 10, Ben Cahill and Raad Alkadiri wrote:

With traders now anticipating tighter crude and product fundamentals for the rest of the year, markets are now more sensitive to the risk of potential geopolitical disruptions to supply.… Market fundamentals should continue to underpin higher oil prices through the remainder of the year. Oil demand growth in the first quarter was relatively strong, including U.S. transportation demand, and the International Energy Agency (IEA) recently upgraded its first quarter demand growth figure to 1.7 million barrels per day (b/d).

The Department of Energy had planned to refill the Strategic Petroleum Reserve (SPR), which, as we reported in our Newsletter No. 29, had fallen to its lowest levels since the mid-1980s. But higher prices have halted purchases. on April 11 reported:

Citing rising oil prices, the DOE said, “We will not award the current solicitations for the Bayou Choctaw SPR site and will solicit available capacity as market conditions allow.” Three million barrels of oil had been slated for delivery to the Bayou Choctaw SPR site in August and September.

In fact, White House Senior Adviser John Podesta said that President Biden will reverse policy and “do what he can’ to keep gas prices low,” including releasing more oil from the SPR. Tapping the Reserve in an election has become a presidential habit, noted Robert Rapier, an energy analyst. He wrote:

One of the 2024 energy predictions I made in January had been, “The Biden Administration won’t replace more than 10% of the oil removed from the SPR since Biden was inaugurated.” The reasoning behind the prediction was that in election years, presidents have tended to withdraw from the SPR to prevent rising oil prices leading up to the election. My prediction concluded with, “By the time the summer driving season and the change to summer gasoline blends arrives in May, I think the SPR purchases will be suspended.”

The Energy Information Agency on April 9 projected that “oil inventories will begin increasing in 2025 because we assume OPEC+ production will increase when OPEC+ supply cuts expire. We forecast global oil inventories to increase by an average 0.4 million b/d in 2025, which we expect will put downward pressure on prices. We forecast the Brent crude oil price will decrease year-over-year from an average $90/b in 4Q24 to an average $86/b in 4Q25, with annual averages of $89/b in 2024 and $87/b in 2025.”

Those levels are roughly what we are seeing now – and they are biting consumers. The Administration wants to do what it can to keep oil prices as low as possible, but depleting the SPR will increase risk in a time of geopolitical dangers.