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Signature Sponsor
By Steven E. Winberg, Former Assistant Secretary for DOE, and Chair & CEO, Net-Negative CO2 Baseload Power, Inc.
Steve Winberg
January 9, 2024 - Electricity is an essential part of modern life and is vitally important to the American people, our economy, and our country. People use electricity for lighting, heating, cooling, cooking, refrigeration, running businesses, and transportation systems. Hospitals have an acute need for always available and affordable electricity so they can keep us well and treat us when our health is threatened.
History
The year was 1930 and Democratic President Franklin D. Roosevelt was discussing electricity prices when he said: “High rates of course bear hard on the individual. But from a social standpoint, they are chiefly to be regretted because they restrict the use of electricity.” On May 11, 1935, FDR signed an Executive Order establishing the Rural Electrification Administration (REA), which led to the Rural Electrification Act of 1936. The REA, and its successor agencies, enabled the build-out of a robust fleet of coal-fueled power plants that has powered the U.S. economic engine for nearly a century--and with technological enhancements could power it for another. These plants provide electricity to tens of thousands of rural homes as well as farms that provide the nation’s food supply. Having already benefited from upgraded technology, modern coal plants have made significant reductions in criteria pollutants and have technology available to reach near-zero emissions. Today, the Biden Administration is threatening the entire coal power plant fleet, and the U.S. economy, by advancing punitive EPA regulatory proposals, championing anti-coal policies at the ongoing international climate negotiations, and enacting expensive and inefficient clean energy subsidies.
In 1959, as a Democratic Presidential candidate, Senator John F. Kennedy spoke in Charleston, West Virginia, extolling the value of coal for employing coal workers and meeting the growing demand for electricity at home and abroad—value that still exists today. JFK noted there would be an increase from three billion to six billion people on the planet by the end of the century that would drive further coal demand. He was, of course, correct. JFK also pointed to the additional potential for many new uses for coal, yet to be discovered. JFK is proving right again as co-production of coal and critical minerals, which reduce our dangerous dependency on China; recovery of rare earth elements from coal mining byproducts, which can meet national security and U.S. manufacturing needs; and CO2-free coal-fueled electricity are all within our technological reach. Yet, the Biden Administration is failing to seize the opportunity. Instead, this Democratic Administration is favoring a one-dimensional energy strategy to advance renewables, which do not have the capability to provide coal’s economic, reliability, or national security benefits.
In 1977, following the second Middle East oil embargo, Democratic President Jimmy Carter created the Department of Energy and appointed Jim Schlesinger as the first Secretary of Energy to lead a transformation in United States energy policy and technology. At the time, the United States was importing oil from the Middle East for 17% of its electric supply. President Carter properly cited the national security concerns and implored electric utilities, including rural electric cooperatives, to build coal and nuclear plants. By doing so, the threat to national security was reduced.
Fast forward to today, President Biden has launched a regulatory and policy assault on the nation’s coal fleet and the American jobs that support the fleet. This assault is resulting in the accelerated retirement of one of our nation’s most reliable electricity sources—coal-fueled power plants. The National Rural Electric Cooperative Association, FERC, NERC and Congress have been sounding warnings about electricity grid reliability, but those warning have largely been ignored by the Administration. And so, brownouts, blackouts, and increased national security risks are beginning to manifest themselves. Ironically, it is a democratic Administration that is dismantling the legacies of FDR, JFK, and President Carter.
Global Coal Use
There is no question that coal has brought an improved quality of life for most Americans and hundreds of millions, if not billions, globally. However, in the United States, many view coal as yesterday’s fuel with no place in tomorrow’s energy mix. This view ignores what is happening globally. China, since 2022, has permitted 152 GW of new coal power plant capacity, which will be operating for most of this century. Meanwhile, based on announced coal plant retirements, by 2030, the United States will be left with 91 GW of coal capacity. If EPA’s proposed “Good Neighbor Rule” is finalized, only about 64 GW of coal capacity will remain.
What does this mean in terms of global CO2 emissions? Despite the COP 28 pledge by almost 200 countries for “transitioning away from fossil fuels in energy systems”, fossil fuels will continue at a steady pace and likely grow. For example, China’s newly permitted coal capacity will produce three to four times the CO2 (1.1 billion tonnes) than the U.S. will reduce (0.27 - 0.38 billion tonnes). This difference is just China’s newly permitted coal plants. Add another 5 billion tonnes from existing Chinese coal plants and, any way you slice the numbers, China’s emissions eclipse those of the U.S many fold. India has an estimated 65 GW of coal power plant capacity under construction or announced for future construction. This capacity will be added to their existing 213 GW of coal capacity. So, India’s coal-power CO2 emissions will also eclipse those of the U.S. for many decades to come. Indonesia and Africa have significant coal reserves and they too will look to this affordable, dependable fuel to expand their energy production in support of economic growth.
This almost certain expansion of global coal consumption means that, even if the United States eliminates all coal, there will be no significant reduction in global CO2 emissions. What there will be is increased energy cost to U.S. consumers, further loss of energy-intensive domestic manufacturing jobs and less energy security due to electricity reliability challenges.
Electricity Prices and Grid Reliability
U.S. residential electricity rates between 2021 and 2023 rose over 25% with the biggest increase (10.6%) occurring in 2022. The Inflation Reduction Act (IRA) clean energy tax credits heavily subsidize intermittent renewables investments over other clean energy investments, such that capital investment is diverted away from other clean energy investments. The IRA tax incentives also ignore the importance of reliability. Why should the taxpayer subsidize intermittent clean power at the expense of dependable clean power (e.g., coal with CCS, gas with CCS, and nuclear)? A balanced tax policy would incentivize all types of cleaner, dependable energy. If allowed to stand as law, the perverse IRA tax incentives further accelerate the emerging electricity grid reliability crisis and do so on the backs of taxpayers.
Particularly noteworthy is that grid reliability warnings are no longer limited to California or the Northeast during Winter and Summer peak demand periods. The North American Electric Reliability Corporation (NERC) has been sounding warnings across the United States, including the Midwest and West.
How do we find ourselves in a situation where electricity prices are high and electricity reliability is low? We need look no further than to Europe. Europe has been in a headlong rush to shutdown coal, and they are now suffering the consequences of their actions. The electricity rate in Germany is 43 cents/kWh compared to an average of 14 cents/kWh in the United States. In England and in the EU, the vast majority of countries have electricity rates greater than 30 cents/kWh. To back-up their intermittent renewables, much of Europe heavily relied on Russian natural gas, which is now a significant problem across Europe and a problem not soon to be resolved--even if there is resolution to Russia’s invasion of Ukraine. Fortunately, United States LNG exports to Europe have softened this life-threatening situation; however, the very same political forces driving higher electricity prices are trying to eliminate domestic LNG production and thus exports. The United States should learn from, not repeat, Europe’s mistakes.
Biden Administration’s War on Coal
Disconcertingly, the Biden Administration sees climate as the “ultimate risk” and are implementing policies that compromise electricity affordability and dependability. They are creating a United States electricity crisis akin to Europe’s. Worse yet, this Administration is turning a blind eye to our abundant domestic energy resources and to American ingenuity. There are technical solutions that will allow the U.S. and allied countries to use domestic natural resources to provide affordable, dependable, clean energy for their citizens. Non-allied countries, such as China and Russia, relish a world in which the United States, by its own short-sighted choice, fails to use its domestic energy resources to its own strategic advantage and creates for itself a European-like electricity crisis.
To advance the Biden Administration’s goal to eliminate coal, EPA has proposed a CO2 rule for coal and natural gas power generation. Most power plant owners will wait until this EPA rule is finalized, or vacated by the court, before investing in carbon capture and sequestration, thus resulting in years of CCS investment delays. If the EPA’s proposed rule stands, the President’s goal of no more coal by 2035 is likely to be achieved, with a clear negative impact on grid reliability, higher cost to consumers for electricity, and a larger budget deficit burden to taxpayers.
Taxpayers has been subsidizing renewables for the last 30 years with the goal of bringing the technology cost down. The renewables industry now brags about being the lowest cost electricity, so 30 years of being on the government dole has worked. Mission accomplished! Yet, the renewables industry wants even more inefficient subsidies, which the Inflation Reduction Act delivered.
It is time to get serious about the nation’s energy future and stop the new green deal hand-waving. If the United States is going to keep electricity affordable, keep electricity dependable, and make electricity cleaner, America needs a compelling national energy strategy. U.S. fossil energy consumption in 2022 made up 83% of all energy consumption—only four percent less than 30 years ago when renewable subsidies first went into effect. During this 30-year period, while the gigawatts of intermittent renewables capacity has grown 103%, renewable electricity still only accounts for nine percent of U.S. energy consumption. Add to that the global energy demand growth, especially in developing economies; the projected addition of 2-3 billion people; and the need to lift 3 billion of the existing world population from energy poverty, and the answer becomes clear. Fossil fuels will be the backbone of the global energy system through 2050, and far beyond it. So, let us not pretend that the world will transition away from fossil energy. Instead, we need to develop the technologies that will allow us to use fossil energy in a way that makes significant reductions in global CO2 emissions.
Some Practical First Steps
First, amend the Inflation Reduction Act to make tax credits available to electricity generation that is both dependable and clean, and second rebalance DOE’s R&D budget to recognize that the U.S. needs to invest in all forms of energy, rather than continue to spend four times the amount of taxpayer money on renewables than on fossil energy technologies.
1. Recognizing that a full repeal of IRA is unlikely, a pragmatic approach is amending the IRA to require that, tax credits are only available for new electricity generation that is dependable and clean. This would go a long way toward keeping electricity prices affordable, ensuring electricity grid reliability and deploying a cleaner electricity generation mix. Specifically, to claim the production or investment tax credit, an electricity generator would have to simultaneously meet a 60% dependability requirement and an 80% CO2 reduction requirement. For intermittent renewables, this would require a tax credit recipient to provide back-up electricity storage or contract for clean back-up electricity to compensate for intermittency. Nuclear, coal and natural gas generation can operate at 85%+ dependability, so a 60% requirement is more than reasonable for renewables. With respect to the CO2 reduction requirement, all renewables and nuclear would meet this requirement, and coal and natural gas would need to install CCS to qualify for the tax credit. The net benefit to consumers and taxpayers is that existing electricity assets could continue to operate, thus keeping electricity prices down, while current grid reliability challenges are resolved. And, new intermittent, renewable generation would not exacerbate the reliability challenges, as it does now.
2. Rebalance the R&D investments across the Office of Energy Efficiency and Renewable Energy, Office of Nuclear Energy, and Office of Fossil Energy and Carbon Management. Currently there is a multi-billion dollar disparity between them. Even though 83% of U.S. energy consumption comes from fossil fuels and is unlikely to decline to less than half before 2050; even though developing economies are on track to significantly increase fossil fuel use and will eclipse any small CO2 emissions declines the U.S. may achieve; and even though there is great concern about the impacts of CO2 emissions on the global climate, the U.S. Department of Energy, the federal agency principally tasked with developing innovative energy technologies, spends over four times the amount of taxpayer dollars on energy efficiency and renewable energy than it spends on fossil energy technology innovation. This alone is evidence that the taxpayer dollars are disproportionately being spent on renewable and energy efficiency technologies when balanced investment is more prudent.
Climate is a global challenge. The Biden Administration has stated that they want the U.S. to be a climate leader. If this is true, then the U.S. must lead on technology development that will allow the world to make significant reductions in CO2 emissions. That technology is fossil energy technology, which we can use here at home and export to other countries that have stated that they will use their domestic fossil energy resources to expand their economy and lift their people out of energy poverty. To do otherwise is simply to appease those that do not understand the gravity of the global challenge and the fundamentals of energy and economics.
Net-Negative CO2 Baseload Power, Inc. Steve Winberg Ken Humphreys Fred Palmer |
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