Flip on a light switch. Press the power button to your TV. Plug your cell phone charger into the wall. Are you expecting something to happen? If the answer is ‘yes’, congratulations, you remembered to send in last month’s electric bill. But the real reason you can be confident that when you want power – you get it, is because somewhere amidst the complicated web of the “power grid” there is a baseload power plant generating a constant supply of electricity, available for your consumption anytime. In the United States, however, we are facing a growing gap between baseload power supply and demand, and both the power generators and their bankers are nervous about putting money into new power plants while the rules for how plants must operate are uncertain. How long can this impasse last before the lights start to flicker?

Coal-fired power has traditionally served as the leading source of baseload power in the United States, but many aging coal plants are facing retirements, a process accelerated by U.S. environmental policy and regulations. Some form of carbon regulation remains probable, increasing the cost to operate coal plants and creating barriers of entry for new plants. Additionally, just this year the Environmental Protection Agency (EPA) has or is expected to release four major regulations that will require much of the existing coal capacity in the U.S. to either install costly control technology or shut down. Last year, the North American Electric Reliability Corporation (NERC) predicted that as much as 70 gigawatts of fossil fuel capacity could be economically vulnerable as a result of power plant regulations impacting air pollutants, coal ash disposal, and water used in cooling structures. While the most recent EPA proposed rules indicate that these projections may be on the high side, the near term retirement of our existing baseload capacity without defined near term replacements presents serious concerns for electricity reliability in the U.S.

Figure 1 – Projected Coal Fired Capacity Retirements over the Next 30 Years

We are not without options; it’s just that no one can seem to agree on what’s acceptable. Everyone loves renewables, but they have limitations. Solar and wind are not baseload options. You’ve heard it before: “The sun doesn’t always shine and the wind doesn’t always blow.” Traditional baseload power plants can be powered by wood waste or biomass – generally considered a renewable resource – but some environmentalists have challenged the virtues of certain biomass feedstocks, particularly their contribution to net carbon reductions, leading the EPA to initiate a three year review assessing how it should be treated.

Nuclear power emits almost no air pollutants and is generally considered a zero carbon energy source. However, it continues to face obstacles. Without speculating too much on the impacts the recent disaster in Japan will have on nuclear reactor deployment in the U.S., the fact is, it’s a technology that hasn’t been built in the last 30 years and will likely continue to face opposition over concerns about safety and nuclear waste storage. Additional safety scrutiny and new permitting and regulatory hurdles are certain to increase the already high cost of developing new nuclear plants.

So then, what fills the baseload capacity gap? The current answer seems to be natural gas combined cycle (NGCC). Natural gas produces less air pollutants and only half the carbon emissions as coal. It’s currently cheap, and there appears to be an abundant supply of it. Plants can be built relatively quickly and cheaply, but more importantly they face far less permitting and regulatory hurdles than that of other fossil fuels and nuclear.

The problem is that of nuclear, coal and natural gas, the latter faces the highest volatility when it comes to fuel prices. Historically, natural gas spot prices have seen periods of volatility, some of short duration because of weather induced events like snowstorms and hurricanes and other of longer duration because of poorly designed regulations or actual limitations on supply. This is not to say natural gas shouldn’t play a critical role in our energy future; it should. And it will. But historically, the more we relied on natural gas as an energy source for electricity, heating and transportation the more volatile gas prices became..

As I noted previously in this forum, the situation regarding natural gas in this country has changed dramatically with the discovery of massive amounts of domestic shale gas reserves. But even with this fortuitous change in our domestic supply balance for natural gas, placing all of oureggs in one basket is never a good strategy.

Our view is that true energy security is best achieved by developing an energy supply portfolio that is diversified in terms of different fuel sources, technologies and source locations. Today, we truly have the opportunity to sculpt such a diversified energy supply portfolio. And we should do so with deliberation and with a sense of urgency. If we do, we will continue to be able to flip on the light switch and know with confidence that the lights will come on.

Comments

  1. Warren Pardi
    Mount Vernon, N.Y.
    April 25, 2011, 10:08 pm

    Taping into our natural gas deposits through hydraulic fracturing is not the answer. More and more evidence is showing that hydraulic fracturing could and has caused contamination of underground water supplies around and miles beyond these drilling sites. Trading air for water pollution is not a good tradeoff. See:
    http://www.damascuscitizens.org/

  2. Nathan McCarthy
    USA
    April 23, 2011, 8:05 pm

    These natural resources are a great start to masking a ever growing problem, but in the end they will be used up with negative effects. Some can’t be replaced, some emit harmful by products in various stages of the resources’ life cycle. One of the best ways is to mimic nature, through the use of solar power, such as the new panels that are being developed over in Ohio State University to absorb the entire amount of energy given off by the sun’s rays will be critical to our future. Other means needs to have serious attention, such as hydroelectric power with updated technology, the wind farms that can be set out at sea where great winds are produced, and many other ideas. The crisis with fresh water is not that hard to figure out, in a nutshell, stop with the ground water… You need to go to the source before it touches the ground (the filtering and re-distribution part of the cycle) and go after the humidity in the air. With simple techniques you can create a humid area and use specialized de-humidifiers this water can be cleaned and shipped to where ever it needs to go… These facilities can be place throughout the US and can even be used as an export item… Coca Cola sell their Dasani water to other countries for more than the cost of a bottle of Coca Cola… There is a huge market, oh and by the way while your obtaining this water in the facilities, run it through turbines… You are creating hydroelectric power. The solutions are out there, we must act on it to provide a better life for us and our future generations.

  3. Niki Yanakou
    USA
    April 22, 2011, 1:41 pm

    Heres a reality check

    http://www.youtube.com/watch?v=PfAQktktGgQ&feature=player_embedded

    natural gas will come to an end just as other resources will. It should be used for industrial purposes only. Conservation of energy must be our first line of defense.