Category: News

There has been much negative chatter about how data centers are placing upward pressure on electricity rates.  However, filtering away the noise, there are many reasons for rising electricity rates that aren’t related to data centers.  The reality is that recent rate increases are primarily the result of past decisions that were intended to transform the electric utility industry by: read more…

The following is my commentary on recent energy-related articles published in the Wall Street Journal on August 22nd (“Why Solar and Wind Power Can Thrive Without Subsidies” – by Jinjoo Lee) and in Barron’s on August 25th (“Electricity Prices Are Surging. How the Political Fallout Could Hit Companies, Too” – by Avi Salzman). Although they address different issues, the discussions read more…

Yesterday, the EPA announced and issued a document initiating a rulemaking, which is summarized below: SUMMARY: In this action, the U.S. Environmental Protection Agency (EPA) is proposing to repeal all greenhouse gas (GHG) emissions standards for fossil fuel-fired power plants. The EPA is proposing that the Clean Air Act (CAA) requires it to make a finding that GHG emissions from read more…

Several industry groups have asserted that repealing the Clean Energy Tax Credits authorized under the (inaptly named) Inflation Reduction Act (IRA) will cause electricity prices to increase. The pending House budget bill would begin phasing-out production tax credits and investment tax credits for facilities entering service beginning in 2029 (20%) through 2032 (80%). Thus, the existing credits would remain intact read more…

Below is an AI-generated summary of the clean energy tax credit provisions in the current version of the House Budget.  The key takeaway is that the tax credits would begin phasing out for projects placed in service in 2029.  However, the tax transferability provisions would be discontinued sooner, thereby limiting the options for utilities to monetize their earned tax credits.  read more…

The proverbial three-legged stool (i.e., Reliability, Affordability, and Sustainability) essential to the well-being of our economy and national security is facing serious challenges as a new year begins.  The North American Electric Reliability Corporation (NERC) just released its 2024 Long-Term Reliability Assessment (LTRA). The LTRA leaves a clear impression that electric reliability is being undermined not only by “explosive” demand growth, read more…

When asked to identify the priorities for procuring electricity, a client used the analogy of a three-legged stool: For the stool to properly function, there has to be balance.  All three legs must be the same length, otherwise the stool will become unstable and eventually fail.   The stool analogy is particularly apt in the electric industry. While there is general read more…

Beware of solar projects bearing exaggerated promises! Happy Thanksgiving! US solar capacity factors retreat in 2023, break multiyear streak above 24% Tony Lenoir • Commodity Insights Wednesday, November 20, 2024 6:54 AM CT Solar capacity factors fell across all US independent system operators in 2023, sending the weighted US average below the 24% mark for the first time in at least read more…

In past blogs, I have described how utilities are prematurely retiring dispatchable generation before it can be replaced with similar accredited (firm) capacity. The recent article discussing Ameren’s request to build an 800 MW simple-cycle natural gas fired plant comes on the heels of a court-ordered retirement of a perfectly functional coal-fired power plant.  (BTW: As a young engineering student, I read more…

As Dave Lyons has stated many times, there is little coordination between Southeast Utilities to ensure the adequacy of both the supply and delivery to meet exploding load growth.  However, given the constraints, cost, and long-lead times associated with other generating resources (particularly coal, nuclear, and renewables that cannot provide 24×7 reliable power), there doesn’t seem to be any reasonable read more…

S&P reports that electric utilities in Florida, Texas, Virginia, and Washington should be closely watched for potential negative credit impacts of higher capital spending, particularly to address wildfire risks and resiliency.  This will be an issue in the upcoming rate cases.   Electric utilities’ negative credit outlooks reflect higher costs Tuesday, February 27, 2024 1:29 PM CT By Tom Tiernan The credit read more…

In a recently published article in Power Magazine, MISO is, once again warning, about severe reliability challenges.  The challenges are the result of many factors, including: In essence, MISO is facing a “perfect storm” created by surging load growth and declining accredited capacity.  The decline is largely due to decarbonization policies that seek to replace conventional generation with renewable resources read more…

Rising interest rates are slowly being reflected in the return on equity (ROE) authorizations in electric rate cases decided in 2023.  Vertically integrated (generation/transmission/distribution) utilities were authorized ROEs of 9.8% (vs. 9.75% in 2022) – see the blue bar chart below.  Wires-only (distribution) utility authorized ROEs were 9.24% (vs. 9.11% in 2022) – see the orange bar chart below.   A read more…

I have previously warned about prematurely retiring fossil fuel plants before they can be replaced with equally capable alternatives that will not jeopardize either the reliability or affordability of electricity.  Unfortunately, there is now a real word example, in the State of Hawaii, where power outages have occurred following the early retirement of a (middle-aged) coal plant (credit to the Energy read more…

One of the early and perhaps most visible benefits from the 2021 Infrastructure Law is a $1.1 billion credit provided to Pacific Gas and Electric to extend the operating life of the Diablo Canyon nuclear plant in California.  This is the same nuclear plant that California’s Governor and other energy policy gurus so desperately insisted should be retired because nuclear read more…

NERC’s CEO now concedes that the reserve margin and 1-in-10-year loss of load event criteria are no longer adequate to assess resource adequacy and system reliability.  New tools and metrics are now needed.  The problem is not that the existing metrics are unreasonable — it is how these metrics are currently used.   In most cases reliability metrics focus on the read more…

For the bargain price of $130 billion per year, the US can achieve the President’s carbon removal target with currently available technology.  The question is where should this technology be deployed for maximum effect and economy?  The US is not the largest carbon emitting nation, and our carbon emissions have declined.  Further, we all live in the same atmosphere. Reducing carbon read more…

We are, once again, being warned that cold-weather events could seriously impact grid reliability during this upcoming winter.  While ERCOT, PJM, MISO, and SPP may report more than adequate reserve margins on paper, when you consider the combination of needle winter peaks, early and accelerated retirement of legacy (coal and gas) generation, and/or generators reliant on just-in-time gas or mother read more…

It’s been a while since my last post.  However, this article was too good not to share.   For those familiar with the utility space, unlike competitive firms, a utility’s authorized earnings (i.e., rate base times rate of return) are an input in determining rates rather than the result of net revenues exceeding operating expenses.  Rate base growth, thus, is the key read more…

In a prior blog, I observed that EPA’s “go-it-alone” policies to force carbon emission reductions from existing power plants would likely have untended consequences, such as less reliable, less affordable electricity.  I also questioned EPA’s reliance on nascent carbon capture technology to bolster its claim that many existing plants can remain in operation.   These concerns were affirmed in the comments read more…

Regulation plays an important role in determining the cost and quality of utility services. Thus, participating in the regulatory process is an essential strategy for pro-actively managing your company’s electricity and natural gas costs.  All regulatory commissions determine: (1) the utility’s overall revenue requirement or cost of service to provide the utility a reasonable opportunity to earn a reasonable return read more…

In last week’s blog, I reported that the EPA had proposed a rule requiring the use of carbon capture and hydrogen for new and existing power plants.  I also observed that neither technology has yet to be successfully deployed at scale, and neither can be characterized as the best available technology.  If adopted, the proposed rule would make it all read more…

With the recent harsh winter storm disruptions in its rear-view mirror, NERC issued its first ever top-level call to action on winter reliability (see article 1 below).  This level 3 action (the highest alert level) calls on generation and transmission owners to report their winter weatherization plans by October 6.  With the continued retirement of dispatchable generation, it is no read more…

Continuing from my last post regarding poor governance, both the EPA and Federal Appeals Court have taken recent actions that will affect grid reliability and future electricity costs.   With respect to the EPA, on April 5, the EPA moved to strengthen a mercury pollution rule for coal-fired power plants on the assumption that the vast majority of affected generators are read more…

It is unfortunate, if not shameful, that an important government agency is implementing rules that could seriously compromise the reliability of the electricity grid.  Yet, it is clear that EPA considered only the improvement in air quality and ignored the downstream impact of its “Good Neighbor” rule — higher costs and diminished reliability of electricity – in determining that the read more…

The Inflation Reduction Act (IRA) is frequently cited for the proposition that renewable energy resources will become more competitive with traditional generating plant technologies.  However, it may come as a surprise that researchers are now claiming that renewables are more economical than all (but 1) of the remaining coal plants.   This is the conclusion of the just released Coal Cost read more…

This should be yet another wake-up call that the more rapid retirement of generation capacity is placing pressure on system operators’ ability to keep the lights on, particularly during more stressful periods.   MISO is not the only region facing an imminent threat.   MISO facing increasingly thin reserve margins due to plant retirements – NERC EXTRA Thursday, December 15, 2022 3:24 PM read more…

All is not well in “Grid-Land.”  The NYISO and MISO have recently issued warnings about the challenges to maintaining a reliable system in meeting decarbonization mandates (see the S&P articles below).  Especially concerning is that mandates are accelerating the retirement of older fossil-fuel units that the RTOs say are needed to avert capacity shortages.  More concerning is the growing reality read more…

There is no shortage of bold energy transition plans, as numerous governmental leaders and think tanks have proposed aggressive actions to fully decarbonize electricity generation over the next few decades.  Importantly, although the goal may be the same, the many transition plans employ different assumptions and means to achieve the goal.  That there are important differences warrants debate.   We have read more…