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Expect Limited Electric Supply This Summer

  • By Admin
  • May 20, 2022

Texas, California, and the Midwest see the potential for a difficult summer as demand will most likely exceed supply.  Texas and California have already endured unseasonably high spring temperatures.  According to analysts at the National Consumer Law Center, the problems of high prices and potential blackouts are intertwined in that they both have roots in the failure of the government, utilities, and grid operators to manage the risks tied to climate change and the transition to clean energy

Comfort is going to be difficult, but if your utility has an operating nuclear power plant you will most likely be ok.

Several factors will limit our electric power supply this summer – It all boils down to the availability of natural gas, coal, and solar.

The Midcontinent Independent System Operator (MISO) expects firm resources “will be insufficient to cover the peak load of the summer months.” They warn that emergency resources and non-firm energy imports “will be needed to maintain system reliability.”

The Russian invasion of the Ukraine has complicated the availability of natural gas. And so, the U.S. has joined with other nations to backstop world markets with natural gas that otherwise would have been supplied by Russia. 

However, both actions have impacted natural gas prices and its availability – natural gas spot prices measured at the Henry Hub are expected to average $7.83/MMBtu during the second quarter and climb to an average $8.59/MMBtu in the second half. 

The EIA, the government’s chief energy forecast agency, sees a 23% increase in LNG exports from 2021, which in turn impacts our storage of natural gas in the U.S. The EIA is forecasting natural gas inventories at the end of 2022 to be 9% below the five-year average.  And if summer temperatures are hotter-than-normal, electricity demand could cause natural gas inventories to shrink even further, resulting in even higher prices. 

By contrast, coal prices are much less, but they too are on the rise.  In the past, economics drove the utilities to utilize natural gas-fired generation over coal-fired generation.  This along with “green power initiatives” resulted in an acceleration of scrapping coal-fired units across the country.  Now that coal is cheaper, the plants remaining are being asked to power full output, but the supply of coal is making this difficult.  Since many of these plants were scrapped, the railroads didn’t expand or improve their coal-hauling capacity which in turn, impacted coal deliveries.   Although recent coal traffic has increased, the operating plants are working to rebuild their 90-day coal supply that was depleted in 2021 due to demand.

Martin Oberman, Surface Transportation Board chairman, blames the rail delivery problems on the railroads themselves, which cut employees by 29% (~ 45,000 people) over the past 6 years.  “On too many parts of their networks, the railroads simply do not have a sufficient number of employees,” Oberman said.

And last but not least, utility-scale solar development projects are being upended as the Commerce Department sorts through a complaint lodged in February by a domestic manufacturer that Chinese companies are dumping solar modules. This has resulted in the postponement and in some cases, scrapping projects that will definitely affect supply in 2023 and will have some impact this year, as well.

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