Guest Post: Climate Change and Electric Utilities

One of the nice things about writing this blog has been the opportunity to meet people online.  For example, one such contact recently reached out and we discussed opportunities to collaborate.  He sent me an article that is the basis of this post. 

Background

A friend of this contact is a registered PE with several decades of design work for electric utility power plants.  He is still working and wants to remain anonymous because his views are not aligned with the his employer. His situation is similar to Russel Schussler aka “Planning Engineer” who published articles at Judith Curry’s Climate Etc. for years before his retirement.  I too have been affected by the concerns of utility management regarding my work here.  For the record, the opinions expressed in this article do not reflect the position of any of our employers or any other organization with which we have been associated.

In the following I chose to lightly edit the article I received from “Design Engineer”, added some introductory/clarifying paragraphs, and have included some personal comments in the discussion section.  I apologize if I have misconstrued anything.

The Problem

Electric utilities must deal with the competing dynamics of political pressure, responsibility to shareholders and societal accountability.  This has led to policies that are likely not in the best long-term interests of most people.

Today, regulated utility CEOs are glad to get rid of coal plants that operate 85% of the time to install windmills that operate 30% of the time and solar that operates 15% of the time.  They also must install battery storage of some kind to store the wind and solar energy because wind and solar only operate when nature allows it to operate but electric customers want power all the time. However, to have the same reliability of utilities power production, the rate base attributable to power production will have to increase by 5-10 times if coal plants are shut down. 

So why is this occurring?  Regulated utilities get earnings from the rate base.  The rate base increases when you build new plants.  The complete cost of the new plant goes into the rate base.  The new equipment then is depreciated.  The rate base decreases each year if no additional capital expenditures are made.  Most coal and nuclear plants have low values in the rate base.  So, getting rid of coal plants and installing wind, solar and battery storage increase utility earnings, and the CEOs pay.  It doesn’t matter if a regulated electric utility builds a plant that never runs.  As long as it is in the rate base it makes the company money because of rate base accounting. 

There are other financial incentives as well.  Banks and Wall Street want utilities to shut down coal plants so they can lend them money for new wind, solar and battery plants.  Bank CEOs have a vested interest in pushing climate change hysteria so they can increase earnings. Wall Street sees the potential for lower risk investments if the renewable energy spending is guaranteed a fixed rate of return by Federal and State policies.

Lost in the greed are the customers.  All the subsidized windmills, solar installations, energy storage and other electrification installations are adding to our national debt.  This cost is hidden from consumers.  Ultimately these costs go to the taxpayers and the citizens of this country. 

It gets worse.  Increasing electric costs make our industries uncompetitive on the world stage when compared to countries like China and India who do not worry about so called climate change.  In 2024 the world shut down 17,000 MW of coal plants and China built 17,000 MW of coal plants.  World CO2 levels are not decreasing.  All we are doing is sending jobs to China and decreasing our national security by not manufacturing equipment in the United States.  China is now producing four times the CO2 of the United States.  If you are worrying about dying from climate change, why would you buy anything from China. 

This is why I think climate change is all about making money.  The greedy CEOs in this country have brought the communist country China to power by transferring all of these manufacturing jobs to China and letting them grow out of the dark ages.  This has made the world much more dangerous. 

Here is a short sidebar lesson on tariffs.  The economic textbooks say free trade is good.  Every country produces the products that they are most efficient at producing and trades with other countries.  An example would be aluminum smelting which occurs where electricity is very cheap because the process of creating aluminum is very energy intensive.  This benefits all countries.  What is never mentioned is this free trade principle is based on all exogenous variables being the same.  That means regulations, environmental laws, lawyers suing people or companies, countries such as China providing cheap capital to companies.  These all have to be the same between countries for there to be real free trade.   If you think China has the same environmental laws as the US you are kidding yourself.  They also don’t have to deal with the multitude of lawsuits US companies have to deal with.  US companies don’t normally receive subsidies from the government until President Biden came along.  So, there may be some free trade in the world.  None of it is occurring in China. 

When I started working for an electric utility in the 1980s, the mantra was 1/3 customers, 1/3 employees and 1/3 shareholders.  Each of those groups was to be considered when making decisions.  This has migrated to 100% shareholders over the years.  If this old mantra was in place now electric utility executives would have fought the environmentalists because they know electric prices would rise dramatically.  My salary would also be more than double what it is now if I kept the same relationship of salary to the CEO.  And this compares a new engineer to a 40-year veteran engineer.    The point I am making is it is all about shareholders now.  And customers don’t have an alternative.  At least employees can leave. 

The Coverup

Design engineers and plant engineers in electric utilities realize renewables are a big scam.  Rates will increase dramatically, and we may have blackouts too.  Unfortunately, it is not a good career move to speak out and unscrupulous engineers go so far as to lie to stay in the graces of management. 

The only way to make a windmill markedly more efficient is to make it bigger.  In my experience, the newer windmills that are larger only have a 10-year life on land.  The older, smaller windmills have a 15-year life on land.  Windmills installed in the ocean only have a 5-year life.  Solar plants have a 15–20-year life.  Currently there is no recycling options for windmill blades.  They are also still working on recycling options for solar installations.   Where is all of this waste going to go?  

There is another wind siting concern.  As more and more sites get developed, the remaining choices may have less wind resource availability and other problems.  Some good sites left are impacted by endangered bat species.  There is now a windmill location in NE Missouri that is not operating for about 6 months a year because of endangered bat species. 

The availability difference between renewables and coal plants is stark.  Most coal plants have a 60-days coal storage pile on site.  The plants can pump electricity out for 60 days even if their coal supply is shutoff.  Midwest utilities know how to handle frozen coal problems in winter due to extreme temperatures.  Windmills have restrictions on cold weather operations to protect the blades and gearboxes.  These values have been decreasing.  Five years ago, they could not operate under 9 degrees F.  These cold spells often are characterized by light winds so just when you need the power the most, the windmill can’t provide it.  And if you get a snowstorm, ice storm or cloudy days solar isn’t much help.  Ice storms can also shut down windmills.  None of these things shut down a coal plant.  Coal plants can run at 25 below zero in the Midwest.  I have witnessed this three times in the past 35 years. 

Every windmill and solar installation that is built requires backup.  If you build a 100 MW wind installation, you need to build a 2400 MWhr battery farm to store one day’s worth of energy. This is 100 MW x 24 hours = 2400 MWhrs.   A Tesla 100 MW power wall can store 400 MWhrs of electric energy.  So you would need six 100 MW Tesla power walls to store one day’s worth of wind energy.  The cost of the power wall far exceeds the cost of the windmill or the solar installation.  Utility executives have finally realized this.  That is why they are now building natural gas power plants with abandon.  They know windmills and solar cannot provide a reliable electric grid.  They are happy to build any kind of plant because they all go into the rate base.  Shareholders are happy.  Customers are hurt badly.

All these natural gas plants being built are interruptible in winter.  That means the pipeline companies will shut off the gas flow to natural gas power plants when the weather gets cold because they must supply the natural gas to natural gas heating customers.   Electric utilities are not willing to reserve the pipeline capacity because the demand charges are so high.   You would need dedicated new pipelines to feed all these natural gas power plants.  That would increase the cost of the plants exponentially.  Instead, utilities are building 3-day oil storage on site.  They hope a 3-day cold snap could be met with oil storage.  Historically that is not a good bet.  In 1982 there was a 24-inch snowstorm with a cold snap that lasted longer than 3 days.  Also, they will be depending on the combustion turbine to be operating successfully on possibly subzero temperatures when the oil-fired part has not been used the rest of the year. 

The extra use of natural gas year-round for electric power will increase natural gas prices for gas heating customers.  So, consumers will face a double whammy:  Rising electric rates and rising gas rates. 

Consumers are also impacted by the drive to electrify home heating.  Environmentalists are pushing heat pumps.  This may be an acceptable alternative to gas heating in the south.  In the Midwest and North, it is a risky proposition.  It is notable that many utility engineers are installing backup generators to power their gas furnaces.  A small generator can power the furnace blower and controls in winter.  Whether you lose electricity due to insufficient power production or an ice storm, you can stop your house from freezing. With the preponderance of two-story houses, you can no longer drain your water piping like in the old days with ranch houses with unfinished basements.   Activists do not acknowledge that installation of heat pumps may cause many people to lose heat and suffer damage to their homes which will be expensive to repair. 

There is another ignored problem with the transition away from coal.  There are not enough pipefitters, electricians, millwrights, carpenters, iron workers, boilermakers, laborers and engineers to build all of these plants.  There are not enough line workers to build all the transmission lines to transmit the electricity from good wind locations to the population centers.  We are shutting down perfectly good coal plants with many useful years of life left.  We are basically destroying our capital base of coal plants. 

Now all the computer companies such as Google and Microsoft want to build data centers to increase their earnings.  This occurs after their efforts to eliminate coal plants for the last 20 years.  They don’t care about electric rates for the consumer.  They are just worried about increasing their profits. 

In conclusion, we should be bringing back coal plants if they haven’t already been torn down.  I believe that current policies are causing an energy crisis. 

Caiazza Discussion

I agree with “Design Engineer’s” conclusions.  I also want to make the point that every time I have talked to a different power plant expert, there always has been a new concern or two raise that I did not know anything about.  In this case, the expected lifetimes of the large windmills in the Midwest are shorter than I expected.  Some may quibble with these numbers but there simply isn’t a lot of experience with the gigantic windmills.

The biggest takeaway is that we are in the midst of a great experiment where short-sighted policies are shutting down coal plants that have a proven record as a reliable source of electricity in extreme weather.  At the same time, there is a drive to electrify home heating which puts a greater emphasis on the need for reliable electricity during extremely cold spells.  These policies will also raise consumer prices. 

I believe the transition away from coal-fired power plants will cause an energy crisis that will do more harm than good.  Consumers will pay more for less reliable power risking the potential for catastrophic blackouts.

My thanks to Design Engineer for his submittal.