By Christopher Hopkins, The Saint Consulting Group
On this first day of spring you can now take time to reflect on the winter past, the endless snow storms, the “polar vortex” that drove temperatures plunging, the “wind chill factor” that we all now generally understand.
This winter was so cold that Chicago set a record for days of below zero temperatures and even in my home in Tennessee, the heart of the south, we experienced temperatures below zero.
As you pause and think about these experiences expect one more dramatic reminder of the winter, the gift that keeps on giving, your heating bill. As your eyes adjust to the sticker shock, remember the two reasons for that bill; of course you used more fuel during the vortex, and the cost of electricity has dramatically increased as well. For example, on the eastern seaboard, some natural gas prices soared seven-fold in January from a typical $13.61 mm/btu to $90.
While there were no rolling blackouts this winter during the increased demand, there were efforts to curtail consumption. Twice in January an Ohio utility asked its customers to reduce their use of natural gas for home heating. The PJM Regional Transmission Organization asked more than 60 million consumers to conserve natural gas, these requests came during the most brutal winter in recent memory. You might think, with winter over, hopefully it will be a long time until customers have to experience soaring prices and shortages again.
Well think again. Chances are things will get worse in the very near future. According to this New York Times article, during this past polar vortex, all energy production across the country was operating at over 90% production. That is all sources – coal, oil, natural gas, nuclear, wind, hydro and even wood – everything you can imagine and everything that was available. The problem is what lies ahead. Many of these power plants that were running at full capacity this winter are scheduled to be “retired” over the next few years as the EPA continues with its enforcement of even stricter air standards in the campaign to completely shut down the coal industry.
Since 2009, 392 coal fired power plants have closed across the United States with a capacity loss of 100,000 megawatts. This trend is scheduled to continue, over the next two years there an additional 65 power plants will be “retired”, taken off line and the grid capacity will lose 26,567 megawatts.
During a time of increased demand, supply will drop as there is not near enough power plants currently under construction to even begin to make up the difference. Now I know it has been years since I studied economics in college, but I remember enough to predict that if you combine increased demand and decreased supply, the cost to the average consumer will increase. Coal is the most cost efficient energy source we have in the United States, a source that we have in abundance, no worries of geopolitics being in play, no worry that there will be a war in middle of the coal fields interrupting supplies.
Many people have already seen heating bills increase, but they will only get worse with some predicting the average utility bill will more than triple over the next three years. Other countries have already experienced this phenomenon. Germany, for example, has converted to “green energy” over recent years and has see a 61% increase in the cost of energy. The cost is rising so much that they have recently begun converting their energy production back to coal.
Why the rush to eliminate our coal inventory? Shutting down these plants will have absolutely no effect on the global generation of Co2 levels due to the increase in coal use in emerging countries such as India and China opening a combined four coal fired power plants weekly. You combine this with other countries, and there is a plan for over 1,000 coal power plants around the world.
It is time to start coming into the 21st century for the United States. There is clean coal technology that vastly reduces Co2 emissions and more efficient technology currently in the testing phase. Not only is China building so many coal plants, they are also building record number of solar power stations, more nuclear power plants, wind farms, they have adopted a strategy of accessing all energy sources. This may not be a bad strategy for the US to adopt rather than being held hostage by some non governmental organizations and targeting economic energy sources.
Remember the headline that will scare the hell out of Congress in the coming years as people see their energy bills soar: “God help you when the people find out. And they always do.”
Click here for full New York Times report.
Christopher Hopkins is senior vice president for mining and aggregates for The Saint Consulting Group, email Hopkins@tscg.biz