The California Conundrum

California has sunk billions into renewable energy yet electricity prices have leapt 80% since 2008.

“California’s surging electricity costs have coincided with increasing renewable energy mandates and the closure of the San Onofre Nuclear Generating Station in 2012,” writes Robert Bryce. “Since 2008, when Schwarzenegger mandated renewables in the electric sector, California’s residential electricity prices have increased more than three times faster than those in the rest of the country…[r]esidential electricity prices in the state jumped by 12.4 cents per kilowatt-hour while prices in the rest of the country increased by less than four cents per kilowatt-hour.”

And despite the massive clean energy buildout, California’s emissions are flat.

Part of the reason California has stalled in emissions reduction has to do with the necessities of electricity reliability. Wind and solar are intermittent and non-dispatchable—their output is inconsistent and they cannot be switched on when they’re needed. Natural gas turbines tend to fill in the reliability gap, as they did during August’s heatwave when natural gas served around 60% of the state’s demand when solar dropped off the grid.

Thus, renewables only spare fuel use up to a certain point. Beyond a certain level of penetration, wind and solar lock in natural gas. A working paper from the National Bureau of Economic Research found that for every 0.88 MW of solar and wind you install, the grid needs 1.0 MW of fossil fuel back-up to maintain reliability. Couple that with the reliability problems wind and solar create at scale, and citizens become incentivized to provide reliability of their own with generators. In 2021, California’s back up diesel aggregation amounted to 15% of the state’s generating capacity—fourteen times the size of the state’s battery fleet that year. Ninety-percent of those generators are diesel powered.

California appears to have reached the point of diminishing returns when it comes to renewables.

But the high cost of green dreams is even worse than the emissions issue. Rising energy prices will also exacerbate the gap between the rich and poor, a problem that already troubles the Golden State. A 2021 report from the Public Policy Institute of California, cited by Bryce, found that “More than a third of Californians are living in or near poverty. Nearly one in six (16.4 percent) Californians were not in poverty but lived fairly close to the poverty line … All told, more than a third (34.0 percent) of state residents were poor or near-poor in 2019.”

Natural Gas’s Impressive 2022 Track Record

The natural gas system had an impressive showing last year, according to the American Gas Association.

The natural gas system set a new record for total daily domestic demand on December 23, 2022, delivering 146.8 billion cubic feet (Bcf) of energy on the coldest day of the year.

How does that compare to the electricity sector on the hottest day of the year?

On that day, the electric grid delivered a record 15,465 GWh of energy, or about 52.8 million MMBtu in total daily energy. That’s a third of the 164.3 million MMBtu delivered by the natural gas system on the coldest day.

This means that the gas distribution system can deliver three times as much energy per 24 hours as the electric grid on the hottest day. Policy that pushes to electrify everything should take into consideration just how taxing that will be on the electricity sector on potentially fatally cold days.

Germany’s $138 Billion Green Energy Plan

Germany continues to bet big on green. The country’s high-voltage grid firms, Amprion, 50Hertz, TenneT, and TransnetBW, have presented a development plan that calls for a whopping investment of €128.3 billion ($137.72 billion) until 2045.

The plan aims to string 14,197 kilometers (8,821.6 miles) of power transmission lines, with 5,742 km (3,567.9 miles) of onshore cables, and 8455 km (5,253.7 miles) of offshore cables, to enable the shift to net-zero.

“Germany aims to generate 80% of its 2030 power output from renewables like wind and solar energy, enabling it to meet a target of a 65% reduction in overall CO2 emissions compared with 1990,” reports Oilprice.com. “Berlin plans for the power sector to be 100% green by 2035 while assuming a doubling of power demand by 2045. The TSOs believe that to achieve this, installed power capacity must rise five-fold from today's level to reach 700 GW in 2045, with several grid measures initially planned for 2045 potentially brought forward.”

Germany will shut down its remaining nuclear plants this spring, terminating powerful sources of green energy.

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Conversation Starters

1. Aramco has cut a deal with China. “Saudi Aramco., the world’s biggest energy company, has signed agreements with Chinese partners to build a state-of-the-art refining complex in the northeast region of the Asian nation,” reports Bloomberg. “Aramco agreed to the deal with North Huajin Chemical and Panjin Xincheng to start construction on the refinery and petrochemical complex in Liaoning Province, Amin Nasser, the Saudi company’s president and chief executive officer, said at the China Development Forum in Beijing on Sunday.”

2. Strikes continue to hobble the French energy sector. “Strikes in France are impacting maintenance plans at EDF's nuclear plants, curbing production just as the utility hoped to rebound from a 34-year output low last year. At least 14 nuclear reactors in EDF's fleet of 56 have suffered some delay affecting their maintenance plans, data from the CGT union showed. France is witnessing widespread industrial action sparked by planned government policy changes including a move to raise the retirement age by two years,” reports Reuters. “For EDF that has meant nuclear power output in 2023 even lower than last year when it had swathes of reactors offline for repairs and checks for stress corrosion cracks. Those factors compounded a backlog in regular maintenance due to the COVID-19 pandemic. On Friday the average hourly nuclear availability until the end of the year was down by around 4% to 44 gigawatts (GW) from 46 GW in January when the strikes began, ICIS analysis showed.”

3. Over 60% of American households used natural gas in 2020. “Although space heating, water heating, and cooking are the most prevalent household uses of natural gas in the United States, it is also used for clothes drying, outdoor grilling, and heating pools and hot tubs,” reports the Energy Information Administration. “The share of households using natural gas for any end use in 2020 was highest in the Midwest Census Region and West Census Region, both at an estimated 74%. The Midwest and the West had the highest shares of households using natural gas for space heating (70% and 60%) and water heating (60% and 64%). The highest shares of households using natural gas to cook were the West (50%) and the Northeast (49%). The South had the smallest share of households using any natural gas, at 43%. The South was the lowest end-use region for space heating (35%), water heating (31%), and cooking (25%) in 2020.”

Crom’s Blessing