NERC: The Grinch Who Stole Gridmas // California's Rooftop Solar Kibosh // Europe's $1 Trillion Energy Bill

NERC: The Grinch Who Stole Gridmas

The North American Electric Reliability Corp.'s latest Long-Term Risk Assessment for 2023-2027 says that much of the country is at high-risk of adequacy shortfall during normal peak conditions. To put that in plain English: most of America may not have enough electricity on hand for expected seasonal peaks. 

NERC's latest assessment repeats what the organization has been saying for years: the pace of the energy transition away from thermal generators and towards renewable energy is changing the structure of the grid in ways that continue to fragilize it. 

“We are living in extraordinary times, from an electric industry perspective,” John Moura, NERC’s director of reliability assessment and performance analysis, told the press during a call.

The major trouble spots are familiar: California and the Midwest. 

The Midcontinent Independent System Operator will face a 1,300 MW shortfall starting summer 2023 that will continue "to grow throughout the 10-year assessment period as coal, nuclear and natural gas generation retire faster than replacement resources are connecting" according to the report.

MISO said that NERC's findings echo its own. “MISO is facing a Reliability Imperative as the region undergoes transformational change, with sizeable segments of generation aging, the resource portfolio shifting to increasing amounts of wind and solar, and load shapes potentially changing with electrification,” Brandon Morris, strategic communications advisor for the grid operator, told Utility Dive. 

"California has been alleviating near-term capacity shortages by adding new resources and retaining generation that had been slated to retire," reports Utility Dive. "But 'variable resource output and changing demand could cause energy shortfalls that range from 1–10 hours.'"

Texas and New England are also facing elevated reliability risks, though not as severe as CAISO or MISO. Curiously, problems in the Southeastern power market evaded NERC's gaze. 

The coming cold front will put all of these regions to the test. Texas is already bracing for impact. "The Electric Reliability Council of Texas — the state’s grid operator — expects power demand to peak Dec. 22 at about 72.5 gigawatts," reports Bloomberg. "That would exceed the high of about 67 gigawatts that it had forecast this winter."

The forecast for Chicago, where I live, dips into the negatives at the end of the week. Stay safe, readers. 

California's Rooftop Solar Kibosh

In a rare spot of good news, California has scrapped its old net metering scheme for rooftop solar. The California Public Utility Commission voted unanimously to approve Net Energy Metering 3.0, which will cut benefits for rooftop solar owners by 75%. 

"Currently, average net metering rates range from $0.23 per kWh to $0.35 per kWh, and the new proposed decision cuts those rates to an average of $0.05 per kWh to $0.08 per kWh," reports PV Mag. This marks the largest export rate cut in American history.

"Payments were cut as a result of a reported cost shift where non-solar owners cross-subsidize solar owners for maintaining the grid," reports PV Mag. "The utility-backed concept suggests poorer Californians are paying higher utility rates to pay for lost profits that utilities endure in order to pay solar owner for delivering clean energy to the grid."

In other words, rooftop solar was previously a wealth transfer from the poor to the already comfortable or even wealthy. California represents 50% of the residential solar market. 

Europe's $1 Trillion Energy Bill

Europe is already bleeding cash in response to the energy crisis and winter has only just begun. It's a steep bill: $1 trillion since Russia invaded Ukraine. 

And the prospects for next year don't inspire hope. "After this winter, the region will have to refill gas reserves with little to no deliveries from Russia, intensifying competition for tankers of the fuel," reports Bloomberg. "Even with more facilities to import liquefied natural gas coming online, the market is expected to remain tight until 2026, when additional production capacity from the US to Qatar becomes available. That means no respite from high prices."

But the emergency could last for years according to the think tank Bruegel. As we learned during the Covid lockdowns, economies don't work like light switches. Europe is currently scrambling to build more LNG import terminals as a medium-term solution.

Germany, for instance, built an LNG terminal in a few months according to the Wall Street Journal. Normally, it takes years. Still, an energy famine would shatter the European economy, especially its industrial sectors. 

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Conversation Starters

1. Japan is restarting more nuclear reactors to weather the energy crisis. "Japan confirmed a major nuclear power policy shift on Friday to tackle an energy crisis more than a decade after the 2011 Fukushima disaster prompted it to idle most of its reactors," reports Reuters. "Public opinion has been hostile towards nuclear energy since a massive earthquake and tsunami triggered a meltdown at the Fukushima Daiichi power plant, but the mood has shifted due to soaring energy costs amid the prolonged war in Ukraine and repeated power crunches in both summer and winter."

2. Texas shale is facing more production cost increases. "A series of recent earthquakes in Texas are poised to hike production costs even more for U.S. shale oil producers," reports Oilprice.com, "with regulators looking to crack down on some wastewater disposal wells. Wastewater is a vital part of the oil and gas production process, with water that comes up along with the oil and gas being injected back into the ground. This wastewater reinjection, however, has been accused of contributing to earthquakes in the area, bringing a new level of scrutiny to the practice."

3. Coal's future looks tight. "The demand for seaborne thermal coal will likely rise 3%-4% globally in 2023, but production may not match up to that scale as current unwillingness of banks to fund coal projects, coupled with the after-effects of the pandemic and the Russia-Ukraine war are still seen as major impediments," reports S&P Global. "The climate hysteria is increasingly restricting institutional funds and banks from investing in the coal sector, leading to a situation where coal demand would rise but supply would be limited, hence prices could remain elevated at close to 2022 levels," Dileep Srivastava, independent director and corporate secretary at Bumi Resources, told S&P Global Commodity Insights.

Crom's Blessing