NERC's Winter Warning // The End of Cheap Renewables? // America Responds to Accusations of "Wartime Profiteering"

NERC's Winter Warning

The North American Electric Reliability Corp. has to repeat itself. Over the summer, NERC warned that a substantial portion of the American grid was vulnerable to blackouts. Texas and California barely made it through the season. Now, it's winter. And the outlook remains grim. One quarter of Americans are in danger of blackouts during an extreme weather event.

“The trend is we see more areas at risk, we see more retirements of critical generation, fuel challenges and we are doing everything we can,” John Moura, NERC’s director of reliability assessment, said. “These challenges don’t kind of appear out of nowhere.”

NERC's winter risk assessment reports that the Midwest, New England, part of the Southeastern seaboard, and Texas are all vulnerable to extreme weather conditions. The most vulnerable section is the Midwest, which is stewarded by the Midcontinent Independent System Operator. Since last winter, MISO's reserve margins have fallen by over 5%.

"Nuclear and coal-fired generation retirements total over 4.2 GW since the prior winter. Declining reserves are the result of few resource additions," reports NERC. "An extreme cold-weather event that extends deep into MISO’s area could lead to high generator outages from inadequate weatherization in southern units and unavailability of fuel for natural-gas-fired generators." MISO's success also relies on wind, which offers no guarantees for performance.

The Lone Star state's in trouble too. Most of Texas's capacity additions have been renewables, which fail to perform in extreme weather conditions (like they did during ice storm Uri). Plus, Texas's power demand has increase by 7% since last winter. The Electricity Reliability Council of Texas can't import power from its neighbors, which adds to its precarity. Though it should be noted, one of its neighbors is MISO, so it's not clear if MISO would have anything to export even if they were connected.

Meanwhile, New England, where 33% of households use oil for home heating, is already tight. "Distillate inventories in the Northeast have fallen 44% compared to the same point last year," reports the Washington Examiner. "The limited inventory has forced wholesalers to ration supplies and sent prices climbing — up 65% this October compared to last year." Not to mention New England competes with the rest of the work for LNG due to a lack of pipeline infrastructure and the Jones Act, which disallows foreign-owned ships from moving commodities between American ports. Natural gas makes for over half of ISO-NE's generation.

It appears the American electric grid is becoming more fragile by the year. “As the demand for electricity risks outpacing the available supply during peak winter conditions, consumers face an inconceivable but real threat of rolling blackouts,” Jim Matheson, chief executive officer of the National Rural Electric Cooperative Association, told Bloomberg. “It doesn’t have to be this way. But absent a shift in state and federal energy policy, this is a reality we will face for years to come.”

The End of Cheap Renewables?

Siemens Gamesa CEO is getting dragged down by its wind power arm. The CEO warns that the energy transition is in grave danger. Supply chain issues and the energy crunch are hammering the renewables sector.

“Never forget, renewables like wind roughly, roughly, need 10 times the material [compared to] ... what conventional technologies need,” he said. “So if you have problems on the supply chain, it hits … wind extremely hard, and this is what we see. And this, unfortunately, obviously, leads to the situation [where] … it impacts the overall group results substantially.”

"In a statement, Siemens Energy said its adjusted earnings before interest, taxes, and amortization — and special items — had fallen to 379 million euros (around $393.8 million) compared to 661 million euros for the 2021 fiscal year," reports CNBC.

“But there’s no question — if we don’t resolve it as an industry, we are missing a substantial part of the energy transition, and we’ll fail with the energy transition. So there’s no option but to fix it," he added.

America Responds to Accusations of "Wartime Profiteering"

Earlier in the season, French President Emmanuel Macron said, “The North American economy is making choices for the sake of attractiveness, which I respect, but they create a double standard," adding, “they allow state aid going to up to 80% on some sectors while it’s banned here – you get a double standard.”

Now the American officials are biting back. “What’s happening is the companies that hold those long-term contracts with US LNG producers, they’re marking that up and earning that margin in the European market,” Brian Crabtree, an assistant secretary at the Department of Energy, said. “It’s not the US LNG company, it’s basically European-headquartered international oil companies and traders.”

The EU has a ban of fracking despite the continent's large reserves. They ditched Russian gas for American LNG, but seems to have forgotten that meant swapping one dependence for another. Traders are acting like traders, companies like companies, and, of course, politicians like politicians.

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Conversation Starters

1. In a strange twist, it now appears that Europe has too much oil. "Crude oil traders have pointed to Europe’s ability to source crude oil from Latin America, the Middle East, and the United States as the main cause for European refiners breathing a sigh of relief. Asia, too, has scooped up less crude oil than analysts were predicting, thanks to China’s neverending battle to obtain the elusive zero-covid goal," reports Oilprice.com.

2. The Federal Energy Regulatory Commission has made the way for the removal of America's largest dam. Last Thursday, FERC cleared the way for restoration of over 400 miles of the Klamath River by 2024. "The commission granted a request from PacifiCorp to surrender licenses and decommission the Lower Klamath Project’s four hydroelectric dams in Oregon and California — the J.C. Boyle, Copco No. 1., Copco No. 2 and Iron Gate — ending decades of debate and review," reports E&E News. “Some people might ask why in this time of great need for zero-emissions energy, why is the licensee agreeing to remove the dams?” FERC Chair Richard Glick said before the vote. “It doesn’t happen every day.”

3. Over the weekend, I talked with Trish Wood, host of On the Fringe, about the Just Stop Oil protests, Christopher Lasch's The Culture of Narcissism, the energy crisis, anti-nuclearism, and more. You can check it out here:

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