Jonathan Lesser
As state and federal policies require nearly all end uses to be electrified to reduce carbon emissions from fossil fuels. For example, 18 states have adopted California's Advanced Clear Car II rules, which require an increase in the share of electric vehicles in new vehicle sales to reach 100% by the 2035 model year. In 2019, New York City enacted Local Law 97, requiring all residential buildings over 25,000 square feet to be electric by 2035.
Mandatory regulations for electric vehicles (EVs), as well as space and hydrothermal electrification, could double electricity consumption and peak demand. Coupled with policies requiring the country's electricity supply to be sourced from zero-emission sources, particularly intermittent wind and solar generation, not only will electricity prices continue to rise, but the ability to meet growing consumer demand will become even more problematic.
One would think that a directive asking consumers to switch to electricity would recognize the need for additional infrastructure to meet growing demand. Someone would be wrong. Not only will additional generation resources be needed to replace shuttered coal and natural gas plants, but new transmission lines, transformers and upgraded distribution lines will be needed to handle the increased load, particularly during times of peak demand, such as early evening hours.
The cost of this infrastructure will be high. The infrastructure required for future all-electric vehicles alone could cost between $200 and $4 trillion. Adding infrastructure to meet the growing demand to switch from space and water heat to electric heat pumps will result in higher costs, as policymakers propose.
The OPEC oil embargo of the 1970s clearly demonstrated the link between energy prices and economic growth. The embargo increased the cost of producing most goods and services, fueled inflation, and pushed the U.S. economy into recession. The same relationship applies to electricity, especially as it becomes the “fuel” for more end uses: higher electricity prices mean slower economic growth, leading to lower living standards and greater economic hardship for consumers.
Among the national grid operators, dual policies mandating greater electrification and requiring it to be met primarily with intermittent wind and solar power are raising concerns that reliability will be affected, leading to widespread blackouts. For example, the New York Independent System Operator estimates that nearly 30,000 megawatts (roughly the size of 30 nuclear power plants) of “dispatchable non-emission resources” will be needed by 2030. Scale”, in fact, they do not exist. To assume that a non-existent power generation technology will be invented, commercialized and deployed at scale in just six years is both a technical and economic fantasy.
Therefore, to address the lack of required electricity infrastructure, policymakers plan to limit the amount of electricity consumers must use. The idea is to “manage” electricity demand, rather than build the necessary infrastructure to allow consumers to get the power they need when they need it.
For residential customers, mechanisms for doing this include time-of-use pricing, similar to the “peak hour” pricing used by Uber, which increases prices when demand is greatest; direct load control, where utilities can control when and where consumers can The number of large electrical appliances used. Home EV chargers will be the largest users of electricity in many households, and as they proliferate, they will place the greatest demands on local grids. Another idea is for local utilities to use EVs as a resource – draining EV batteries when the utility needs extra power to meet demand.
For large commercial and industrial customers, it includes interruptible contracts where the local utility or grid operator can shut off a customer's power for a specified period of time in exchange for lower electricity prices.
Electricity consumption can be “managed” or even reduced by limiting consumers' electricity use or charging exorbitant prices when they need it most. But there are real economic costs to doing so, which policymakers are ignoring.
The result will be greater inconvenience to consumers, higher costs, lower economic growth and greater economic hardship. While some environmentalists may view this result as a “feature” rather than a “flaw,” presumably most consumers will not.
Jonathan Lesser is a senior fellow at the National Center for Energy Analysis and president of Continental Economics. This article is adapted from a forthcoming report on electricity planning and infrastructure.
This article was originally published by RealClearEnergy and provided via RealClearWire.
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