U.S. electricity prices may be going up for good
One recent study predicts the cost of electricity in California alone could jump 47% over the next 16 years, in part because of the state's shift toward more expensive renewable energy.
"We are now in an era of rising electricity prices," said Philip Moeller, a member of the Federal Energy Regulatory Commission, who said the steady reduction in generating capacity across the nation means that prices are headed up. "If you take enough supply out of the system, the price is going to increase."
In fact, the price of electricity has already been rising over the last decade, jumping by double digits in many states, even after accounting for inflation. In California, residential electricity prices shot up 30% between 2006 and 2012, adjusted for inflation, according to Energy Department figures. Experts in the state's energy markets project the price could jump an additional 47% over the next 15 years.
The problems confronting the electricity system are the result of a wide range of forces: new federal regulations on toxic emissions, rules on greenhouse gases, state mandates for renewable power, technical problems at nuclear power plants and unpredictable price trends for natural gas. Even cheap hydro power is declining in some areas, particularly California, owing to the long-lasting drought.
"Everywhere you turn, there are proposals and regulations to make prices go higher," said Daniel Kish, senior vice president at the Institute for Energy Research. "The trend line is up, up, up. We are going into uncharted territory."
New emissions rules on mercury, acid gases and other toxics by the Environmental Protection Agency are expected to result in significant losses of the nation's coal-generated power, historically the largest and cheapest source of electricity. Already, two dozen coal generating units across the country are scheduled for decommissioning. When the regulations go into effect next year, 60 gigawatts of capacity — equivalent to the output of 60 nuclear reactors — will be taken out of the system, according to Energy Department estimates.
Moeller, the federal energy commissioner, warns that these rapid changes are eroding the system's ability to handle unexpected upsets, such as the polar vortex, and could result in brownouts or even blackouts in some regions as early as next year. He doesn't argue against the changes, but believes they are being phased in too quickly.
The federal government appears to have underestimated the impact as well. An Environmental Protection Agency analysis in 2011 had asserted that new regulations would cause few coal plant retirements. The forecast on coal plants turned out wrong almost immediately, as utilities decided it wasn't economical to upgrade their plants and scheduled them for decommissioning.
The lost coal-generating capacity is being replaced largely with cleaner natural gas, but the result is that electricity prices are linked to a fuel that has been far more volatile in price than coal. The price of natural gas now stands at about $4.50 per million BTUs, more expensive than coal. Plans to export massive amounts of liquefied natural gas, the rapid construction of gas-fired power plants and the growing trend to convert the U.S. heavy truck fleet to natural gas could exert even more upward pressure on prices. Malcolm Johnson, a former Shell Oil gas executive who now teaches the Oxford Princeton Program, a private energy training company, said prices could move toward European price levels of $10.
"When those natural gas prices start going up again, we will feel it in the way of higher electricity prices," warns James Sweeney, a Stanford University energy expert.
Continued: U.S. electricity prices may be going up for good | Investor Discussion Board: IDB
Black Blade: Might be time to seriously consider going off-grid and upgrading to on site solar power as well as wood burning stoves. Getting started on the woodpile for next heating season here: