Monday, September 05, 2022

LACK OF CENTRAL PLANNING

U.S. Solar Bottlenecks Are Causing A Resurgence In Coal

  • Coal has seen a resurgence since the beginning of the pandemic.

  • The Ukraine war aided in coal’s return as the West scrambled to rid itself from Russian energy.

  • Solar bottlenecks too are fueling a rise in coal consumption in the United States.

For years, academics and journalists alike have been reporting the terminal decline of coal in the United States. In 2018, Vox reported that while the sector was “flailing about desperately for subsidies, tax breaks, and regulatory loopholes — the kinds of political favors that have kept it afloat for so long — at this point it is merely delaying the inevitable.” But those reports could not have predicted the pandemic, or the Russian war in Ukraine, or the hiccups in renewable energy supply chains that have converged along with high summer temperatures to create the “perfect storm” of energy setbacks that are currently reviving the domestic coal sector.

It’s true that coal is not now, and will likely never again be anywhere close to peak production levels in the United States. In the last 15 years domestic coal production levels have fallen by half as the dirtiest fossil fuel has fallen out of favor with the general public and been economically undercut by the shale revolution. After a flood of cheap natural gas gushed out of the West Texas Permian Basin and saturated the U.S. energy market, followed by a huge decline in costs for solar and wind energy, coal plants began to shut down at a steady clip – until now. 

According to a report this week from the Financial Times, a growing list of U.S. electric utilities are extending the lives of their coal-fired plants past their planned closure dates. Many of them say that delays in solar energy installation are to blame. “Many of the operators are attributing the deferral of plant closures to delays in solar or solar [and battery] storage projects,” Morris Greenberg, an analyst at S&P Global Commodity Insights, told FT. 

For one thing, solar installments have slowed down severely in 2022. This seems to be due to a perfect storm of issues in the solar panel supply chain: difficulties receiving parts, legal issues concerning illegal labor and trade practices in solar manufacturing in Southeast Asia and China, and hotter and longer heat waves attributed to global warming. Meanwhile, in regions of the United States where solar is being produced in large quantities, bottlenecks in the grid aren’t allowing that energy to be transported to meet demand. Instead, it’s languishing on the grid where it was produced and pushing energy prices negative. So even if solar panels were being installed at the same rate of last year, infrastructure failures would still leave utilities between a rock and a hard place.

The extension of coal production is bad news for the country’s – and by extension the world’s – climate pledges. As disappointing as the setback may be, it may not be all that surprising. Just last year at the COP26 global climate conference, the United States neglected to take a strong stance against coal. “The Biden administration arrived this month at international climate talks in Scotland with the intent to prove the United States was again ready to lead the fight against global warming,” Scientific American reported at the time. “But when more than 40 countries signed a pledge to phase out coal in the coming decades, the United States was conspicuously absent.” Economists commented that instead of riling up political adversaries and coal-country constituents, the Biden administration preferred to let the market continue its course.

We are now seeing the consequences of that inaction. The United States, of course, is far from the only country begrudgingly returning to coal. Across the world, an unprecedented energy squeeze is leading governments to source energy from wherever they can get it. Europe and China are seeing a coal renaissance in response to the squeeze, while Japan has done the unthinkable and proposed a return to nuclear energy in a stunning policy reversal. Keeping the heat on this winter has pushed climate concerns to the back burner. 

While the focus on the immediate is understandable, it gives cause for concern for future inevitable energy shocks as the world attempts to embark on a green energy transition in the midst of worsening climatic conditions. If global leaders return to coal every time there is an upset in the energy sector, meeting climate goals will be all but impossible. Instead of focusing merely on ramping up renewable capacity, pairing capacity with better renewable infrastructure and stop-gap measures are needed to make these inevitable hiccups as smooth as possible.

By Haley Zaremba for Oilprice.com 

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