Transition Cause & Effect

Wholesale and Retail Electricity Price Increases

The ongoing transition of the US energy economy to an “all-electric everything” energy economy can be analyzed and understood as a set of causes and effects.

CAUSE: The underlying cause which precipitated the transition is the amplification of the mild global warming currently underway by political opportunists into a “crisis”, “existential threat” or “emergency”.

EFFECT: The resulting effect is the adoption of a “global” effort to achieve anthropogenic greenhouse gas emissions of “Net Zero by 2050”, primarily by replacing fossil electricity generation with wind and solar generation and existing fossil fuel applications with electric applications.

CAUSE: Installation of intermittent wind and solar generation increased investment in electricity generation, since these intermittent sources require full backup when they are unavailable.

EFFECT: Wholesale electric prices increase.

CAUSE: Intermittent renewable generation displaces generation from fossil powerplants, reducing fossil powerplant output and increasing fixed powerplant cost recovery per unit of output.

EFFECT: Wholesale electric prices increase.

CAUSE: Renewable generation output price is adjusted up based on price of the last increment of fossil generation output acquired to meet grid demand.

EFFECT: Wholesale electric prices increase.

CAUSE: Electric end use transition increases grid demand, driving increase in intermittent renewable generating capacity and requirement for full backup.

EFFECT: Wholesale electric prices increase.

CAUSE: Electric end use transition increases grid demand, driving increase in grid transmission capacity.

EFFECT: Retail electric prices increase.

CAUSE: Electric end use transition increases end use electric demand, driving increase in grid distribution capacity.

EFFECT: Retail electric prices increase.

CAUSE: Remote location of renewable generation requires grid expansion to connect the larger number of smaller generators.

EFFECT: Retail electric prices increase.

CAUSE: Resistance to increased fossil generation capacity as renewable backup requires addition of electricity storage and generating capacity. Storage cost is 2.5 times the cost of natural gas combined cycle generation per kW and approximately 30 times the cost per kWh.

EFFECT: Wholesale electric prices increase.

CAUSE: Fossil generation capacity is shuttered as the result of government edict or unsustainable economics and is replaced by additional renewable generation plus storage sufficient to render the intermittent generation dispatchable. Undepreciated fossil generation asset value is securitized and recovered through rates.

EFFECT: Wholesale electric prices increase.

CAUSE: Intermittent renewable generation life expectancy is approximately half of fossil generation life expectancy, requiring more rapid depreciation.

EFFECT: Wholesale electric prices increase.

CAUSE: Electricity storage life expectancy is approximately one quarter of fossil generation life expectancy, requiring more rapid depreciation.

EFFECT: Wholesale electricity prices increase.

SUMMARY: Numerous aspects of the transition to an “all-electric everything” energy economy contribute to an increase in wholesale and retail electric rates, rather than to the promised reductions which were supposed to result from the conversion to renewable generation. The magnitude of the increases might be reduced in the future if electricity storage costs can be reduced. However, the proponents of the transition appear unwilling to wait for the evolution of storage technology.

Originally published here.