By Jonathan Lesser
Federal and state policies mandate electrification of virtually all end-use vehicles to reduce carbon emissions from fossil fuels. For example, 18 states have adopted California's Advanced Clear Car II rules, which require an increasing percentage of new cars sold to be electric, up to 100% for the 2035 model year. In 2019, the City of New York enacted Local Law 97, which requires all residential buildings with a floor area larger than 25,000 square feet to convert to electricity by 2035. Other states, such as New Jersey, are aiming to convert all residential heating to electricity.
Together, mandates for electric vehicles (EVs) and electrification of space and water heating are likely to double electricity use and peak demand. Combined with policies mandating that the country be supplied with zero-emission resources, particularly intermittent wind and solar power, not only will electricity prices continue to rise, but it will also become more difficult to meet increased consumer demand.
You would think that consumers who are required to switch to electricity would also recognize the need for additional infrastructure to meet the increased demand. But that would be wrong. It's not just the additional generation resources to replace the coal and natural gas plants that are being retired, but also the new transmission lines, transformers and improved distribution lines that will be needed to handle the increased load, especially when demand is at its peak, such as in the early evening hours.
This infrastructure will be costly. The infrastructure needed for an all-electric vehicle future alone is likely to cost between $2 and $4 trillion. Additional infrastructure to meet the increased demand from switching from space and water heating to electric heat pumps, as proposed by policymakers, will drive up costs even further.
The OPEC oil embargoes of the 1970s clearly demonstrated the link between energy prices and economic growth. By increasing the cost of producing most goods and services, the embargoes exacerbated inflation and plunged the U.S. economy into recession. The same link applies to electricity, especially as electricity becomes the “fuel” for more and more end users: higher electricity prices mean lower economic growth, which leads to lower living standards and greater economic hardship for consumers.
The twin strategies of national grid operators, forcing greater electrification on the one hand and requiring that it be met primarily by intermittent wind and solar generation on the other, are raising fears that reliability will suffer and widespread blackouts could occur. For example, the New York Independent System Operator estimates that it will need nearly 30,000 MW—about the size of 30 nuclear power plants—of “controllable zero-emission resources” by 2030. Although NYISO states that DEFRs are “not yet available at commercial scale,” they do not actually exist. To assume that a nonexistent power generation technology will be invented, commercialized, and deployed at scale in just six years is a technological and economic fantasy.
To address the lack of necessary electrical infrastructure, policymakers instead plan to restrict access to the electricity that their regulation requires consumers to use. The idea is to “manage” electricity demand rather than building the necessary infrastructure to give consumers access to the electricity they need, when they need it.
For residential customers, this includes time-based pricing, similar to Uber's “surge” pricing, which raises prices when demand is highest, and direct demand response, where utilities control when and how much consumers can use their large electrical appliances. Home electric vehicle chargers will be the largest electricity consumers for many households and, as they become more widespread, will place the greatest demands on local power grids. Another idea is for local utilities to use electric vehicles as resources, discharging the EVs' 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 network operator can cut off the customer's electricity for a set period in exchange for a lower electricity price.
Electricity consumption can be “managed” or even reduced by limiting consumers’ access or charging high prices when they need it most. But this has real economic costs that policymakers have so far ignored.
The result would be greater inconvenience for consumers, higher costs, lower economic growth, and greater economic hardship. While some environmentalists consider such an outcome a “feature” rather than a “bug,” most consumers would probably disagree.
Jonathan Lesser is a senior fellow at the National Center for Energy Analytics and president of Continental Economics. This article is adapted from a forthcoming report on electric planning and infrastructure.
This article was originally published by RealClearEnergy and made available through RealClearWire.
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