By Terry Fitzpatrick, Energy [Utilities] Association Of PA

This guest essay was first published in the Pittsburgh Post-Gazette on August 6, 2024--

What can Pennsylvania lawmakers do about a looming regional power shortage that they didn’t cause and can’t easily fix? This dilemma poses the most important energy issue facing the Commonwealth.

PJM Interconnection operates the regional electric grid serving 13 states and the District of Columbia. It issued a report last year warning that, under current trends, there may not be enough electric generating capacity to keep the lights on by 2028–2030.

Demand and policy

The problem results from a combination of circumstances.

First, demand for electricity is growing due to the proliferation of electric vehicles and data centers that power artificial intelligence.

Second, coal and natural gas-fired power plants that are work horses of the grid are retiring prematurely both because of the climate policies of some states (not Pennsylvania) and because the federal government discourages or bans fossil-fuel power plants and give preferential treatment to renewable energy.

As a result, PJM’s interconnection queue now consists almost entirely of renewable energy and battery projects. These technologies alone can’t replace the reliability value of power plants capable of operating around the clock.

Pennsylvania’s energy policies have not caused this problem. We generate more electricity than any other state in PJM, and we have not forced the closure of natural gas and coal plants.

Our renewable energy requirements are modest — 8% of the electricity we use — which should be enough to kick-start these technologies in what was intended to be a free market.

What can lawmakers in Pennsylvania do to avoid a supply shortage?

The best solution would be for other states and the federal government to moderate their climate policies to preserve reliable electricity supplies.

But Pennsylvania lawmakers can’t control those decisions, and these other jurisdictions show no sign of changing course.

Given this reality, any solution Pennsylvania lawmakers pursue will be second-best.

Since the restructuring of the electric industry in Pennsylvania over two decades ago, we have relied on incentives in PJM’s wholesale markets to ensure enough power plants were built to guarantee adequate electricity supplies.

That worked until recently, but we now face the prospect that these markets have been damaged and can no longer be relied on to ensure adequate supplies.

Keep the lights on

To keep the lights on, it may unfortunately become necessary for the government to intervene in the market to support power plants capable of operating 24/7 to offset the mandates and subsidies given to renewable energy.

While this problem is being studied and solutions debated, every piece of energy legislation in the General Assembly should be judged by how it affects the problem of prematurely retiring power plants and maintaining reliable electricity supplies.

The first law of holes is if you find yourself in one, stop digging.

[Note: PJM reports it has cleared 38,000 MW in new electric generation projects, most are renewables and/or storage.  In Pennsylvania, PJM said it expects to clear 91 more projects with a generation capacity of 3,696 MW in 2024 and 2025.  So, why aren’t these projects coming online?  Read more here.]

Terry Fitzpatrick is the president and CEO of the Energy Association of PA and a former chairman of the Pennsylvania Public Utility Commission.

NewsClips:

-- Bloomberg: It Will Take More Than Record Payouts From PJM’s One Auction To Spur New Power Plants; Takes At Least 3 Years To Building A Gas-Fired Power Plant

-- Utility Dive: Dominion Energy Says Its Ratepayers Will Be Insulated From PJM Capacity Auction Record High Prices

-- Utility Dive: Constellation Energy Raises 2024 Profit Guidance Amid PJM Load Growth, Tighter Power Supplies 

Resource Links:

-- PJM Electricity Auction Price 9 Times Higher Than Previous Auction-- $269.92/MW-Day For 2025/26 Delivery Compared To $28.92/MW-Day In 2024-25; Extreme Weather Risk Big Factor    [PaEN]

-- Natural Resources Defense Council: The Cost Of Slow-Walking Clean Energy Can Be Seen In Latest PJM Electricity Prices  [PaEN]

-- PennFuture: Dramatic PJM Electricity Price Increases Due To Forced Outages Of Gas Power Plants; Huge Backlog Of New Generation Projects; Demand Growth Driven By Data Centers, Cryptocurrency Mining  [PaEN]

-- Kleinman Center For Energy Policy: The High Price Of Failing To Transition To Clean Energy In PJM Footprint; Next PJM Auction Is In December - By John Quigley, Senior Fellow, Kleinman Center  [PaEN]

[Posted: August 7, 2024]

8/12/2024