Arctic Blast Heating Up Battle Between Energy Lobbying Groups

Source: By Tim Loh, Bloomberg • Posted: Friday, January 5, 2018

Just about the only thing heating up in the eastern half of the U.S. right now is the debate over what power source should be trusted to keep homes warm and the lights on.

There are 99 nuclear generating units in the U.S. and every one of them is currently operating — “an incredible but unsurprising testament to nuclear’s reliability,” said John Keeley, spokesman for the Nuclear Energy Institute.

Coal has become the dominant power-plant fuel across the Midwest, thanks to higher natural gas prices tied to record demand for that rival energy source. “Coal shines when temperatures plunge,” said Luke Popovich, spokesman for the National Mining Association.

And while there’s bound to be challenges in such extreme cold, the good news is that grid operators are finding it easier than ever to handle the adverse conditions — that is, “thanks to an increasingly diverse electricity supply featuring more wind energy production,” said Evan Vaughan of the American Wind Energy Association.

Policy Battles

The competing explanations for what’s holding the U.S. power grid together thus far signal more battles ahead. Later this month, the Federal Energy Regulatory Commission is set to act on sweeping proposal by Energy Secretary Rick Perry that would bail out some coal and nuclear plants because they can stockpile months’ worth of fuel on site — something backers of the plan say will come in handy in moments like this, and that opponents say is unnecessary at a time of record gas production and steadily growing renewable energy.

“I’m sure both sides in the ongoing debate about natural gas and pipelines and reliability will point to this severe weather spell to support their positions,” said Jason Bordoff, director of Columbia University’s Center on Global Energy Policy, in a phone interview. “At this point, the arctic temperatures we’ve seen show that the system actually works pretty well.”

Nevertheless, power prices spiked across the country in the past week to the highest levels seen in several years. While there have been no major disruptions thus far, the cold spell is far from over and there are signs that problems may arise.

While higher power prices will benefit struggling nuclear plants in the Northeast, they could also spur regulators to revisit plans to subsidize the facilities, Nicholas Steckler, an analyst at Bloomberg New Energy Finance, said in a note.

Fuel Concerns

In New England, where fuel oil has taken a rare turn as the leading source of power, some plants are running short of supplies, according to Marcia Blomberg, a spokeswoman for ISO New England Inc., the region’s grid operator. Restrictions governing air emissions are also a factor limiting their use.

“As oil inventories are depleted, replenishment of these fuels will be important given the uncertainty around weather and future fuel demands for the remaining two months of the winter period,” she said by email Tuesday.

In the Midwest, some gas plants are having trouble getting supplies, forcing outages and increased use of fuel oil, according to Dustin Smith, a spokesman for the Southwest Power Pool.

American Electric Power Co. spokeswoman Melissa McHenry said that while the utility has experienced “some of the equipment challenges that typically accompany very cold temperatures,” the utility has been able to respond to demand as needed.

“With few exceptions, our plants are running well,” David Byford, a spokesman for Houston-based Dynegy Inc., said in an interview.

The holidays may be over, but the looming dissection of how various energy sources performed during them is likely to evoke a different annual tradition, according to Paul Patterson of Glenrock Associates.

Think of Groundhog Day, at least as it’s portrayed in the Bill Murray movie.

“I think that the extremely cold weather this winter may likely lead to the resurrection of the old public policy arguments raised in the past,” Patterson said.

— With assistance by Jim Polson, and Christine Buurma