Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what’s going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue!
CAGE MATCH BETWEEN COAL AND GAS: Coal and natural gas interests are locked in an existential cage match over which fuel source is best positioned to stop the bleeding as regulators at FERC and NERC warn about diminishing grid reliability.
A bit of stage-setting: Before getting to the arguments, we note that gas is a primary driver of coal’s demise. Pennsylvania offers a case study: Natural gas-fired electricity generation there catapulted to 52% in 2021 from just 2% in 2001. Coal generation fell from 57% to 12% over the same period.
EIA’s newest Advanced Energy Outlook predicts the trend will continue, estimating a decrease in coal-fired generation nationally from 20% in 2022 to between about 4% and 8% of total generation by 2050: “Continued low natural gas prices increase retirements of more expensive coal-fired generation assets in the near term,” the AEO said.
Coal case: NERC issued multiple warnings last year warning that a mismatch between traditional generator retirements (mostly coal) and the addition of new resources to replace them is driving reserve capacity down and making the grid more vulnerable to outages, which utilities in the Southeast were forced to perform during December’s spell of extreme cold.
Coal interests hope utilities, lawmakers, and regulators will rectify reliability shortcomings by holding on to coal plants a little longer, and they’re also making the case that coal has the cost advantage because it’s less subject to the kind of extreme price spikes that gas markets suffered last year.
“Europe made a grave mistake sacrificing its own dispatchable fuel diversity and energy security in largely pushing coal off its grid and embracing a notoriously volatile gas market dominated by Russia,” the National Mining Association said in a recent blog post.
Uri and Elliot: Gas generators struggled immensely in Texas during Winter Storm Uri due to equipment and fuel supply issues, accounting for 58% of unplanned outages, derates, and failures (vs. wind and coal at 27% and 6% respectively, according to the joint FERC-NERC review).
Gas outages were a problem during Elliot, too. Duke Energy, which ordered controlled outages for the first time ever, said it faced frozen instrumentation at gas-fired units, leading to their derating (Reviews of the storm from TVA, which also implemented outages, and from NERC are pending.)
Between Uri and Elliot, gas is “like zero for two in winter performance,” Clair Moeller, president and COO of MISO, said during a February meeting of the National Association of Regulatory Utility Commissioners.
Gas’s value proposition: Natural gas interests, meanwhile, see a big opportunity in the rebound of coal in Europe and its consequences to global emissions, which reached a new high last year.
Major banks and other financial institutions are generally locking down financing of coal more aggressively than oil and gas ventures, and coal-to-gas switching has driven the massive drop in power sector emissions in the U.S. over the past two decades.
Gas executives campaigned hard on this latter fact during CERAWeek to promote more policy support for the sector, including faster approvals of pipeline infrastructure to help displace more coal.
“The energy transition is going to have to be built,” Will Jordan, executive vice president of top U.S. gas producer EQT, said during a panel on LNG. “In the natural gas sector, that is building pipelines and infrastructure to allow the Marcellus Shale to be the behemoth that it can and should be.”
Jordan noted that opposition to the Mountain Valley Pipeline goes beyond environmental NGOs to gas’s direct competitor.
“Guess who’s on the side of the Sierra Club in supporting blocking Mountain Valley Pipeline? It’s the West Virginia Coal Association … because they don’t want to have the coal-fired power plants in North Carolina shut down,” he said. “Is that progress? I don’t think so.”
WVCA President Chris Hamilton came out against MVP in January, and the coal trade group has opposed other initiatives by the industry to increase gas infrastructure and exports.
Correction: A previous version of this newsletter misattributed Moeller’s quotation to Michelle Bloodworth, president and CEO of America’s Power, who had merely paraphrased the quote. Daily on Energy regrets the error.
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
WESTERN G-7 NATIONS WARY OF JAPAN’S FOSSIL PRIORITIES: G-7 countries not named Japan are worried the group’s lone Asian member, which holds the presidency this year and is taking the lead on drafting the communique ahead of an initial meeting of environment ministers next month, is being insufficiently aggressive on climate change measures.
Western G-7 members, including the U.S., have taken issue with Japan’s draft communique, which calls for “the need for upstream investment of LNG and natural gas,” Bloomberg reported.
The draft was also too light on language endorsing a phasing out of coal and other fossil fuels in the power sector in the eyes of concerned nations, according to the report.
Making sense of it: Ensuring security of supply hangs over every energy and climate decision because of the war in Ukraine and its consequences to energy markets, and last year’s G-7 conclusions were shaped heavily by the war and emphasized a need to cut ties with Russia.
Environment ministers’ final communique acknowledged “that investment in [the LNG sector] is necessary in response to the current crisis.”
Conclusions from the larger G-7 meeting in June also “publicly supported investment in the gas sector can be appropriate as a temporary response,” but neither explicitly called for more upstream investment.
Stepping back: Some have raised concerns that Japan, which like Europe relies on imports and remains vulnerable to price hikes, is being treated disparately because of its pursuit of more natural gas from the U.S. and other sources — an initiative the Biden administration has blessed in the case of Europe.
A handful of senators wrote to Ambassador Rahm Emanuel earlier this month and encouraged him to support more LNG trading between the U.S. and Japan.
Sen. Dan Sullivan, who led the letter to Emanuel, accused climate envoy John Kerry of discouraging the Japanese from pursuing new LNG deals with the United States, citing conversations with sources who’d met with Kerry, although Kerry denied doing so.
NEW IPCC REPORT SHOWS ‘HUMANITY IS ON THIN ICE,’ U.N CHIEF SAYS: United Nations Secretary General António Guterres called on developed countries to commit to reaching net-zero emissions to 2040—a decade sooner than originally planned—on the heels of a new climate change assessment published today by the group’s Intergovernmental Panel on Climate Change.
In the report, the IPCC said the window to meet targets set under the Paris climate accord was rapidly closing, and warned that the world must halve greenhouse gas emissions by the mid-2030s if there is any hope of limiting temperature rise to 1.5 degrees Celsius above pre-industrial levels.
Already, average temperatures are 1.1 degrees Celsius higher compared to the start of the industrial era, causing more extreme weather events and leaving some half of the world’s population vulnerable to the dangerous effects of climate change, the report said.
“Humanity is on thin ice – and that ice is melting fast,” Guterres said. Read more on the report here.
RUSSIAN OIL EXPORTS REMAIN STRONG, DESPITE THREATENED PRODUCTION CUTS: Russian crude oil shipments continued to hold steady for the month of March, short of a slight dip last week, offering no substantial evidence that Moscow has delivered on its threat of cutting production by 500,000 barrels per day.
Russia announced the production cuts in February as a response to the G7-backed oil price cap. The cuts, slated to begin this month, would have removed 5% of its oil from the markets for a five-month period.
But Russian crude exports have fallen just 90,000 bpd this month, putting its four-week average output around 3.3 million barrels per day, according to ship tracking data compiled by Bloomberg. The country’s crude oil storage tanks have also topped 15 million barrels for the first time since last April, further suggesting Russia has not trimmed back its production.
FRENCH STRIKES BLOCK REFINERY SHIPMENTS AND LNG TERMINALS: Strikes over France’s controversial pension reform plan entered a 13th day today, blocking shipments from key refineries the country awaits the results of two votes of no confidence against its government slated to be held later today.
The strikes blocked shipments from multiple TotalEnergies refineries in France, as well as Esso’s Fos refinery. As a result,TotalEnergies was forced to throttle production at its 240,000 bpd refinery in Normandy and its 119,000 bpd refinery in Feyzin, a company spokesperson told Reuters. About 39% of TotalEnergies’ operational and depot staff were participating in the strike.
And workers at the three French LNG terminals operated by Engie extended their strike by an additional 7 days.
… UK’S OIL AND GAS OUTPUT ALSO THREATENED BY STRIKES, UNION WARNS: Meanwhile, North Sea oil and gas workers voted to strike over jobs, pay, and working conditions in the coming weeks, threatening oil and gas production in the UK.
The Unite union, which is coordinating the strikes, said in a statement that the walkouts will involve 1,400 workers, and will affect “dozens” of North Sea platforms operated by BP, Shell, EnQuest, and TotalEnergies, whose profits have soared to record highs amid Russia’s war in Ukraine.
Unite General Secretary Sharon Graham warned of a “tsunami of industrial unrest in the offshore sector” as workers seek better wages, working conditions, and a tougher windfall tax on oil and gas firms that have benefited from the high oil and gas prices. It is unclear when the strikes will take place, though they are expected somewhere between late March and early June.
“Unite will support these members every step of the way in their fight for better jobs, pay and conditions,” Graham said in a statement.
The Rundown
Financial Times Surviving winter: how three factories battled through Europe’s energy crisis
Wall Street Journal Europe moves to revive mining to cut reliance on China
E&E News ‘Climate homicide’: Could Big Oil be sued for disaster deaths?
Calendar
WEDNESDAY | MARCH 22
10:00 a.m. Dirksen 608. The Senate Budget Committee will hold a hearing to explore how climate change is changing insurance markets.
THURSDAY | MARCH 23
10:00 a.m. Dirksen 366. The Senate Energy and Natural Resources Committee will convene for a hearing to examine cybersecurity vulnerabilities to U.S. energy infrastructure.
