Report: Retiring fossil fuel generators could cause electricity shortage

The regional power grid organization is raising concerns over a possible drop in electric generation in the near future as fossil fuel generation is retired.

In a report released Feb. 24, regional transmission organization PJM Interconnection states there are increasing reliability risks as energy generation transition from fossil fuel to sustainable sources.

The report focused on near-term adequacy through 2030 and the risks if new solar, wind or other sustainable energy production does not make up for the number of existing fossil fuel generators that are scheduled to retire before 2030.

“Thermal generators are retiring at a rapid pace due to government and private sector policies as well as economics,” states the report by PJM, which serves 65 million customers across 13 states including Delaware. “Retirements are at risk of outpacing the construction of new resources due to a combination of industry forces, including siting and supply chain, whose long-term impacts are not fully known.”

In addition, PJM expects electricity demand to increase 1.4% per year over the next 10 years. A large part of the increase, the report states, comes from data center activity, namely the Data Center Alley in Loudoun County, Va., which is the largest concentration of data centers in the world. State and federal policies and regulations to decouple from fossil fuel energy production also play a role in electricity demand with their push for electric vehicles, electric heating and electric appliances. The report estimates there will be 17 million EVs, 11 million heat pumps, 20 million water heaters and 19 million cooktops plugging into the grid by 2037.

Under new mandates, the report states, electric demand is expected to increase over the winter months, mostly because of heating use. Already, a cold snap over the 2022 Christmas holiday prompted PJM to send out frequent radio messages asking consumers to conserve energy.

Historically, thermal energy in the form of coal has made up the bulk of energy production, coupled with natural gas to a lesser extent. According to the report, retirement, deactivation and “potential policy-driven retirements” of energy generators will result in a drop of 21% of PJM’s current capacity.

Pressure on the natural gas market remains as the Ukraine war continues. In the first half of 2022, liquefied natural gas imports into the European Union and the United Kingdom increased 66%.

“This international natural gas demand is a new competitor for domestic spot-market consumers, resulting in significantly higher fuel costs for PJM’s natural gas fleet,” the report states.

Historical decrease in reserves

More demand for electricity could ultimately impact the amount of electric reserves the grid maintains, and impacts from the Inflation Reduction Act, post-pandemic supply chain issues, and other external forces are not fully understood, the report states.

“For the first time in recent history, PJM could face decreasing reserve margins should these trends continue,” the report states. “The amount of generation retirements appears to be more certain than the timely arrival of replacement generation resources and demand response, given that the quantity of retirements is codified in various policy objectives.”

Policy-driven retirements

A number of policy-driven retirements are expected through 2030, according to the report. These include:

• In 2024, New Jersey will begin its three-phase plan to reduce carbon dioxide emissions, which the report estimates will result in plant closures

• In 2025, company environmental, social and governance commitments will eliminate two coal plants in Maryland and another in Indiana
• In 2026, an Environmental Protection Agency Good Neighbor Rule will require stringent limits on nitrogen oxide emissions, which will require some plants to invest in catalytic equipment to reduce those emissions. The report assumes that some plant owners will not make the investment, choosing instead to retire the power units
• In 2027, the EPA will set new minimums for coal combustion residuals, prompting facilities to indicate if they will cease coal-firing operations
• In 2028, two coal units will retire as a result of EPA Effluent Limitation Guidelines. Other units may be affected when they go to renew their discharge permits
• Starting in 2030, the Illinois Climate & Equitable Jobs Act mandates the scheduled phase-out of coal and natural gas generation. The remaining phase-out dates are 2035, 2040 and 2045
• Dominion, an energy company that provides power to Virginia and North Carolina, has committed to be net zero carbon by 2050. It will maintain natural gas generation while proposing “significant development of solar, wind and energy storage,” according to the report.