A decade ago, natural gas displaced coal as America’s top electric-power source due to hydraulic fracking technology that provided inexpensive natural gas. Now, environmentalists want to replace natural gas with batteries charged with wind and solar power despite battery storage providing less than 1 percent of the U.S. electricity market and costing over 3 times more than combined cycle natural gas generation, rivaling offshore wind for the most expensive technology that the Energy Information Administration (EIA) considers. Batteries would also require massive land requirements to back up an entirely renewable electric system and they are not able to provide electricity for more than a few hours with current technology. Currently, storage batteries can discharge for four hours at most before needing to recharge.
While not being able to supply power 24/7, most of the growth in solar and wind energy occurred due to state mandates that required utilities to procure certain amounts of wind and solar power, and by federal tax incentives. President Biden is proposing to extend these tax credits to battery projects as part of his $2.3 trillion infrastructure plan.
Coal, Natural Gas, and Renewable Generation
Over 60,000 megawatts of gas-fired capacity came online since 2014, according to EIA. Natural-gas-fired electricity represented 40 percent of U.S. generation in 2020, supplying electricity to the power grid 24/7 and capable of operating during peak demand. The combination of subsidized batteries and subsidized renewable energy, however, is threatening natural-gas generation, raising questions about whether power plants built in the past 10 years and financed with the expectation that they would operate for decades, will become “stranded assets,” i.e. facilities that are forced to retire before they are completely paid for by consumers.
Gas-fired power plants are struggling to compete with mandated and subsidized wind and solar farms. Duke Energy Corp. supplies electricity and natural gas in parts of seven states and is considering building additional gas-fired power plants. Duke proposed building 9,600 megawatts of new gas-fired capacity in the Carolinas to help meet demand as it retires coal plants and builds solar and wind generators that need back-up power. To ensure that they do not become stranded assets, the company will need the plants to pay for themselves sooner because they might not be able to operate for decades. It is considering shortening the plants’ expected lifespan from about 40 years to 25 years and recouping costs using accelerated depreciation—an accounting measure that allows the company to write off more expenses earlier in the plants’ lives.
Between 2011 and 2020, over 100 coal plants with 95,000 megawatts of capacity were closed or converted to run on natural gas, according to EIA. An additional 25,000 megawatts are slated to close by 2025. Stranded costs resulting from these coal retirements are generally modest because many of the plants were built decades ago and have had their capital costs paid. But, much of the nation’s gas fleet is relatively young, increasing the potential for stranded costs if closures occur within the next several decades. While natural gas plants can operate at an 80 percent capacity factor, they typically average 60 percent capacity due to subsidized and mandated renewable energy getting first preference in markets. By the end of the decade, that average is expected to fall to 50 percent.
Most grid-scale batteries are made of lithium ions, the same technology that powers electric vehicles. They look similar to large shipping containers and are often grouped together to create arrays capable of providing large amounts of power. Some are attached to renewable energy sources, while others stand alone and draw power from the grid. Today, grid-scale batteries are most often paired with solar farms, rather than wind farms, because their power is more predictable than wind and because it is easier to secure federal tax credits for that pairing.
Major battery projects under way in New York and California are driven in part by state mandates to reduce carbon dioxide emissions. Florida Power & Light Co. began construction on what is expected to be the world’s largest solar-powered battery system. The Manatee Energy Storage Center will have 409 megawatts of capacity, enough to power Disney World for about seven hours.
But, caution is needed when reducing natural gas power and increasing wind and solar power. Last August, California experienced the consequences of quickly reducing its reliance on natural gas plants. During an intense heat wave that swept the West, the California grid operator had to resort to rolling blackouts to ease a supply crunch when demand skyrocketed. In a postmortem published jointly with the California Public Utilities Commission and the California Energy Commission, the operator identified the rapid shift to solar and wind power as one of several contributing factors.
While batteries can provide stored power when wind and solar are not operating, most current batteries can deliver power only for several hours before needing to recharge. That makes them of little value during extended outages as Texas saw in February when its wind turbines went from supplying 42 percent of its power to 8 percent. Despite the fact that batteries only supply power for at most four hours before needing to be recharged, several states (New York, California, and Florida) are installing them as back-up to their solar and wind units.
Storage batteries are expensive, rivaling very expensive offshore wind in cost, according to EIA. And if they displace natural gas combined cycle capacity that can operate 24/7 and during peak periods, consumers may also pay for stranded assets. That means electricity consumers may be paying for natural gas units, batteries and wind and solar units simultaneously to reach President Biden’s net zero electric sector goal by 2035. American consumers need to be aware that they are paying for these changes in their taxes as well as in their utility bills. As more complex and expensive systems are required by government, citizens and consumers will be paying the tab.