Two pivotal points come to mind when considering the big news of April 22, 2023, highlighted below: First, Industrial asset owner-operators would do well to prepare themselves for higher electricity prices in the future; and, second, from the right perspective, controversial though it may sound, higher electricity prices are not a bad thing, in the opinion of this analyst, at least.
The reasons we should expect significantly higher electricity prices include recent news regarding upcoming EPA proposals to control CO2 emissions from power plants.
The reasons higher electricity prices will be a good thing stem from aspects of human nature, economics, wars, and a total cost perspective which weighs the enormous cost benefits of reduced severe climate events and greater energy independence, on the one hand, against those higher electricity prices on the other.
While informed debate has its place, unconditional naysaying is increasingly becoming a total liability. Blind efforts being put into opposing the obviously needed direction going forward, rather than the form that direction should take, will create competitive disadvantages for the organizations advocating for them. In contrast, leading organizations would do well to add to their positive support some much-needed “big picture” marketing, which could include models based on digital twins of ecosystems and economies and AI-based details, associated with the greater good that will come via a sustainable way of life.
An EPA spokeswoman, Maria Michalos, was quoted in an April 22, 2023 NY Times article regarding expected new carbon dioxide regulations for US electric power generation facilities, saying that the agency is “moving urgently to advance standards that protect people and the planet, building on the momentum from President Biden’s Investing in America economic agenda, including proposals to address carbon emissions from new and existing power plants.” (The EPA spokeswoman is quoted in the April 22, 2023 NY Times article, "EPA to Propose First Controls on Greenhouse Gases From Power Plants.")
Prior curtailment of the EPA’s ability to regulate emissions from power plants was removed in the summer of 2022 when those restrictions were basically nullified as the Supreme Court reaffirmed the rightful authority of the E.P.A. (within certain limits) to regulate electric power generation facility carbon emissions.
Another important bit of prior context concerns the recent changes with the Inflation Reduction Act (IRA). Prior to those changes, the entire US market for carbon capture technologies has been limited. As referenced in the NY Times April 22nd article, to date only 40 power plants worldwide have had carbon capture equipment installed, and growth has been slow. In addition, in the US, there has been a natural ceiling on the carbon capture market. This ceiling has been a bi-product of the low level at which all potential tax incentives would max out—but even this artificial ceiling had been nowhere near being reached. Now, with the IRA in place, incentives have been increased significantly, from a prior maximum tax incentive of $50 per ton of carbon dioxide, to $85 to $135 per ton going forward.
As stated, the new upcoming moves by the EPA would put carbon capture, and green hydrogen, into a much higher gear, and industrial asset owner-operators would do well to prepare themselves for higher electricity prices in the future.
More perspective on the beneficial, “big picture” perspective is worth providing now, with the proviso that it is not likely the “big picture” perspective will be employed widely enough. Absent improvements in our discourse and our language around seemingly simple terms, such as “price” and “cost,” the chances of the needed wholistic understanding being achieved are low in the near term, though they will occur. They are as inevitable as generational cultural shifts underway which will eventually change the position of a lot of industrial asset owner/operators.
Among the big picture aspects of human nature and economics, one must consider the many decades long poor performance of US Industrial, Commercial and Residential electricity end users, when it comes to their participation levels in economical and energy independence-enabling programs utilities have been offering for decades, notably energy efficiency rebates and peak electric demand reduction offerings (so-called Demand Response programs).
Another key aspect involves the well-known phenomenon of reverse impacts: What would happen if electricity were free? People would use a portion of the “extra” money to buy more goods and services, which would in term have higher emissions and environmental impacts on a per capita basis, than the impacts if electricity were not free, in the aggregate.
Finally, to have a truly sustainable path toward reduction in adverse environmental impacts requires a change in how people use energy, and a change in how they feel about that energy usage. There is a need for a sense of connectedness for individuals and organizations when it comes to their energy and electricity usage, and low prices and high levels of waste go hand in hand with a sense of disconnectedness, while higher prices and lower levels of waste, likewise, go hand in hand with the much-needed sense of greater connectedness required of all of us, going forward.