Note: Since Doug Lewin wrote the post below, the No Good, Horrible, Very Bad Bill has gotten even worse.
Texas Energy and Power Newsletter:
If the federal budget reconciliation bill passes in its current form, we will still build renewable power in the United States and in Texas — but developers will build less of it, and it will be more expensive.
The financial advisory firm Lazard reaffirmed last week that renewables remain the cheapest form of energy: “On an unsubsidized $/MWh basis, renewable energy remains the most cost-competitive form of generation.”
In other words, if Congress removes clean energy tax credits — even maintaining myriad other energy subsidies for just about every other form of energy — renewables will still be built, but electricity will cost a lot more.
What does that mean? Your energy bills would go up.
Anti-clean energy activists blithely suggest that the nation can just build a lot of new gas and nuclear power; market realities tell a different story. Even the staunchest nuclear proponents don’t think it can scale up before 2032.
And Lazard wrote that “turbine shortages, rising costs, and long lead times are expected to drive steep [cost] increases for gas technologies in the near term.”
More than ever, the U.S. needs renewables — even if only to cover current and near term needs, counter the cost pressure that’s already building, and buy time for other technologies to catch up. Renewables and storage are, at the very least, a bridge fuel to other forms of power. There simply aren’t available alternatives in the next few years.
After years of flat or declining electricity demand, US utilities are projecting rapid growth driven by AI, electrification, and industrial expansion. The North American Energy Reliability Corporation (NERC) expects national peak demand to increase by 150 GW over the next decade. This represents 18 percent growth over current levels — nearly the equivalent of adding a new California, Texas, and New York to the bulk power system. At the same time, more than 120 GW of existing power generation — over 10 percent of the United States’ total fleet — is expected to retire as mid-20th century coal plants reach the end of their operating lives and are replaced by cheaper and cleaner resources. While expectations will change over time, the projected 270 GW gap means that decision-makers at all levels will need to act swiftly to maintain reliable, affordable, and sustainable electricity.
Power providers across the country have turned to gas-fired power plants as their first-choice technology to fill the impending gap. Exhibit 1 shows that across the nation, utilities and independent power providers plan to build an average of 19 GW of new gas-fired capacity each year through the rest of the decade, double the recent rate of construction.
Yet, there is a perfect storm of uncertainty brewing: surging global demand for gas turbines is creating supply chain constraints, which create timeline and cost risks for recently announced projects. At the same time, global economic turbulence makes it difficult to predict where new load will be located, how large it will be, and how fast it will grow. All this uncertainty, added together, spells massive risks to system-wide reliability and affordability for ratepayers. Fortunately, there are fast and affordable alternatives.
Turbine supply is already falling short
Three companies will need to supply most of the historic demand for new gas plants: GE Vernova, Siemens Energy, and Mitsubishi Power — who together serve over 75 percent of projects under construction. Booming demand for turbines has led each of these companies to report extended delivery timelines. Mitsubishi states that turbines ordered today will not be delivered until 2028–2030. Siemens reports a record backlog of €131 billion (US$148 billion). And GE Vernova has announced new turbines will not be available until late 2028 at the earliest. When delivery backlogs exceed the expectations of developers and utilities, they can create unexpected delays and project cost overruns.
I don’t pretend to understand the rules now prevailing in our political jungle. Far more than ever before in my life it seems an exercise in pure and corrupt power, but even that power is operating only half-logically. This new bill does everything it can to kill off solar and wind power, including by imposing a sweeping new tax on them that appeared out of nowhere over the weekend. In their place it adds yet more subsidies for that 18th century technology, coal. Sun and wind accounted for more than 90 percent of new electric generation last year in this country, and around the world. It’s the cheapest power on planet earth; it’s clearly where the planet is heading; it’s our only serious hope for fighting the spiking temperature of our planet.
I don’t really think those, or any, arguments matter at the moment. So it is more out of a sense of duty than of hope that I urge you to get on the phone this morning and make one last set of calls to your Senators. Here’s the link and the numbers we’ve been using for days at Third Act. Perhaps it will make a difference, but if it doesn’t then acting out of duty is a good thing nonetheless. I believe that—I’m not certain why, but I do.