If you think the worst of energy-driven inflation is over, you’re unfortunately very wrong. While prices at the gas pump have settled from mid-summer highs, electricity bills are soaring on the back of surging natural gas prices. Regulators, grid operators and utilities are warning that the nation’s power supply is growing alarmingly less reliable.
Europe’s energy crisis is pulling prices up and destabilizing markets everywhere. Since the United States is now the world’s largest liquefied natural gas exporter, U.S. consumers are having to compete against energy-desperate European buyers. European electricity prices have soared so high, they’re equivalent to $1,000 per barrel oil.
In Britain, the government announced that energy bills are going to jump 80% in October after nearly doubling earlier this year.
Britain’s National Health Service has warned of a “humanitarian crisis” from this surge in prices, with millions potentially pushed into poverty. The U.S. is flirting with a similar disaster.
Across Europe, governments have disassembled balanced electricity mixes, closed their coal fleets and increasingly exposed themselves to a natural gas market dominated by Vladimir Putin. Now, European leaders are scrambling to bring coal capacity out of retirement. Germany is allowing 21 coal plants to restart or work past planned closing dates and is prioritizing coal trains over passenger traffic to ensure that power plants get the fuel they need.
If Europe can navigate this energy crisis, it will be in no small part because of coal. But U.S. policymakers seem fixed on ignoring the ramifications of dismantling the balance in our own electricity mix.
The Inflation Reduction Act, which was marketed as an answer to energy inflation, paired with an onslaught of regulations from the U.S. Environmental Protection Agency (EPA), is poised to push much of the U.S. coal fleet off the grid nearly overnight.
Coal plants meet nearly a quarter of the nation’s power demand, providing a critical source of balance to our use of natural gas — balance that is vitally important during winter months when natural gas struggles to meet the dual demands of electricity generation and home heating needs. Yet that balance is under grave threat, and Americans will soon be increasingly exposed to a far more expensive and volatile natural gas market.
Natural gas prices are at 14-year highs, quintupling from where they were as recently as the fall of 2020. Power prices are beginning to surge, and winter is coming fast. Already, more than 20 million American households have fallen behind on their utility bills.
And now there’s deep and growing concern Americans are going to be paying far more for a far less reliable supply of power.
Even before the disrupting pressures of the Inflation Reduction Act and the EPA’s new regulatory agenda, reliability experts sounded the alarm about the pace of America’s energy transition, the loss of essential, on-demand power plants, and the challenges of replacing them. Several utilities have already delayed coal plant closures for fear of not being able to keep the lights on.
This summer, nearly two-thirds of the country was at elevated risk of power shortages and rolling blackouts for lack of needed capacity during periods of high demand.
There are no quick fixes for the energy affordability and reliability crises now gripping the country, but an important first step is to stop the bleeding.
Congress must act with urgency to ensure the coal fleet can maintain its role as a reliability and affordability backstop.
Now is the moment for Congress to provide regulatory relief, push back on EPA’s dangerous agenda, and work with utilities and regulators to ensure we don’t lose the invaluable fuel diversity that has long-shielded consumers from price spikes. Europe’s unfolding humanitarian crisis is one we must avoid.
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