Energy markets, not coal bailouts, will keep the East Coast warm this week

The frigid weather is increasing energy use, but trading is helping utilities meet power demand

Cold weather quickly turns lethal. Already, at least 11 people are dead in the United States from the weather as freezing temperatures and snowfall have crept as far south as Florida. This highlights the fact that heating is a lifesaving necessity in periods of extreme cold.

And as temperatures drop, energy demand shoots up, with people spending more time indoors and switching on furnaces. In fact, there’s pretty much a direct relationship between colder temperatures and increasing electricity use, as these charts from the Energy Information Administration show:

 Energy Information Administration

And now a “bomb cyclone” is spooling up to blanket swaths of the East Coast in cold and snow this week, causing even higher demand for heat. Cold snaps like the one we’re in are an especially big drain on the energy system since they are sudden and severe, giving power producers little time to prepare. Some utilities are already asking their customers to keep electricity consumption in check to cope with the surging demand.

One big question that crops up whenever temperatures drop and energy needs rise is whether we need more fossil fuels to provide a steady stream of power. Some, like Energy Secretary Rick Perry, have argued that not only does the grid need fossil fuels, but coal plants that lose money in open markets need to be propped up to ensure the grid’s reliability.

But past experiences with extreme cold show that fossil fuels can’t always keep us warm, and that it’s not the supply of fuel but the infrastructure around it that leads to problems like blackouts. Meanwhile, in the current cold, renewables like wind power are doing some of the lifting, and smooth-running energy markets are keeping the frigid weather at bay for millions of Americans.

Though the current weather is extreme, we’ve seen similar cold spells before

The current weather echoes the 2014 polar vortex that froze parts of the United States in record cold and led to rolling blackouts.

The 2014 freeze was a key part of Perry’s justification for bailing out coal-fired power plants, since these generators can run 24/7 and store fuel on site.

But as Vox’s David Roberts explained, that’s exactly the wrong lesson to take away because as it turned out, coal didn’t do so hot that winter.

In the PJM Interconnection, the regional transmission organization that powers much of the East Coast and serves 65 million customers, nearly 14 gigawatts of coal generation was forced offline during the 2014 cold snap.

 PJM
PJM power outages on January 7, 2014

That was largely due to temperatures below the operating limit of equipment at these power plants, forcing them to shut down, and in the case of coal, it turned out that coal piles froze, rendering that onsite fuel useless.

What did end up working well was demand response — which is where utilities work with their customers to cut demand at critical times — and wind energy.

And so far, it looks like utilities have applied the lessons of the polar vortex. They added insulation to power generators and took measures to keep fuels from freezing, along with streamlining energy markets to ensure that grid operators could buy and sell power to compensate for demand spikes and supply losses. That means utilities don’t have to keep their own generators up and running but can schedule and buy power from other producers as needed, meeting their needs while lowering costs.

“We’ve seen much better generator performance than what we saw during the polar vortex, for sure,” Chris Pilong, director of dispatch at PJM Interconnection, told E&E News.

Wind energy production has also gone up, mitigating some of the increase in demand.

“I don’t think anyone disputes that we have more than enough capacity online to meet higher than expected demand,” said John Moore, who leads the sustainable Federal Energy Regulatory Commission project at the Natural Resources Defense Council. “The only issue is making sure that higher capacity is available to run.”

Coal is still a huge and important part of the energy mix

The current rise in energy demand has raised power prices, making it more economical for utilities to buy more power from costlier coal and even oil, as Ben Storrow at E&E News explains:

Day ahead power prices crested above $200 per megawatt-hour yesterday afternoon, according to ISO New England.

That has led power plant owners to burn a disproportionate amount of oil. Oil accounted for roughly a third of all New England power generation yesterday afternoon, compared to roughly 1 percent in all of 2016.

The increase in gas prices resulted in higher coal burn in PJM. Coal generation accounted for nearly 40 percent of the grid operator’s power generation yesterday afternoon. That was the most of any fuel and represented an increase over the 32 percent of coal generation PJM averaged through the first 11 months of 2017.

Meanwhile, we’re seeing reductions in natural gas, with some fields in North Dakota reporting declines as much as 20 percent as temperatures fell to -45 degrees Fahrenheit this week, leading water vapor to freeze in pipelines and hinder gas flow. Natural gas is the main way Americans keep warm, and gas demand reached a record high this week, spiking prices 13 percent.

That doesn’t mean that cold weather calls for more coal, but rather more energy, regardless of the source, according to Moore. New England saw coal’s share of the power generation mix decline over the past few years but has still kept the lights on and the heaters hot so far. In periods of high demand and high energy prices, other energy sources like renewables become competitive as well, challenging the need for coal.

And when it comes to power outages, they almost always stem from damage to transmission and distribution systems, not disruptions in the fuel supply, with severe weather as the most common cause. All this means that the case for subsidizing coal to ensure reliability in the power system in periods of extreme cold falls apart.

The tougher test for the power grid will come later this week, as a winter storm looms over almost the entire East Coast of the United States. Oil and coal supplies may dwindle while power transmission lines may snap, straining the endurance of the power sector as frigid air lingers even longer.