Big increases coming in electric costs
From the “Things Grist readers already knew” file comes this report from ClimateWire ($ub. req’d) that price shocks are looming for power plant operators, even before the costs of carbon are factored in.
A few excerpts below the fold:
[F]rom the utility industry’s point of view, the coming price on a ton of carbon dioxide pollution couldn’t have come at a worse time.
“There’s one really basic, I think really important fact, which is that we don’t really have full transparency between the prices you and I see in our monthly bills and the production costs of electricity,” said Revis James, director of energy technology assessment at the Energy Policy Research Institute. “Where we are definitely seeing trends to higher and higher electricity costs is on the production side. What’s not necessarily happening yet is whether or not you are seeing those increases fully or at all at the retail side.”
“Obviously, at some point, the increase in production costs are going to have to be reflected in the retail price,” James said in an interview. “It’s just a question of when.”
Construction cost increases are clearly causing pain. In a recent survey by the Edison Electrical Institute (EEI) of its industrial members, EEI found that companies are planning investments in transmission upgrades from 2006 to 2009 at levels 60 percent higher than the earlier investment cycle, from 2002 to 2005, or almost $38 billion. Billions more will have to be spent to meet rising demand.
Rising costs and steadily growing demand alone will increase electricity and heating bills throughout the country, with or without a price on carbon. At a recent industry conference in New York, one executive from the Midwest stood up to tell the audience of utility reps and government regulators that “you should start telling your customers that their utility bills will triple in the next three to five years.” [my emphasis]
Not all utilities will be equally affected. The worst-affected sector will be coal generation, with natural gas feeling a much lighter impact and nuclear power not affected at all.
There is a critical need for policy to fix this. If we wait for prices to increase as we build expensive, dirty power, we will suddenly find it economically justifiable to build less-expensive clean power. But those same plants won’t be built today in an era where — as EPRI notes — retail rates are artificially depressed. So do we build the right stuff first, or do we first build a lot of dumb stuff and hope that equity investors will roll over and take the loss as new stuff comes on line? We need good policy to ensure the former.