Embracing the Energy Market in 2021
As conservatives, we firmly believe in capitalism and the free market. The mantra “follow the market” instinctively makes sense to us. However, to do that, we must understand and accept what the market is telling us.
The energy market has always changed over time. When our country was founded, the primary energy source used was wood. Water mills also played a role for a while. Then the use of coal began to dominate starting in the late 19th century. Oil has played a big role as well, but mostly in the transportation sector.
The widespread use of electricity changed the energy picture dramatically. Instead of being burned in homes, coal was used to fuel power plants. Midway through the twentieth century, nuclear power emerged as another option for generating electricity.
Over the past two decades, natural gas gradually gained the upper hand over coal and nuclear as the primary fuel stock for electric power plants. Gas burns cleaner and has logistical advantages over coal, while nuclear has been hampered by cost and safety concerns.
Today, advances in solar and wind energy, along with similar advances in energy storage technology have vaulted those energy options over those more traditional sources in both cost and reliability.
Part of the reason this is happening is that coal and gas fired power plants have become more expensive to operate and maintain as they age. This is a big deal, because 88% of our nation’s coal-fired power plants, which have a 40-year life expectancy, were built between 1950 and 1990. The average age of our nation’s natural gas plants is 22 years old—and they have a life expectancy of 25 to 30 years. This means that the vast majority of these plants becoming uneconomical and the cost of electricity generated from coal and gas will continue to rise.
In fact, electricity generated from some coal plants is rapidly approaching $80 per megawatt hour (MWh). Gas generated electricity is headed in the same direction, as it now costs between $45 and $60 per MWh.
Meanwhile, new solar projects that include storage for nighttime generation are selling electricity for as low as $14 per MWh! Just ten short years ago that same solar power was selling for over $300 per MWh. Wind energy is priced similarly to solar.
Also notable, is the fact that purchase agreements for power from solar+storage facilities typically run for 20 years, which means that today’s low solar prices will be locked in for the next two decades.
Two decades of guaranteed bargain basement electricity prices sounds pretty good, does it not? A lot of utilities think so, which is why new solar projects are popping up all across the country.
As we consider this dramatic change in the energy market, it is worth noting that there is no red or blue, left or right, energy source. Energy is energy. If the market now favors solar and wind generated power, then we conservatives should embrace the market just as readily as we did when the market favored other forms of energy.
And, there is ample reason to believe that solar and wind could easily dominate the energy market for the next century. Keep in mind that all of the cost is upfront, the fuel is free. This contrasts greatly with coal and natural gas, where the fuel costs play a major role in the overall price.
Just like with the price of gasoline, the price of natural gas can be affected by everything from pipeline disruptions, to increasing fuel demand across the world, to foreign conflicts. If your electricity is generated from gas-fired power plants, its price can suddenly soar from any of these reasons with no warning at all—and creating a big hole in your wallet.
So, what does a changing energy market mean to us? Now that the energy market is favoring cleaner forms of energy, it means that simply by leaning into the market, we can fight climate change and lower electricity bills at the same time. There has never been a more opportune time to fight climate change, than right now.
Now is the time for we conservatives to get in the game and work to advance real climate solutions, solutions that not only help safeguard our life-sustaining atmosphere, but economic health as well.