The Institute for Energy Research is a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets.

About IER
Latest Analysis
April 29, 2016

Could the U.S. Electricity System Become Like Venezuela’s?

April 29, 2016
Print Friendly
Facebook

Venezuela has been cutting its electricity to consumers because of huge shortages that the country blames on El Nino, but critics blame on economic mismanagement and inefficient running of the energy network. According to the Venezuelan government, El Nino caused its hydroelectric dams to run low, which normally generate two-thirds of the country’s electricity. Starting last week, Venezuelans in eight states are having their power curtailed 4 hours a day—the lights go out, fans and refrigerators stop running, hairdryers lay mute and clothes are line-dried. This power curtailment will continue for 40 days.[i]

Unfortunately, Obama administration policies can place the U.S. electric grid in a similar precarious situation by forcing the premature retirement of the nation’s coal plants and forcing intermittent renewable power on the public through the so-called ‘Clean Power Plan’ that the Environmental Protection Agency has forced upon U.S. states. More than half of the 47 states affected by the regulation are fighting its implementation through the U.S. legal system. Earlier this year, the Supreme Court put a temporary halt to the plan as lawsuits proceed through the federal appeals court. The suing states, joined by industry groups and some utilities, are arguing that the EPA exceeded its authority in implementing the regulation.[ii]

Venezuela’s Electricity Crisis

In Venezuela, a prolonged drought blamed on the El Nino weather system lowered water levels substantially at the Guri Dam, the hydroelectric plant that supplies the country’s capital, Caracas, with most of its electricity. The dam, built in the 1970s and 1980s, provides over 70 percent of the power generation for Caracas. According to data from Corpoelec, the state-run power company, water levels at the dam, located in southern Bolivar state, fell to 244.9 meters above sea level on March 29. Below 240 meters, vortexes can form and damage the turbines. This condition may be reached by April 30th unless severe rationing is implemented.

In March, Venezuelan President Maduro extended the Easter holiday to 5 days, gave state employees Fridays off for two months, and cut the hours of more than 100 shopping centers across the country in an effort to conserve electricity. Together with other measures, he hopes to reduce electricity consumption by at least 20 percent.[iii] On April 26, he declared a two-day work week for government workers and indicated that he was seeking international help through the United Nations for public works funding and construction to help the country recover from an “extreme situation.”[iv]  Further, primary and high schools are now closed on Fridays and the government is shifting its time zone forward 30 minutes to add daylight and save power.[v]

Because the government was irresponsible in not bringing on line other forms of electricity generation, Victor Poleo, a former vice minister of electricity, blamed poor planning by the government and a lack of maintenance by Corpoelec at the hydroelectric plant for the need to ration electricity.[vi] Experts believe rationing could have been prevented by investment in maintenance and in the construction of thermoelectric plants. These are the same types of thermoelectric plants that President Obama is prematurely retiring due to EPA’s regulations (Mercury and Air Toxics Standard and Clean Power Plan).

EPA Favors Intermittent Renewables in the Clean Power Plan

In drafting its final “Clean Power Plan,” EPA made changes that forced increased intermittent renewable energy, favoring it over natural gas to replace retiring coal-fired capacity. In fact, EPA stretched what renewable power can achieve by using biased historical deployment patterns for renewable energy technologies. For example, the agency assumed that the historical high reached for wind capacity additions in 2012 could be easily replicated despite that high being reached because the Production Tax Credit (PTC) for wind was to expire at the end of 2012, making wind owners quickly complete construction of their wind turbines in 2012 instead of 2013 in pursuit of the government tax payout. As a result, wind capacity additions in 2013 precipitously dropped as depicted in the chart below.

wind electric generation capacity additions

Source: EIA, Today In Energy, March 23, 2016

Further, despite the stay on the Clean Power Plan by the Supreme Court, EPA submitted its plans for The Clean Energy Incentive Program to the Office of Management and Budget this week, where EPA is giving credit for power generated by new wind and solar projects in 2020 and 2021 and a double credit for energy efficiency measures in low-income communities.[vii]

This push for solar and wind power can destabilize the electric grid, as these technologies generate power only when the wind is blowing and the sun is shining. Further, because these technologies cost more than a new combined cycle natural gas unit and more than the existing coal units that they are replacing, Americans will be paying more for their power. According to a study by NERA Economic Consulting, the so-called “Clean Power Plan” will hike electricity prices in all 47 states that are subject to the regulation: 41 states are projected to see double-digit “peak” electricity price increases and 28 states are projected to see “peak” electricity price increases greater than 20 percent.[viii] Another study by Energy Ventures Analysis finds that 45 states will see double digit increases in wholesale electricity costs, and 16 states will see a 25 percent or higher increase in wholesale electricity costs.[ix]

And yet, according to EPA’s models, the benefits of the Clean Power Plan are minuscule, reducing global carbon dioxide emissions by less than 1 percent and global temperatures by 0.02 degrees Celsius by 2100. EPA Administrator Gina McCarthy recently told Congress that EPA cannot measure the impact of the proposed Clean Power Plan on global temperatures because it would likely be incredibly small.[x]

Conclusion

The U.S. has long prospered under an electrical grid system that provides low cost, reliable energy for everyone’s benefit. If allowed by the courts to proceed, the so-called Clean Power Plan will be the costliest and most intrusive EPA regulation ever to affect the U.S. generating sector, and will have no real impact on temperature, reducing it just two hundredths of one degree Celsius in 2100. Instead, it will deny the nation the use of inexpensive coal-fired generation that is half the cost of new natural gas combined cycle technology and a third of the cost of wind technology that it forces us to use.[xi] With its bias towards intermittent renewable technologies, it could destabilize our electric grid, possibly placing us in a similar situation as Venezuela with electric power curtailments and/or disruptions. This fundamental transformation of our electrical system – from low cost and reliable to much higher cost and unreliable – will not be seen as progress by most Americans.


[i] Yahoo, Fridges go off as Venezuela power-rationing hits, April 26, 2016, https://www.yahoo.com/news/fridges-off-venezuela-power-rationing-hits-030240311.html

[ii] U.S. News and World Report, Supreme Court Blocks Signature Obama Climate Rule, February 10, 2016, http://www.usnews.com/news/articles/2016-02-10/supreme-court-puts-epas-clean-power-plan-on-hold

[iii] Independent, Venezuela Energy Crisis: President tells woman to stop using hairdryers and go with natural style to save electricity, April 9, 2016, http://www.independent.co.uk/news/world/americas/venezuela-energy-crisis-president-tells-women-to-stop-using-hairdryers-and-go-with-natural-style-to-a6976246.html

[iv] Bloomberg, Venezuela Needs Oil’s Rally More Than Anyone as Economy Teeters, April 28, 2016, http://www.bloomberg.com/news/articles/2016-04-28/venezuela-needs-oil-s-rally-more-than-anyone-as-economy-teeters

[v] Yahoo, Venezuela forces public sector leave on 3 weekdays, April 27, 2016, https://www.yahoo.com/news/venezuela-enforces-public-sector-leave-three-weekdays-230119339.html?ref=gs

[vi] Bloomberg, Low Water Levels May Mean Lights May Go Out in Caracas, Marche 31, 2016, http://www.bloomberg.com/news/articles/2016-03-31/blackouts-loom-for-venezuela-s-capital-as-water-levels-fall

[vii] Daily Caller, EPA continues to implement global warming plan Supreme Court said it couldn’t, April 27, 2016, http://dailycaller.com/2016/04/27/epa-continues-to-implement-global-warming-plan-supreme-court-said-it-couldnt/

[viii] NERA Economic Consulting, Energy and Economic Impacts Of EPA’s Clean Power Plan, November 7, 2015, http://www.americaspower.org/wp-content/uploads/2015/11/NERA-CPP-Final-Nov-7.pdf

[ix] Energy Ventures Analysis, EPA’s Clean Power Plan An Economic Impact Analysis, November 2015, http://nma.org/attachments/article/2368/11.13.15%20NMA_EPAs%20Clean
%20Power%20Plan%20%20An%20Economic%20Impact%20Analysis.pdf

[x] Daily Caller, EPA Head Admits Clean Power Plan Wouldn’t Impact Global Warming, April 21, 2016, http://dailycaller.com/2016/04/21/epa-head-admits-clean-power-plan-wouldnt-impact-global-warming-video/#ixzz46UrzwVUT

[xi] Institute for Energy Research, July 15, 2015, https://www.instituteforenergyresearch.org/analysis/icymi-new-electricity-sources-still-more-expensive-than-existing-ones/

Print Friendly

View Comments
  • rally2xs

    We need a crash program to build as much wind as can humanly be accomplished. Once that can provide 100% of our energy, we’ll be immune from the enviro-whiners, as well as actually having some real benefit in that there won’t be any radioactivity and heavy metals being spewn into the air by coal, and we won’t have to be digging or drilling for electricity generation, and we won’t have to be shuttling fuels around for electrical generation.

    • tompro97

      You have sniffing that methane way too long, Ratfly!!!!!

Back to top