A recent Realclearwire.com article noted that since 2021, the cumulative effect of persistent inflation has reduced Americans’ purchasing power by 19%. Since 2021, grocery prices have increased by 21%, gasoline prices have increased by 47%, shelter costs have increased by 20%, and electricity costs have increased by 30%. Wholesale prices rose at the fastest rate in April 2024 since April 2023, signaling persistent pressure on retail prices for months to come.
When I read the data, I think of energy prices rolling through everything, adding to consumer prices across the board. For example, diesel fuel prices roll through the food supply chain from the farm to the grocery shelf. Fuel is used to grow and harvest food, transport it to processing plants, warehouses, and distribution centers, and finally, transport it to the grocery store for our picking.
Transition Tariffs
Additionally, the president recently hit China with sweeping tariffs on some building blocks for the energy transition. Tariff increases include:
- Battery parts from 7.5% to 25%
- Electric vehicles 25% to 100%
- Lithium-ion batteries from 7.5% to 25%
- Solar cells 25% to 50%
- Permanent magnets 0% to 25%
- Graphite 0% to 25%
These tariffs will also add upward pressure on prices. However, I’ve been plenty critical of the Chinese Communist Party, so I have offsetting opinions. In addition to the CCP stealing our technology, they pollute and exploit citizens of rogue regimes, including their own.
The Wall Street Journal reported the battery tariffs close off the easiest route to affordable EVs. They say the Tesla 3 and Ford Mach-E use Chinese batteries, which were hit by the new tariffs. “Whoever is in the White House next year, the direction of travel is clear: China’s supply chain is effectively off limits in the race to lower EV costs.”
One hope is that a new low-cost battery solution will magically emerge without the Chinese supply chain. Still, the Journal reports that Tesla’s and Toyota’s efforts to overtake China with low-cost batteries are taking longer than expected.
Heating Electrification
Pivoting to building electrification, I noted to a colleague last week that the next twenty years will be interesting, notably as some cities and states race to ban or fine the use of natural gas for heating out of existence. Complete heating electrification can work cost-effectively in regions where the annual low temperatures stay above 20 or 30 degrees Fahrenheit – e.g., the Gulf states, desert Southwest, California, and parts of Oregon and Washington. In regions where annual low temperatures dive to 0F or colder, look out! The reason is that the heating load increases linearly with falling temperatures, and the efficiency of air-source heat pumps, the predominately promoted technology, drops precipitously with temperatures falling below 0F.
Falling temperatures have a negligible impact on natural gas efficiency. Therefore, I suggest electric-gas hybrid technologies to minimize grid stress and avoid rolling outages, property damage, and even death. A second option is ground-source heat pumps, which add cost and manageable complexity. Using the earth as a heat sink rather than wildly fluctuating air temperatures helps mitigate falling efficiency in extremely cold weather.
Storage for Renewable Droughts
Electric heat has additional challenges compared to cooling technologies, peak loads, and getting to net zero. The convenient facts about cooling and peak summer loads are that they coincide with peak solar power generation, at least on a 24-hour cycle. The peak cooling load occurs an hour or four after peak solar production, but we can shift that load with thermal energy storage. The problem with peak heating is minimal coincident solar generation. There is more wind during the heating season, but it is less predictable and may not blow for days during a peak heating event like Uri.
One of my favorite writers in this industry is Steve Huntoon. He recently wrote a well-researched article on long-duration energy storage of the range that might have a chance of storing sufficient energy to keep buildings from freezing during an extended cold snap with little wind – a renewable energy drought. First, he points to data showing that PJM, our nation’s largest interconnection, experienced a three-week span in 2018, during which electricity production from wind and solar was 10% of nameplate capacity. The nameplate capacity was 9,500 MW, and the output over that span was close to 1,000 MW. Therefore, many multiples of peak load need to be built on the generation side, or a miracle of two weeks of storage needs to cover that gaping gorge.
Steve’s analysis covers iron-air batteries, which I roasted briefly in 2022. He cites a 5 MW, 500 MWh project that cost $30 million, $60,000 per MWh, or $60 per kWh. Readers can search for themselves, but an EV battery costs around $100 per kWh, so it would seem that iron-air technology isn’t too bad. However, the roundtrip efficiency of the iron-air battery is 35%. Ouch! Smearing that across every kWh consumed in California in one year is 9.5 cents, increasing the average retail rate by 50%. Note this is the cost of storage only and not the added generation to charge it.
The alternatives include power generation with natural gas and purchased carbon credits at market rates, carbon credits from capture (more expensive), and installing carbon capture directly on the natural gas power plant. The results are as follows.
Even this isn’t apples to apples because there is no generation cost for the battery storage, whereas the cost for natural gas includes the generator, fuel, and abatement cost.
This is a case study in the full cost of electricity, FCOE, introduced here and explained here. The cost of generating electricity is far from the only cost. Availability 24/7/365 can substantially hike the cost of service. These realistic perspectives make nuclear power, as one alternative, far more attractive.
Conclusions
Policymakers promoting the energy transition should think only of one thing: peak, peak, and peak. The peak load drives the cost of everything from storage to transmission and distribution.
