Years of misguided climate policy have brought America to the brink of an electricity crisis.
Fossil fuel plants are being phased out faster than they can be replaced by renewable energy, while electricity demand is skyrocketing due to AI data centers and the push to electrify everything from vehicles to appliances. Congress and the new administration need to act quickly to avoid potentially years of soaring prices and dangerous power outages.
The scale of the impending capacity shortage is staggering. Typical coal-fired power plants Over 15% of America's electricity generation It is expected to close by 2032 when demand has met. expected to climb Increase by at least 15%. This could result in a shortfall of 30 percent of the 1,200 gigawatts of power generation capacity needed by 2030, the equivalent of 400 average-sized nuclear power plants.
Nonsense, environmentalists say. Despite the retirement of 8.5GW of coal capacity last year, the addition of 13.3GW of solar capacity and 4.3GW of battery storage capacity increased the country's electricity grid by 8.4GW. Shouldn't that solve the problem?
Unfortunately, that's not the case. New renewable energy is a mirage. On average, solar power plants produce only 24% of their nominal output, even less in the winter, and often not at all depending on the weather. Utility-scale batteries can maintain maximum output for only a few hours at most. In contrast, most natural gas, coal, and nuclear power plants can operate at 90% or more capacity and can be increased or decreased as needed.
Despite the surge in demand, the grid is actually shrinking in terms of projected energy availability. Transmission operators are currently warning that large areas of the country will fall below the minimum reserve margin from summer 2025.
To meet new demand, America will need hundreds of new gas and nuclear power plants. However, investment in such plants has virtually disappeared. In fact, data center developers are increasingly considering bypassing the power grid altogether and building their own power plants.
The main reason is the Inflation Control Act's renewable energy subsidies. Most power companies are required to purchase electricity from the company that offers it least expensively. With so much subsidized solar power being dumped onto the power grid during the day, large coal, natural gas, and nuclear power plants are unable to recover their costs. That makes investing in such power plants very unattractive, which in turn destroys the economics of electricity supply in the United States.
This is the main reason why electricity prices are rising as more renewable energy enters the grid. Bjorn Lomborg pointed out that It was recently featured in the Wall Street Journal.
Congress should abolish IRAs as soon as possible, or at least allow these subsidies to expire in a few years unless renewed. This could be accomplished through “budget reconciliation,” which requires a simple majority in Congress, but would require congressmen and senators to resist the lure of giving away free money to their favorite constituents. Dew.
In the meantime, the new administration will base reserve margins on projected energy availability under stress test scenarios, rather than nominal capacity, which is not a meaningful metric for variable power sources such as solar, wind, and batteries. It is necessary to obligate power transmission companies to maintain the system. Federal regulators should also require grid operators to prioritize reliability, for example by requiring them to provide dispatchable backup of electricity provided by renewable power plants.
Another major constraint on investing in the power plants we actually need are state renewable energy mandates. Although such mandates have no measurable impact on the climate, people in resource-rich New York and California pay 76 percent and 113 percent more for residential electricity, respectively, than people in resource-poor Florida. I am forced to do that.
To offset the social costs, such a mandate should trigger a federal surcharge (or loss of IRA tax credits) for renewable projects that cause state electricity rates to exceed the national average by, say, 30 percent or more. This is also a measure that could be achieved through a settlement.
Inefficient authorization is another problem. Due to the hydra-headed nature of the federal bureaucracy, America has the slowest, costliest, and riskiest approval process for large-scale infrastructure projects in the world. It deprives American communities of urgently needed infrastructure and is a major drag on America's industrial and technological strength.
The new government should look to international best practices, such as Denmark's one-stop permitting authority for projects of national importance and Australia's single permit application. Expanding general permits for projects that can self-certify without lengthy prior government approval could further reduce delays.
Litigation reform is also needed to prevent small local organizations from stalling nationally important projects with endless lawsuits. Requiring plaintiffs to post a bond to cover potential losses from unreasonable delays is another idea that could be passed in a budget reconciliation.
President Trump has promised to tackle the looming power shortage crisis. Now Congress must be ready to play its role.
Mario Loyola is a professor at Florida International University and a senior fellow at the Heritage Foundation.
