Commentary on Political Economy

Wednesday 8 September 2021

 Get Ready for the Blackouts

By Robert Bryce

Generac Power Systems, a company that produces home generators and other equipment, announced in July record sales of $920 million during the second quarter, a 68% jump over last year. But what’s good for Generac is bad for America.

That’s no slam on the Wisconsinbased company, which manufactures about three-quarters of the home standby generators sold in the U.S. Instead, Generac’s soaring sales are evidence that the U.S. electric grid is becoming less reliable, which will make Americans less wealthy and less secure. Consumers are spending billions of dollars on generators to have on hand when the power goes out. This capital would be better spent on other things such as education or home improvements.

Blackouts are deadly and create costly drags on the economy. Bad policies and lack of oversight contributed to the February blackouts in Texas. The final tally: about $200 billion in damage and some 700 people dead from hypothermia, carbon monoxide poisoning and other causes. In California—a state that is hemorrhaging residents— blackouts have become a near-daily event.

Generac says in a recent investor presentation that power outage severity is “increasing significantly.” Between 2000 and 2020, the number of what the Energy Department calls “major electric

  disturbances and unusual occurrences” jumped 13-fold.

The grid is the Mother Network for critical systems: GPS, communication, traffic lights, water, and wastewater treatment. Essayist Emmet Penney had it right when he declared in the American Conservative that, “there is no such thing as a wealthy society with a weak electrical grid.”

Three things are weakening the grid. One is the rush to add renewable energy sources such as wind and solar, which depend on amenable weather to function. Second, over the past few years, numerous coal and nuclear plants that provide baseload power and help keep the grid stable have closed. Third, regional transmission organizations such as Ercot in Texas and Caiso in California are mismanaging the system. They are not providing enough incentives to ensure reliability such as providing payments to generators that have on-site fuel storage.

Renewable energy promoters don’t want to admit that wind and solar are undermining the grid. But the North American Electric Reliability Corporation, a nonprofit trade group, said in a report last month that “changing resource mix” is the most urgent challenge for reliability. The group says America’s electric generation capacity “is increasingly characterized as one that is sensitive to extreme, widespread, and long duration temperatures as well as wind and solar droughts.”

The decline in reliability is especially important because President

  Biden has said he wants to “decarbonize” the power industry by 2035, a move that will likely require retiring all coal- and gas-fired generators in the country. In addition, activists are demanding more reliance on renewables and “electrifying everything,” including industry and transportation. Yet the grid is struggling even under existing loads.

Trying to electrify everything would be a disaster, especially for low- income consumers. Poor folks tend to live in homes that aren’t as efficient or sturdy as those occupied by the wealthy. They are more likely to suffer, or even die, during blackouts or extreme weather. They can’t afford generators or backup battery systems, which can cost $10,000 or more. Generac’s customers have a median household income of about $130,000, more than twice the U.S. median.

The problems on the electric grid should be setting off alarms in Washington, D.C., and state capitols. Regulators and policy makers should be preserving nuclear plants and making sure further coal plant closures don’t damage the grid’s resilience.

If America wants to stay a world leader, it must have a robust grid that delivers cheap, abundant and reliable electricity all day, every day of the year. We can’t rely on Generac for that.

Mr. Bryce, a research fellow at the Foundation for Research on Equal Opportunity, is the author of, most recently, “A Question of Power: Electricity and the Wealth of Nations.”

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