Commentary: Big Tent Ideas

America Can’t Afford To Keep Ignoring Blackout Costs

Evgeniy Alyoshin/Unsplash

Sweltering heat on the East Coast tested the resiliency of America’s largest power grid over the 4^th of July holiday, just days after a federal court recently upheld a Biden-era EPA rule that will make it more difficult to operate the reliable coal and natural gas plants America relies on to keep the lights on.

Margins are already tight, as America’s grid watchdog, the North American Electric Reliability Corporation (NERC), warns that half of America could be on the brink of rolling blackouts by 2030. 

We find ourselves on the brink of an unreliable power grid because, for too long, lawmakers and regulators have had policy tunnel vision, obsessing over the externality costs of greenhouse gas emissions from power plants, while entirely ignoring the economic damage posed by the growing risk of power outages. The result was regulations designed to force coal plant retirements, limit new natural gas generation and promote an overreliance on the use of wind, solar and battery storage to meet our energy needs.

This path is simply unsustainable, and it requires a serious rethink of our current regulatory process. If policymakers are going to quantify the costs of greenhouse gas emissions, they should also be required to quantify the costs associated with blackouts and reliability failures.

Federal regulators and state utility commissions routinely estimate the externality costs of greenhouse gas emissions for the regulations they propose and energy portfolios they approve using the Social Cost of Carbon (SCC), a forward-looking estimate of the economic damage from each incremental ton of greenhouse emissions emitted from power plants and cars.

However, regulators do not employ an equivalent metric to quantify the negative externalities of blackouts that may arise from these same regulations and energy portfolios, which leaves them examining only one side of the cost-benefit equation.

To remedy this unbalanced economic analysis, Always On Energy Research, where we work, has released a new report entitled “Introducing the Social Cost of Blackouts: A Practical Guide for Policymakers,” which provides a common-sense framework for evaluating the reliability of proposed regulations. Our report recommends using blackout cost estimators from the Lawrence Berkeley National Laboratory (LBNL) to evaluate the economic damages policy-driven blackouts may cause.

One of the most consequential regulatory bodies engaging in emissions-only analyses is the U.S. Environmental Protection Agency (EPA). Under the Biden Administration, the EPA enacted stringent greenhouse emissions rules on existing coal plants and new natural gas plants that America’s grid operators warned would cause “significant power shortages.”

Incredibly, the agency ignored the warnings from grid operators and did not even model the reliability implications of these new rules when it finalized in April 2024. Instead, it simply assumed that the rules would maintain reliability. Energy modeling conducted by our firm, commissioned by the North Dakota Transmission Authority, concluded otherwise.

Our analysis studied the impact of the rules in the Southwest Power Pool, a regional grid serving 20 million people stretching from North Dakota to New Mexico, and determined the grid imagined by EPA could have led to more than a dozen blackouts in the region due to an underperformance of wind and solar resources and insufficient natural gas, coal, and nuclear capacity on the system to keep the lights on.

In its Regulatory Impact Analysis, a document that conducts a cost-benefit analysis to justify the economic cost of new rules, the Biden EPA claimed that reducing greenhouse gas emissions would result in $370 billion in net benefits through 2047.

However, using the LBNL blackout cost calculator to calculate the Social Cost of Blackouts, our analysis determined the power outages in the Southwest Power Pool could cost $407 billion through 2047, which would exceed the EPA’s expected net benefits for the entire country in a regional grid that serves approximately six percent of the nation’s population.

America simply cannot afford to account for the externalities of emissions while ignoring the potentially massive costs of blackouts. Incorporating reliability modeling and estimates of the Social Cost of Blackouts into regulatory proceedings is a necessary change to ensure that reliability receives the same consideration as emissions reductions.

Isaac Orr is the Vice President of Research and Mitch Rolling is the Director of Research at Always On Energy Research, a non-profit energy modeling firm.

The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.