Each month, the energy bill hits your mailbox. There’s not much thought into writing the check for payment, aside from the seasonal changes. Waiting for summer to end and energy bills to drop.
As many great crises hit, we’re are in the calm within the storm. The past several years have seen steady wholesale rates and gradual price increases for consumers.
But you’ll soon see a spike bigger than what we saw in 2006 due to four shocking reasons.
Reason #1 – An aging infrastructure
The American Society of Engineers has given a ‘D’ rating to the electrical grid.
Power outages are up over 400% in just 4 years. Demand has been stable, it’s just that some areas of our power infrastructure dates all the way back to the 1880s. [Much like some of the drinking water infrastructure in Washington DC dates back to the early 1800s…think about that the next time you have some tap water in the nation’s capital.]
Yet, power companies have been strangled to improve the existing network. States won’t grant them licenses for additional facilities due to “environmental concerns”.
The only concern that leaves you with is the ability to turn the lights on.
Reason #2 – Digitization of the grid has exposed it
Would you believe that over 40% of cyber attacks targeted energy and pipeline infrastructures around the world. That’s right, hackers are targeting the very networks that lead to the basic flow of electricity and oil.
It’s not too difficult either. Two researchers used a public search engine to easily locate 7200 devices that controlled the flow of energy, which creates plenty of opportunity for hackers to hijack a system and cause disruption.
The digital revolution has enabled energy companies to automate many of the control centers, but that has led to more serious issues. These upgrades are merely patchwork.
Reason #3 – Coal goes idle
Right now, wholesale prices have remained low. Cheap coal is still being pushed through the system.
Coal, which accounts for 1/3 of our electrical generation, can’t be relied in the next 18 months. The EPA’s Mercury and Air Toxics Standards (MATS) is moving much of that cheap coal offline in 2015. 93% of factories don’t have the processes in place to clean the air to meet EPA standards. Just have a look at the capacity that will be pulled offline in the next 3 years.
That won’t be good for prices.
Reason #4 – LNG exports
The domestic energy market took a fundamental shift when we discovered vast reserves of Liquified Natural Gas on American soil. Energy companies and investors began digging for LNG gold.
The abundance of LNG will continue. Reserves are huge, but there’s one factor that will cause prices to increase.
The Department of Energy, which had previously only approved one export facility from 2011 to 2012, has approved two new facilities since May 2013. There are more to come as big demand for our cheap natural gas is coming from China, India and South America.
When exports go up, the price will follow.
There is some good news…maybe…
Long-term sustainability for your family isn’t going to come from a profit-driven utility company.
Instead, it will come from our own willingness to take action.
Luckily, there have been two huge breakthroughs in the energy markets that can help you withstand any shock or failure to the system. One can get you instant power, with the flick of a switch. New technologies in the other gives you a long-term solution if you need to be off the grid for a while.
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