Joseph Krist
Publisher
GAS
Jacksonville Electric Authority (JEA), the municipal utility for Jacksonville, Florida, plans to spend $1.57 billion to develop a 675-MW combined cycle gas plant, replacing an older unit that will retire in 2031. The new gas plant will be located at the site of the former St. Johns River Power Park, a complex of coal fired generation developed in the early 1980’s to move JEA off imported oil. It would replace a 50 year old unit.
In Texas, legislators conceived of the Texas Energy Fund in the spring of 2023, with the goal of incentivizing and accelerating the construction of more natural gas power plants to support the state’s strained power grid. In the aftermath of the disastrous winter storm experience in 2021, the idea certainly made sense to some. The Fund was authorized to make $7.2 billion worth of low-interest loans and bonus grants to fund gas generation.
That has not resulted in large scale development of gas generation. Only two new proposals have been approved so far through the Fund’s In-ERCOT Generation Loan Program, one of four programs included in the fund intended to motivate energy companies to building new gas power plants. The two loans, both to be paid back over 20 years at a 3% interest rate, would account for $321 million of the $7.2 billion total. The plants would have a capacity to generate 578 megawatts of electricity.
The program is running into a problem. Of the 25 total loan applications that have advanced to the fund’s due diligence review stage, seven have been pulled from consideration by the companies that filed them, citing supply chain issues or forecasts that the projects would not be as profitable as expected. An eighth application was denied funding last fall when there were charges of fraud.
The Electric Reliability Council of Texas (ERCOT), the state’s power grid operator, is predicting energy demand in the state will double by 2030. Legislators this spring extended the deadline for spending the $5 billion they approved in 2023. Under the original legislation creating the fund, the PUC had until the end of this year to distribute the money earmarked for power plant construction loans.
RENEWABLES
The United States added more than 15 GW of new electricity generation resources between January and May this year, according to the Federal Energy Regulatory Commission. Renewables dominated the growth led by 11.5 GW of solar, followed by 2.3 GW of wind and 1.3 GW of gas. Gas still constitutes 43% of the country’s total generating capacity. Coal is 15% and declining; solar is a little over 11%; wind is 11.8%; and nuclear is 7.7%.
Out of 133 GW of “high probability” additions expected to come online by 2028, FERC projects that 84% will be from solar (90 GW) and wind (23 GW). Gas is projected to make up about 20 GW — just 15%. Solar continues to grow as it has been the largest source of new generating capacity added each month for 21 consecutive months, since September 2023. It is estimated that at least 25%-30% of U.S. solar capacity comes from small-scale systems, such as rooftop arrays, that are not included in FERC’s data. In addition to new generation, the grid saw 244 miles of new transmission lines reach completion.
The growth of renewables and the cost effectiveness of those facilities is what makes the federal attitude towards wind seem insane. The recent spate of threats to “de-permit” offshore wind and the infrastructure to support wind threatens way more jobs than the average American thinks. One of the factors supporting the decision to relent on efforts to stop the Empire Wind project off NYC was the 1,000 on-shore jobs that were expected to result from the project.
That economic and jobs impact has not been enough to change the administration’s mind towards wind. Several projects had received federal support in great part because of the jobs potential of supply terminals for the industry. Just this week, the administration’s meat ax was taken to the Sparrows Point Steel Marshalling Port Project, which had been awarded $47.3 million in Port Infrastructure Development Program.
Others on the hit list include the Arthur Kill Terminal, an offshore wind port in New York, which had been allocated $48 million in PIDP funding; and the Humboldt Bay Offshore Wind Heavy Lift Multipurpose Marine Terminal, which had been allocated $426.7 million in Nationally Significant Freight and Highway Projects funding.
These decisions come in the wake of the Department of the Interior issuing a stop work order so that the 700 MW project off the Rhode Island coast could no longer proceed. The administration also intends to revoke the approved construction and operations plan for the 2 GW Maryland Offshore Wind project off the coast of Maryland and Delaware.
SINGING FOR THEIR RATING
The Metropolitan Opera is the largest performing arts organization in the United States. The Met’s annual budget is about $334 million. The loss of attendance during the pandemic began to accelerate trends of declining financial results and attendance. That led to drawdowns on the Met’s endowment is now valued at $232 million, down from $306 million in 2022. That was already considered small for an institution of its size.
Paid attendance is still below prepandemic levels: It was 72 percent of capacity in the 2024-25 season, compared with 75 percent before the pandemic. When the impact of discounting is included, the company took in only 60 percent of its potential box-office capacity last season. One saving grace: it raised an average of $174 million a year over the past three years.
With no real sign in sight of a turnaround in the Met’s outlook and a shrinking endowment, out of the box thinking was required. That has led to an agreement between the Met and the kingdom of Saudi Arabia which calls for the Met to perform there for three weeks each year. The deal is expected to bring the Met more than $100 million. For five years beginning in 2028 the Met will stage operas like Mozart’s “The Magic Flute” and Puccini’s “La Bohème” for three weeks each February.
The infusion of cash can buy some time from a ratings perspective but the Met still faces considerable headwinds. Attendance was significantly down before the pandemic. Changes in the offerings alienated long time attendees without generating increased attendance from younger audiences. Management acknowledges that donations – an always important revenue source – from younger donors has been disappointing.
UNIVERSITY OF CALIFORNIA
Most if not all of the attention focused on the President’s war on academia has been on private institutions, especially the Ivy League. Recent efforts by the administration have been directed at the University of California (UC). UC “receives over $17 billion per year from the federal government — $9.9 billion in Medicare and Medicaid funding, $5.7 billion in research funding, and $1.9 billion in student financial aid per year. “We would need at least $4-5 billion per year to minimize the damage” according to the school president.
Already, more than $500 million in federal grants have been suspended at UCLA. The government is asking for $1.2 billion to restore them. The Governor wants UC to sue but legally it’s not his call. The Board of Regents has that task. As this process plays out, it represents another potential source of pressure on the State’s budget. It is noted that Harvard scored an initial legal victory against its loss of research funding in its parallel dispute with the President.
PASSING ON THE SALT
The Corpus Christi, TX City Council moved to cancel a contract for a seawater desalination plant. The plant was projected to help the city attract additional industrial development. Proposed in 2019, the cost was projected at $160 million. In July, project manager Kiewitt produced an initial design and cost estimate that put the project at $1.2 billion and expected its operations to begin in summer 2028. That was not going to work. It still leaves the city in a very precarious water supply position.
The project was initially planned to begin operations by 2023. Much of the projected industrial expansion materialized but the new water supply did not. The last seven years have seen drought conditions in the city’s water shed. So, an insufficient supply of replenishing rain was accompanied by sharply increased water use by the expanded industrial base.
Initially, the proposed plant would produce 10 MGD. In 2020, the yield projection was doubled and then raised to 30 MGD. That helped to increase costs substantially. At the same time, the city is under pressure from the Governor’s office which said the state would cut all funding to Corpus Christi if it didn’t proceed with the plant.
Without additional water supply, Corpus Christi could face an emergency situation by December 2026, city officials said, forcing a 25 percent reduction of water use by the large industrial users. Corpus Christi intensified its water-use restrictions for citizens this year in March, banning all outdoor water use. Industrial facilities were exempt from drought restrictions under special city rules. The city will explore other water projects, including groundwater import and wastewater recycling. A possible large-scale groundwater import project wouldn’t likely be completed until 2030
CLIMATE RISK
A private study funded by a real estate entity has taken another shot at quantifying the risk to real estate in the U.S. The results provide support for concerns about the potential impact of natural disasters, especially flooding. It’s findings are not really surprising.
The study finds that 26% of U.S. homes are at severe or extreme risk, with flood risks particularly underestimated by the federal government. Nearly 6 million homes ($3.4 trillion in value) face severe flooding in the next 30 years, about 2 million more than FEMA estimates, due to outdated flood maps. Major metro areas like Miami, New York, Tampa, Los Angeles, and Houston collectively hold hundreds of billions of dollars in at-risk property.
Miami-Fort Lauderdale-West Palm Beach leads in total property value at risk of severe flood and wind damage, with all homes in certain metros such as Miami and Houston classified as highly vulnerable. Miami homeowners paying an average of 3.7% of a home’s value in annual premiums—the nation’s highest rate. New Orleans and several Florida metros show the highest share of homes exposed to flood risk relative to overall property value.
California holds nearly 40% of the nation’s total wildfire-exposed property value, some $3.4 trillion, with Los Angeles and Riverside as the hotspots of concern. Outside California, western cities such as Colorado Springs, Colo., and Tucson, Ariz., also face high wildfire-related property threats.
NUCLEAR
The Tennessee Valley Authority announced an agreement with ENTRA1 Energy to develop up to 6 GW of new nuclear power in the largest U.S. small modular reactor deployment program to date. The agreement calls for ENTRA1 to develop and own six “energy plants” across TVA’s seven-state territory. The nuclear company would then sell their output to the federal utility.
The project will utilize small modular reactors developed by NuScale Power. ENTRA1 holds the rights to commercialize, distribute and deploy NuScale’s products and services. The Nuclear Regulatory Commission in May granted approval of NuScale’s 77 MW power module and the company’s design for a small modular nuclear plant with a capacity of 460 MW.
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