The rise in artificial intelligence (AI) has reignited concerns about electricity and strains on the power grid. These concerns were muted over the past decades due to the increased efficiencies of the new computers. However, this time, the concerns are justified.

The key issue here that has direr implications is the Biden administration’s EPA. On May 9, the agency published a rule in the Federal Register that, if it survives legal challenges, will force the closure of every U.S. coal-fired power plant and prevent the construction of new baseload gas-fired power plants. Should the rule survive those challenges, it will curtail AI issues.

The same day the EPA published the rule, Vinson & Elkins, a Texas-based law firm with 700 lawyers that does extensive work in the energy sector, published a summary of the rule, explaining that it presents ”heavy headwinds for new gas-fired plants intended to operate above 40 percent capacity factor.” 

“Heavy headwinds” indeed! The EPA’s new rule is a de facto ban on new gas-fired power plants. The new rule requires all existing coal-fired plants and new gas-fired plants to deploy carbon capture and sequestration (CCS) equipment and “capture 90 percent of all [carbon dioxide] emissions.”

Dan Brouillette, former energy secretary in the Trump administration and head of the Edison Electric Institute (a trade group of investor-owned utilities), states that “CCS is not ready for full-scale, economy-wide deployment, nor is there sufficient time to permit, finance and build the CCS infrastructure for compliance by 2032.”

 Given the impossibility of adding CCS to existing coal plants, those facilities will be shuttered. That would be disastrous as coal plants currently produce 16 percent of the electricity consumed in the United States.

What happens next is up to the courts. On May 9, attorneys general from 27 states and The National Rural Electric Cooperative Association filed a lawsuit against the EPA. Jim Matheson, CEO of the cooperative group, states that the “EPA’s power plant rule is unlawful, unreasonable and unachievable. It exceeds EPA’s authority and imposes an immediate threat to the American grid.”

OPEC+ Considering Production Cuts Into 2025

July marks the beginning of the second half of the calendar year 2024 — with OPEC+ working on a deal, as of this writing, to extend some of its deep oil production cuts into 2025.

 The cuts include 3.66 million barrels/day (bpd) by OPEC+ members through 2025 and voluntary cuts of 2.2 million bpd through September 2024. OPEC+ will gradually phase out the cuts of 2.2 million bpd over a year from October 2024 to September 2025.

As of this writing, WTI is at $75.38/barrel and Brent is at $79.49/barrel.

The oil markets are expected to remain static for several months; however, barrel pricing could escalate quickly, predicated on the effects of geopolitical events, lower interest rates, improvement in China’s economy (the world’s largest oil importer) and lower U.S. production output on world demand.

The U.S. petroleum refining industry is anticipating an extremely busy summer, per Reuters analysts. Domestic refiners expect to operate at 90 percent of combined capacity after completing planned turnarounds initiated earlier in the year.

The industry has more than a few turnarounds scheduled to kick off in the third quarter. Industrial Info Resources (IIR) is tracking about $640 million worth of maintenance projects in the petroleum refining industry, commencing in July through September, more than 40 percent of which are in Louisiana and Texas.

Contraction Territory: Manufacturing 

Manufacturing activity has continued to contract, as the Purchasing Manager’s Index (PMI) remains under 50 percent. Timothy Fiore, chair of the Institute of Supply Management’s Manufacturing Business Survey Committee, states that the drop in demand reflected in the New Orleans index supports the PMI in indicating continued contraction. 

In addition, he says the Backlog Orders Index regressed further into contraction territory, and the Customer’s Inventories sat at a level that is “neutral for future production.”

Despite the negativity affecting U.S. manufacturing activity, IIR is tracking more than $300 billion of U.S. industrial manufacturing industry projects under construction. Nearly one-third of these projects are attributed to semiconductor production.

Data Center Power Consumption to Rise

Data centers are expected to consume up to 9 percent of U.S. electric capacity by 2030, exacerbated by the rapid rise of AI that, as noted previously, has reignited concerns regarding the availability of electricity and strains on the power grid.

This Fourth Industrial Revolution is a boon for companies in the power and renewable energy sectors and data center equipment providers. Goldman Sachs anticipates a $50 billion investment opportunity in U.S. power generation through 2030.

The surge in power demand is prognosticated to be supplied by approximately 60 percent from gas-fired power plants and 40 percent by renewable sources, driven by that $50 billion industry investment.

Data centers, also referred to as “server farms” or “telco hotels,” consume vast amounts of electricity. With power consumption of 100 watts per square foot, a 10,000-square-foot data center can demand as much power as 1,000 homes. Unlike homeowners who curtail their demand at night, while at work or on vacation, data centers require full power 24/7.

Wind and solar do not provide the consistency required to meet these demands, thus emphasizing the need for consistent power generation from environment-friendly sources such as natural gas and biomass-fueled power plants.

Recognizing the need for consistent economic power generation, energy technology and service provider Babcock & Wilcox will help Michigan convert a coal-fired power plant in Filer City, Mich., to run on biomass.

Power company Ameren Corp. is planning a similar project: converting a coal-fired 2,89.4 megawatt Labadie plant in Franklin County, Mo., to a natural-gas-fired plant.

California — yes, California — has recognized the need for added power generation during the coming high-demand months and will kickstart the use of natural gas-fired power generation.

Stable Commodity Pricing

The pricing and the availability of commodity carbon steel butt-welding fittings and forged steel flanges remain stable. However, with tensions rising in both the Pacific and the Mideast, the shipping constraints at the Panama Canal and the continuing attacks on commercial shipping by the Houthis in the Red Sea, supply chains remain vulnerable to disruptions and higher costs.

It is wise to remain in close contact with your manufacturer/supplier to avoid surprises regarding the U.S. Tri-Seal Compliance Note, pricing and the availability of pipe, forged flanges, butt-welding fittings, valves and other PVF-related products.

PVF Roundtable News

The PVF Roundtable Golf Tournament scheduled for May was canceled due to extreme flooding. The tournament has been rescheduled for Dec. 9. Please check the PVF Roundtable website (www.pvf.org) for updates and details.

The PVF Roundtable TroutBlast is scheduled for Oct. 3-4, with the Captain’s Dinner on the 3rd, followed by the tournament on the 4th. Again, check the website for further details.

The PVF Roundtable Golf Tournament and TroutBlast are the major fundraising events scheduled for 2024. The Weldbend Corp., Ferguson Industrial and MRC Global are key sponsors of these events. 

The next Networking Meeting of the PVF Roundtable will be August 13, beginning at 4 p.m., followed by a sit-down dinner with guest speaker Jeff Bagwell. A retired Houston Astro first baseman, Bagwell was part of the “Killer B’s,” along with Craig Biggio, Sean Berry and Derek Bell. Bagwell and Biggio were inducted into the National Baseball Hall of Fame in 2017 and 2015, respectively. 

The event will be held at the Bayou City Event Center in Houston, 281-501-6720.    

As a member of the board of directors, and I speak for all members, we thank you for participating in these events.

With the geopolitical uncertainties in the world today and their potential effects on the PVF marketplace, Networking Meetings are now, more than ever, essential for you and your associates. These events provide the platform to share information, discuss pertinent issues, meet new contacts, develop new long-lasting friendships and pursue new opportunities in the industry.