A global energy crunch, fueled by tightening coal and gas supply, has already roiled the market and threatened to squeeze customers this winter, as utility bills rise.
That may just be the beginning, according to Duke Energy (DUK) CEO Lynn Good, who heads one of the country’s largest energy holding companies.
In an interview at Yahoo Finance’s All Markets Summit, Good said she expects the supply and demand imbalance in the energy markets to continue well into 2022, with full rebalancing not expected until "2022 rolls into 2023."
“We're facing a period where the production of these commodities has remained flat, in some cases, maybe even declining,” she said. “Over time, prices will increase. And that kind of depends on where you're situated, what your mix of fuels are, and how much exposure you might have to natural gas and coal.”
Surging global demand, coupled with a supply crunch coming out of the pandemic, has contributed to a global scramble for energy resources. In China, the world’s largest producer of coal, a shortage has led to factory closures, creating disruptions that have rippled across supply chains, In Europe, which imports 90% of its natural gas supply, strong demand and limited supply has led to a more than 350% increase in prices, so far this year.
The U.S., the world’s largest supplier of natural gas, hasn’t been immune. Prices are up roughly 90% over the last year, reaching levels that haven’t been seen since 2014.
While Good didn’t specify the level of price hikes Duke Energy customers are likely to see, the U.S. Energy Information Administration estimates heating bills could jump as much as 54% for some households.
“We're working hard to mitigate those price increases to the extent that we can, and also to communicate actively with our customers, our regulators, our policymakers about what we're seeing,” Good said.
‘No material impact’ on green transition
Fears of rising costs stemming from a limited fuel supply threatens to complicate the transition to clean energy, as the Biden administration pressures utility companies to move away from carbon emitting fossil fuels to tackle climate change.
While President Joe Biden has set a goal of decarbonizing the power grid by 2035, coal use in America is set to increase for the first time since 2014 this year, according to the EIA, with the commodity offering less price volatility compared to natural gas.
Duke Energy is aiming to slash 2005 carbon emissions in half by 2030, with a long-term goal of reaching net-zero emissions by 2050. While 30% of Duke’s energy capacity still comes from coal-burning plants, Good said the utility company had no plans to slow down the closure of those plants, to simply keep costs lower in the face of elevated demand. Duke has retired 54 units so far and plans to ‘retire many more over the next decade into the 2030s," Good said.
“At this point, we do not see it having any material impact on our plans, because we believe we have plans that introduce some flexibility. We also believe as we retire some of our units and add renewables, we'll have some natural decreases in price that could be used to offset some of those dynamism,” Good said. “We will oversee the largest closure of coal in the U.S., because of the scale of our company.”
Akiko Fujita is an anchor and reporter for Yahoo Finance. Follow her on Twitter @AkikoFujita