The energy landscape has changed so fast in the last five years that the national debate has shifted fundamentally, leaving experts struggling to figure where energy is headed.
A few new trends are clear: growing pessimism over the future of nuclear power due to cost and public acceptance after Fukushima, renewables closing in on parity with traditional fuels but still needing technology breakthroughs to become significant players, and cheap natural gas from shales transforming the landscape for everything. But questions about where the transformation is headed has revealed divisions and confusion among a number of the speakers attending the Oct. 10-12 conference of the US Association for Energy Economists in Washington DC.
See Breaking Energy’s comprehensive coverage of the USAEE conference here.
Robert McNally of the Rapidan Group said in 2007, ethanol mandates had wide bipartisan support and cap and trade was considered a bipartisan market-based mechanism. Shale gas was unheard of, and environmentalists backed natural gas to backstop intermittent renewables.
In less than 5 years, he said, cap and trade is castigated as a tax, ethanol has lost support everywhere, shale gas is so cheap it is undercutting the case for renewables, and environmentalists are attacking the hydraulic fracturing that makes it feasible to drill shales.
Without cap and trade as an organizing construct, McNally said, the political left’s goals have become mainly shutting down coal while the right’s goals are more drilling, and it’s unclear whether state policies designed to lead to cleaner energy will survive as their costs become more apparent.
Sarah Ladislaw of the Center for Strategic and International Studies said the energy landscape is shifting so fast, experts may have no choice but to wait and see how things develop.
The Government’s Role
Speakers agreed there is a fundamental reevaluation under way of the government’s role in energy. Michael Canes of LMI Research said he has been surprised how difficult it is to talk about even a nickel addition to the federal gas tax when the need for infrastructure repair is so obvious, for example.
Ladislaw noted government’s role as a regulator is also currently a subject of debate, but in one area, shale gas, industry and governments “need to recognize they are on the same page” in seeking to assure the public of safe drilling.
Many environmentalists who favored natural gas in 2007 are now active at the local level in stopping energy projects, and they are “far ahead of the industry in local communications,” she said. As the shale plays shift from gas to more oil, she added, “It will get even worse.”
Another issue for economists, said Ladislaw, is the increasing tendency of advocacy groups to create their own “facts” with competing studies, which has eroded dialogue to reach compromises.
Budget Cuts Obscure Markets
Getting independent data was a major concern at the conference, with the Energy Information Administration facing major Congressional budget cuts. Deputy Administrator Howard Gruenspecht asked the economists to help EIA prioritize what data it should stop collecting or issuing.
Benjamin Schlesinger of Benjamin Schlesinger & Associates was one of many experts warning the EIA cut is ill-advised. He said, “Industry cannot and will not pick up the gaps.” He recalled the days before EIA became the authoritative gatherer of data like gas and oil reserves. Traders had only self-serving data issued by companies, he said, and he assured the conference if EIA can’t issue its independent data, “people will make it up,” to the markets’ detriment.
“Industry cannot and will not pick up the gaps.”
Speakers also noted the shrinking role of the US worldwide. Ladislaw said in 2007-09, the international community was looking to the US for energy and climate leadership, but no longer, since the US debate has been shifted by climate deniers. US policy is now mainly a regulatory one, with new Environmental Protection Agency rules pressuring coal plant closures and switching to natural gas.
A new Deutsche Bank study says that switch will help more than the energy picture. Transforming the electricity system from coal to gas by replacing old and highly inefficient coal plants with less polluting and more efficient gas will net the economy, over a 20 years period, 500,000 jobs, the study says.
Efficiency Drive Featured
Speakers said that, with fossil fuels continuing to dominate energy for the next several decades, energy efficiency assumes new importance. They said study is needed of human behaviors that are key to efficiency. Electricity in particular has been priced low enough that consumers often aren’t motivated to change behavior to save money, and can’t see the costs of electric appliances as they use them.
Experts urged both applying new technology to provide understandable information and working with social scientists on incentivizing consumers to help create a more energy-efficient economy.
