It's tempting to focus mainly on the energy issues that have come up in the context of the presidential campaign, such as the Keystone XL pipeline, tax breaks for energy companies, and whether and how to regulate hydraulic fracturing, a.k.a "fracking". Yet whoever is inaugurated next January, and however he resolves these issues, he will also face a much wider array of energy concerns, including some that are outgrowths of current policies or have emerged after a long gestation. Though not intended as an exhaustive list, here are a few such issues that merit close attention from the next president's energy team.
They should begin by taking a fresh and objective look at the overall US energy posture and devising a clear and concise way to describe it to the public. Big changes have taken place, with many of the issues that preoccupied us for the last decade or longer having become less relevant or out of date. Topping that list is the sense of energy scarcity that has burdened us since the oil crises of the 1970s and early 1980s. There's a realistic possibility that the combination of "tight oil" and the gas liquids production from shale gas could push domestic US petroleum/liquids production back above its early '70s peak of around 11 million barrels per day. At the same time, our net oil imports are declining, due in large part to the weak economy. However, as the share of fuel efficient vehicles in our car fleet increases, it's reasonable to think that we've already seen the peak of US demand for petroleum fuels, even after the economy returns to healthy growth. The net result might fall short of energy independence, but it will put us in a much better position than our largest economic rivals in terms of real energy security.
Then there's shale gas. Not only has it reversed a worrisome decline in US natural gas production that prompted numerous projects to import liquefied natural gas (LNG), but it has upended our assumptions about future prices and emissions in the electric power sector, while completing the divorce of oil and electricity that began in the 1980s. Now we're talking seriously about exporting natural gas. When you combine all these changes with biofuels that are contributing roughly a million barrels per day to US supply (in volumetric, though not BTU-equivalent terms) the need to revisit some of our most basic assumptions about energy looks compelling.
Energy scarcity isn't the only paradigm that needs to be rethought. The current administration apparently took office with a view that was prevalent in the environmental community and among some in energy circles, that the solutions to climate change and energy security were effectively synonymous and synergistic. That view predates the shale/tight oil revolution and was founded on the notion that renewable energy and efficiency were the only serious answers to both concerns. That linkage was always oversimplified, because it ignored the trade-offs inherent in the shortcomings of every energy technology available. And now, thanks to unexpected technological developments, we face an explicit choice between energy abundance based on hydrocarbons and a lower-emissions future based on renewables and electric vehicles that won't reach the required scale for decades, despite promising early signs. The transition from the former to the latter appears long and largely unpredictable, nor will it be cheap.
The next administration also faces a set of practical issues, along with the big-picture reframing described above. Two of these issues involve urgent tasks. The first is the growing need for a thorough evaluation of the recent and current approach to incentivizing renewable energy technologies and projects. Since early 2009 we've spent tens of billions of dollars on a constellation of federal grants, tax credits, and loan guarantees to stimulate the growth of a domestic renewable and advanced energy industry and the deployment of its products. There's a lot of new hardware on the ground, but the sustainability of this industry looks uncertain. Although only a fraction of the companies that received federal support have failed, the tally has grown large enough--with the addition of Abound Solar last week--that it's no longer acceptable merely to shrug off these losses as par for the course. We need some hard-nosed, detail-oriented outsiders to conduct a comprehensive post-expenditure review and extract the major lessons learned. That should be an absolute prerequisite before anyone contemplates renewing or expanding any of these programs, including the Pentagon's $210 million "green fleet" program.
Another urgent clean-up task is the reform of the federal Renewable Fuel Standard (RFS). This 2007 mandate was premised on the imminent arrival of cellulosic biofuel technologies that have turned out to be much harder than expected to transfer from demonstration to commercial scale. That has resulted in drastic annual revisions to the cellulosic biofuel targets of the mandate, but even these lower targets have not been achieved. Instead, the EPA imposes penalties on refiners and gasoline blenders for failing to blend non-existent volumes, with consumers ultimately absorbing the higher costs at the pump. The attractive vision of abundant renewable fuels has thus turned into a bureaucratic game. And while corn ethanol supplies 10% of gasoline and consumes nearly 40% of the US corn crop, it cannot more than double to meet the entire 36 billion gallon per year RFS target for 2022, nor should we wish it to. Instead, the RFS must be updated to reflect reality, and the associated biofuel-credit trading system should be restructured to squeeze out the fraud that is infecting it, instead of leaving refiners and blenders--and again ultimately consumers--to pick up a tab estimated at $200 million.
These items don't constitute an entire energy agenda by themselves, but together with a few higher-profile proposals from among those that both campaigns will announce and debate during the next four months, they could fill out a worthy first-hundred-days' energy plan for 2013.