Wednesday, January 04, 2012

"Energy Reality"

Earlier today I attended a luncheon and press conference rolling out the annual "State of American Energy" report from the American Petroleum Institute. API's President and CEO, Jack Gerard, also used the occasion to launch a new "Vote 4 Energy" campaign, which he described as a non-partisan effort intended to start a conversation about energy during a key election year. He also touched on a number of issues that are very familiar to readers of this blog, including the Keystone XL Pipeline decision, the need for greater access to US energy resources, along with energy security and jobs. A phrase that Mr. Gerard used in his remarks, and that recurred several times during the press conference, was "energy reality." This struck me as an apt encapsulation for the energy policies that should be addressed by President Obama and whomever his Republican challenger turns out to be, from the shrinking pool of candidates.

I was pleased to hear Mr. Gerard cite the need for a full range of energy solutions, with renewables, nuclear energy and energy efficiency prominently mentioned along with the expected references to oil and gas. That is precisely the energy reality we should be pursuing: tapping the hydrocarbon riches with which the US is endowed, in order to reduce our dependence on unstable foreign suppliers, even as we ramp up the wind, solar, biofuel and other renewable energy sources that must take over the energy burden in the long run, and with all of it used more efficiently than today. Yet energy reality should also take account of the tremendous disparities of scale that still exist between conventional energy and renewables, and that are likely to persist for some time. After a decade of rapid growth, wind power accounted for less than 3% of the electricity generated here last year, and solar for much, much less than that--with neither displacing any meaningful amount of imported oil, since less than 1% of our electricity is generated from oil.

Energy reality came up again in the context of a question about the EPA's Renewable Fuel Standard, which was recently finalized for 2012 to require the use of 8.65 million gallons of cellulosic biofuel--a reduction of 98% from the 500 million gallons previously specified for this year in the RFS enacted by the Congress in 2007. Biofuel from corn, soy and animal fat has expanded to contribute nearly 10% of the US gasoline supply and a smaller fraction of diesel fuel. However, a law requiring the use of advanced fuels that don't yet exist in commercial quantities--and may not for many years--and forcing refiners to purchase credits in place of these non-existent gallons is certainly out of touch with objective energy reality and ultimately constitutes another tax on consumers.

I would argue that the decision that the President now has less than 60 days to make on whether to allow the Keystone XL Pipeline to go ahead also hinges on his understanding of energy reality. He must choose between the urgent concerns of employment and energy security articulated repeatedly in Mr. Gerard's answers to numerous questions on the subject, and an objective assessment of the environmental impact it might cause. Stripping away the various red herrings that sprang up in the course of the debates and protests over the pipeline, the latter boils down to the incremental greenhouse gas emissions from the extra oil sands production that the pipeline would facilitate, compared to the emissions from the conventional crude we would otherwise have to import from the Middle East or elsewhere. I've seen some wild exaggerations about that, including the doozy I ran across over the holidays from former Vice President Gore, to the effect that a Toyota Prius running on fuel refined from oil sands crude would have emissions equivalent to a Hummer. (When you do the math, it actually works out to the equivalent of a Ford Fusion hybrid.) In fact, the incremental emissions at stake in the Keystone decision amount to around 0.3% of total 2009 US emissions. That's the basis of the trade-off Mr. Obama must make, and no matter which side he chooses he will infuriate those supporting the other side.

As the 2012 presidential election approaches, I expect to find many opportunities for comparing campaign rhetoric to this kind of energy reality barometer. Elections tend to focus on the differences between candidates, and I have little doubt that the differences on energy will be significant. However, when the dust settles on November 7th it will be high time to start work on a new bi-partisan consensus on energy policy that might actually survive the next change in administrations, unlike the disruptive pattern we've been in for the last five cycles or so. Not reality? Perhaps, but certainly worth aspiring to. Happy New Year!

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