Are Renewables Set to Displace Natural Gas?

• Bloomberg's renewable energy affiliate forecasts that wind and solar power will make major inroads into the market share of natural gas within a decade. 
• This might be a useful scenario to consider, but it is still likelier that coal, not gas, faces the biggest risk from the growth of renewables. 

A recent story on Bloomberg News, "What If Big Oil's Bet on Gas Is Wrong?", challenges the conventional wisdom that demand for natural gas will grow as it displaces coal and facilitates the growth of renewable energy sources like wind and solar power. Instead, the forecast highlighted in the article envisions gas's global share of electricity dropping from 23% to 16% by 2040 as renewables shoot past it. So much for gas as the "bridge to the future" if that proves accurate.

Several points in the story leave room for doubt. For starters, this projection from Bloomberg New Energy Finance (BNEF), the renewables-focused analytical arm of Bloomberg, would leave coal with a larger share of power generation than gas in 2040, when it has renewables reaching 50%. That might make sense in the European context on which their forecast seems to be based, but it flies against the US experience of coal losing 18 points of electricity market share since 2007 (from 48.5% to 30.4%), with two-thirds of that drop picked up by gas and one-third by expanding renewables. (See chart below.)

It's also worth noting that the US Energy Information Administration projected in February that natural gas would continue to gain market share, even in the absence of the EPA's Clean Power Plan, which is being withdrawn.

Natural gas prices have had a lot to do with the diverging outcomes experienced in Europe and the US, so far. As the shale boom ramped up, average US natural gas spot prices fell from nearly $9 per million BTUs (MMBTU) in 2008 to $3 or less since 2014.  Meanwhile, Europe remains tied to long-term pipeline supplies from Russia and LNG imports from North Africa and elsewhere. Wholesale gas price indexes in Europe reached $7-8 per MMBTU earlier this year.

But it's not clear that the factors that have kept gas expensive in Europe and protected coal, even as nuclear power was being phased out in Germany, will persist. The US now exports more liquefied natural gas (LNG) than it imports. US LNG exports to Europe may not push out much Russian gas, but along with expanding global LNG capacity they are forcing Gazprom, Russia's main gas producer and exporter, to become more competitive.

Then there's the issue of flexibility versus intermittency. Wind and solar power power are not flexible; without batteries or other storage they are at the mercy of daily, seasonal or random variation of sunlight and breezes, and in need of back-up from truly flexible sources. Large-scale hydroelectric capacity, which makes up 75% of today's global renewable generation and is capable of supplying either 24x7 "baseload" electricity or ramping up and down as needed, has provided much of the back-up for wind and solar in Europe, but is unlikely to grow rapidly in the future.

That means the bulk of the growth in renewables that BNEF sees from now to 2040 must come from extrapolating intermittent wind and solar power from their relatively modest combined 4.5% of the global electricity mix in 2015 to a share larger than coal still holds in the US. The costs of wind and solar technologies have fallen rapidly and are expected to continue to drop, while the integration of these sources into regional power grids at scales up to 20-30% has gone better than many expected. However, without cheap electricity storage on an unprecedented scale, their further market penetration seems likely to encounter increasing headwinds as their share increases.

BNEF may be relying on the same aggressive forecast of falling battery prices that underpinned its recent projection that electric vehicles (EVs) will account for more than half of all new cars by 2040. As the Financial Times noted this week, battery improvements depend on chemistry, not semiconductor electronics. Assuming their costs can continue to fall like those for solar cells looks questionable. Nor is cost--partly a function of temporary government incentives--the only aspect of performance that will determine how well EVs compete with steadily improving conventional cars and hybrids.

I also compared the BNEF gas forecast to the International Energy Agency's most recent World Energy Outlook, incorporating the national commitments in the Paris climate agreement. The IEA projected that renewables would reach 37% of global power generation by 2040, or roughly half the increase BNEF anticipates. The IEA also saw global gas demand growing by 50%, passing coal by 2040. That's a very different outcome than the one BNEF expects.

Despite my misgivings about its assumptions and conclusions, the BNEF forecast is a useful scenario for investors and energy companies to consider. With oil prices stuck in low gear and future oil demand highly uncertain, thanks to environmental regulation and electric and autonomous vehicle technologies, many large resource companies have increased their focus on natural gas. Some, like Shell and Total, invested to produce more gas than oil, predicated on gas's expected role as the lowest-emitting fossil fuel in a decarbonizing world. If that bet turned out to be wrong, many billions of dollars of asset value would be at risk.

However, it's hard to view that as the likeliest scenario. Consider a simple reality check: As renewable electricity generation grows to mainstream scale, it must displace something. Is that likelier to be relatively inflexible coal generation, with its high emissions of both greenhouse gases and local pollutants, or flexible, lower-emitting natural gas power generation that offers integration synergies with renewables? The US experience so far says that baseload facilities--coal and nuclear--are challenged much more by gas and renewables, than gas-fired power is by renewables plus coal.

The bottom line is that the world gets 80% of the energy we use from oil, gas and coal. Today's renewable energy technology isn't up to replacing all of these at the same time, without a much heavier lift from batteries than the latter seem capable of absent a real breakthrough. If the energy transition now underway is indeed being driven by emissions and cleaner air, then it's coal, not gas, that faces the biggest obstacles.

Withdrawal Exposes Weakness of the Paris Climate Agreement

When President Trump announced last week that the US would withdraw from the Paris Climate Agreement, he unleashed a flood of condemnation. Foreign leaders, US politicians, corporate executives, and environmental groups all roundly criticized the move. It also hasn't polled well.

As the initial reaction dies down, it's worth considering how this happened, what it means, and what might come next. The invaluable Axios news site has some noteworthy insights on the latter problem that I will get to shortly.

I am convinced it was a mistake to withdraw. In this I share the view of many current and former business leaders, including the Secretary of State, that the US was better off as a party to the deal and all the future negotiations it entails. Even if the goal was truly to renegotiate the agreement on more favorable terms, signaling withdrawal first seems counterproductive. However, I also see the consequences of our withdrawal in less catastrophic terms than most critics of the move.

As I noted not long after it was concluded, the Paris Agreement is by design much weaker than its predecessor, the Kyoto Protocol. Although the 2015 Paris deal was probably the strongest one that could have been negotiated at the time, it still represented a big compromise between developed and developing countries on who should reduce the bulk of future emissions and who should bear the responsibility for the consequences of past emissions. Its text is full of verbs like recognize, acknowledge, encourage, etc., and  the commitments it collected were essentially voluntary.

The agreement was also explicitly negotiated so as to maximize its chances of being enacted under the executive powers of the US president, without his having to refer the agreement to the US Senate for its concurrence. That implied it could be undone in the same way.

In other words, President Obama took a calculated risk that his successor(s) would choose to be bound by his Executive Order endorsing Paris. That was tantamount to a bet on his party winning the 2016 election, since most of the Republicans who had announced at the time were opposed to it, or the Clean Power Plan that was the linchpin of future US compliance with it.

Seeking Senate approval as a treaty would have been a much bigger lift--or required an even weaker agreement--but success would have provided significant political protection for the follow-on to the unratified Kyoto Protocol. Perhaps that explains why President Trump has chosen the much slower exit path--up to three years--provided within the Paris Agreement, rather than the quicker route of pulling out of the umbrella UN Framework Convention on Climate Change. The Convention was signed by President George H.W. Bush with the bipartisan advise and consent of the Senate in 1992.

Setting politics aside, it's also not obvious that US withdrawal from Paris will put our greenhouse gas emissions on a significantly different track than if we stayed in. Even the EPA's review and likely withdrawal of its previous Clean Power Plan, which underpinned the Obama administration's strategy for meeting the voluntary goal it submitted at Paris, may have only a minor impact on global emissions.

Federal climate policy has not been the main driver of recent emissions reductions in the US power sector. Cheap, abundant natural gas from shale and the rapid adoption of renewable energy under state "renewable portfolio standards", supported by federal tax credits that were extended again in 2015, have been the primary factors in overall US emissions falling by 11% since 2005. These trends look set to continue.

The bigger question is what happens globally with the US out of the Paris Agreement--assuming the administration does not reverse course again before it can issue the required formal notice to withdraw roughly 2 1/2 years from now. 

At least in the short term, I doubt much else will change. For the most part, the Nationally Determined Commitments delivered at Paris reflected what the signatories intended to do anyway. China's NDC is a perfect example. That country's ongoing air pollution crisis provides ample incentive to scale back on energy intensity and coal-fired power plants, which are the main source of its emissions. 

Increasing the role of renewable energy in its national energy mix perfectly suits China's ambitions in renewable energy technology. Exhibit A for that is a solar manufacturing sector that went from insignificance to more than 50% of the global supply of photovoltaic (PV) cells in under a decade, while China's domestic market accounted for 21% of global PV installations through 2015. 

The reactions to last week's announcement surely raised the stakes for other countries that might consider leaving. However, this action has also provided China and other high-emitting developing countries with an ironic mirror image of one of the main arguments on which the US government based its unwillingness to implement the Kyoto Protocol. 

What ought to matter more than any of the domestic and geopolitical maneuvering around the US exit is the actual impact on the global climate. Reporting on Axios, Amy Harder (formerly of the Wall St. Journal) portrayed this as a sort of emperor's clothes moment with a column entitled, "Climate change is here to stay, so deal with it." Monday's main Axios "stream" characterized her piece as a "truth bomb." 

As Harder put it, "The chances of reversing climate change are slim regardless of US involvement in the Paris agreement." That's consistent with recent assessments from the International Energy Agency and others. Citing the Bipartisan Policy Center and the UN, her column suggested a pivot to greater focus on adaptation, the hard and deeply unglamorous work of bolstering infrastructure and systems to withstand changes in the climate, including those that are already baked in. Attributing the source of changes in rainfall and sea level matters less than plugging the resulting physical gaps. That makes adaptation politically less toxic than cutting emissions, though still plenty challenging, fiscally. 

As I have been watching the fallout from last week's news, I keep coming back to comparisons to the Cold War that I made when the idea of pursuing climate policy through executive action was emerging in 2010. Like the Cold War, dealing with climate change requires a similarly enduring bipartisan coalition. Major policy swings every 4 or 8 years are just too costly and ineffective, due to the planning horizons involved.

NATO may be going through a difficult moment, but it is approaching its 70th year. After seeing its key weakness exposed, can anyone honestly look at the framework of the Paris Agreement and conclude that it is likely to last as long? Yet if climate change is as serious as many suggest, those are exactly the terms in which we should be thinking.

Is the US Ready for a Carbon Tax?

• While the Trump administration seeks to undo CO2 regulations, a group of former Republican officials has proposed a new, market-based emissions plan.
• This "carbon tax" looks simpler than EPA's Clean Power Plan or previous cap-and-trade legislation, but not simpler than the pre-Obama status quo.

The idea of taxing the carbon content of energy--and presumably the goods and services produced with it--is back in the news. A group of Republican "wise men" has floated it as an alternative to the regulation-based approach to emissions that the Obama administration pursued after its preferred "cap & trade" legislation died in the Congress.

Reduced to its basics, a carbon tax is a focused version of a consumption tax, based on usage rather than income or valuation. The level of the tax would be set by law, either as a fixed amount per ton of emissions or at an initial rate with preset future increases. What can't be known with certainty in advance is just how much a given level of carbon tax would reduce actual emissions.

This contrasts with the method of setting a price on carbon preferred by many other economists and environmental groups, called "cap & trade." In this approach, the government sets a cap, or maximum level, on emissions for a designated sector or the economy as a whole, while parties subject to the cap are allowed to trade emission allowances and credits with each other under that cap. Thus policy makers set the level of emission reductions, and allow the market to find the resulting price on carbon. In principal, that ought to be more efficient than the simpler carbon tax, because market forces should drive participants with low costs of cutting emissions to make the deepest reductions and then sell their excess cuts to others, for less than it would cost the latter to reduce by that amount.

From the late 1990s until 2009 or '10 I was convinced that cap & trade was the better approach to pricing emissions. However, the experience of watching the US Congress attempt to design a cap-and-trade system for the US economy cured my certainty. As I have described at length, the inclination of legislators to help favored companies, industries and sectors, combined with the extraordinary temptations created by the sheer scale of the revenue such a system would channel through the government's hands, revealed practical problems that look insurmountable in the real world, at least under our political system.

In fairness, cap-and-trade is currently used to promote emissions reductions in various jurisdictions, including California, the mainly northeastern states participating in the Regional Greenhouse Gas Initiative, and the European Union. From what I have observed, all of them have experienced technical difficulties involving the allocation of free allowances, inadequate liquidity, and other issues. The biggest practical problem is that the carbon prices these systems have tended to deliver might be characterized as the opposite of a Goldilocks price; i.e., they are typically high enough to generate substantial revenue, creating strong constituencies for their continuation, but too low to influence behavior very much.

For example, California's emissions credits currently trade at around $13 per metric ton of CO2, equivalent to $0.10 per gallon of gasoline containing ethanol. Would an extra $1 per fill-up make much of a difference in how much you drive, which car to buy when you replace your current car, or whether to sell your car (or forgo buying one) and take public transportation?

Moreover, California's emissions have been essentially flat since the state implemented cap-and-trade in 2012. However, since 2002 the state's electric utilities--historically the highest emitting sector--have operated and invested under a Renewable Portfolio Standard requiring them to increase the share of renewable energy in their generation mix to 20% by 2010, 33% by 2020, and now 50% by 2030. I suspect that accounts for most of the 7% drop in emissions since 2002, while the impact of a carbon price equivalent to 0.6 cents per kilowatt-hour (kWh) is likely lost in the noise. Of course a carbon tax would create its own political and practical complications.

First, consider how a carbon tax would affect different energy sources. As with cap & trade, a carbon tax should have its biggest impact on the highest-emitting forms of energy. In practice that would compound the current disadvantages for coal compared to abundant, low-priced natural gas and rapidly growing, essentially zero-emitting renewables like wind and solar power. At least on the surface, that seems at odds with the stated goal of the Trump administration to attempt to rescue the US coal industry and the communities that depend on it.

Like cap & trade, a carbon tax would also require a significant amount of new bookkeeping to track the path of "embedded emissions"--the CO2 and other greenhouse gases emitted at each step of a product or service's supply chain--through the economy. Some of this is already done voluntarily by companies participating in various sustainability reporting efforts, but it would be new for many others. The EPA, Department of Energy, and numerous non-governmental agencies have done much work to quantify such emissions, but a carbon tax would require a level of rigor and audit trail consistent with the creation of what amounts to a shadow currency within the economy.

A carbon tax also raises similar questions of how to spend the resulting revenue that have bedeviled cap & trade. At the current US emissions and assuming few sources were exempted, the proposed $40 per metric ton initial carbon tax would raise around $275 billion per year. That's 8% of this year's federal budget. It doesn't take a cynic to guess that the first inclination of any Congress enacting such a tax would be to hang onto this money to fund new programs, reduce the federal deficit, or some combination, rather than returning it to taxpayers as former Secretaries Baker and Schultz and the economists who back them suggest.

Their proposal would require that the proceeds of the carbon tax be rebated to essentially the same people who would be paying it at the gas pump or in their gas and electric bills. This sounds similar to the "Cap and Dividend" approach to cap & trade proposed by Senators Cantwell (D) and Collins (R) a few years ago. Their bill had the great advantage of simplicity, requiring just a fraction of the 1,427 pages of the 2009 Waxman-Markey cap & trade bill, the main purpose of which seemed to be to redistribute vast sums of money outside the tax code. But like W-M, it went absolutely nowhere.

Like it or not, that's my best guess of the fate of the current carbon tax idea, too. The biggest challenge facing a carbon tax today is that it would not be running as a simpler, more market-oriented alternative to prescriptive legislation or complex EPA regulations. After all, the administration's intention appears to be to eliminate the EPA's main emissions-reduction regulation, the Clean Power Plan, not to replace it.

And although the new US Secretary of State, Mr. Tillerson, is on record numerous times in support of a carbon tax, that position seems to have been put forward mainly in preference to cap & trade, rather than on its own merits in the absence of any other strict climate policy.

A carbon tax would raise the effective price of energy commodities in which we appear to have a global competitive advantage, at least for now. The current proposal may rebate the carbon tax on exports, but most economic activity starts and ends within this country. And as noted in the NY Times op-ed by Dr. Feldstein and the other economists backing this measure, the revenue recycling to consumers would be on an equal basis, rather than proportional to usage, so there would be winners and losers as with any redistributive taxation. Lower-income Americans driving older cars seem likelier to come out on the short end of that than wealthier consumers driving new cars that meet rising fuel economy standards.

Ultimately, we must ask why President Trump or his team would want to impose a new tax on US consumers and businesses to address a problem that has probably just become an even lower priority for them than it was. Notwithstanding Mr. Trump's demonstrated unpredictability, the simplest answer seems to be that he wouldn't.

Don't Book Your Solar-Powered Flight Yet

• An around-the-world flight by a solar-powered airplane is a remarkable achievement, but it does not signal that solar passenger planes are the next big thing.
• Compared to other options, solar's low energy density makes it an especially challenging pathway for pursuing large cuts in the emissions from aircraft.

Earlier this week the pioneering solar-powered airplane, Solar Impulse 2, completed its record-setting circumnavigation of the Earth, returning to Abu Dhabi. Just a few hours earlier, the US Environmental Protection Agency announced its intention to regulate greenhouse gas emissions from aircraft engines under the Clean Air Act. Over the last dozen years I have written numerous posts linking stories like these together, but this is one case in which I sincerely hope these events were entirely unrelated. That requires a bit of explanation.

Let's start by acknowledging the engineering talent and sheer courage involved in the flight of the Solar Impulse 2 (Si2). The aircrew and designers deserve all the kudos they will receive; they have earned a place in aviation history. However, notwithstanding the prediction of pilot Bertrand Piccard that, "within 10 years, electric aircraft could be carrying up to 50 passengers on short to medium-haul flights," I am skeptical that this project will be the forerunner of solar-powered commercial flight in the way that Charles Lindbergh's transatlantic flight in 1927 led to the first non-stop commercial flight across the Atlantic in 1938.

There's no anti-solar bias involved in that statement, just an appreciation of the constraints that physics and geometry (e.g., the "square-cube law") impose on the amount of solar energy an aircraft can harvest during flight with anything like current technology. Energy density is an essential factor in the economics of commercial air travel.

According to the website for the Si2, the aircraft is approximately "the size of a 747 with the weight of a car." That should be our first hint that scaling up to the performance and capacity of today's jets would be an even bigger challenge than the one these folks have just completed. During the course of its journey, which entailed over 500 hours of flight spread across 17 months, the Si2 collected and consumed electrical energy equivalent to a little over 300 gallons of kerosene-based jet fuel. By comparison, a Boeing 777, which is capable of carrying up to 400 people, burns an average of around 2,000 gallons of jet fuel per hour.

If you covered a 777's wings with the same 22%-efficient SunPower solar cells used by the Si2, they would generate the fuel-equivalent of less than 3 gallons per hour at noon on a cloudless day. Even allowing for the higher efficiency of electric motors compared to gas turbines, that is still orders of magnitude less than the energy necessary to push a fully-loaded jetliner through the sky at 550 miles per hour. (The Si2 averaged 47 mph.)

As the Financial Times reported, the near-term applications of solar-powered flight are likely limited to surveillance drones and other specialized platforms for which long-range fuel-free flight confers a big advantage. I could also envision lightweight, high-efficiency solar cells being used on next-generation commercial aircraft to provide auxiliary (non-motive) power, saving both fuel and emissions.

That brings me back to the EPA. The agency's stated rationale for targeting aircraft engines now is that they expect these emissions to increase in the future, and that reductions would lead to climate and health benefits. There's no mention of solar-powered aircraft, and I must trust that had nothing to do with their announcement.

The EPA's latest greenhouse gas inventory reported that in 2014 commercial and other aircraft accounted for 8% of US transportation-related emissions, and about 2% of all US emissions of CO2 and other greenhouse gases. It also showed that aviation emissions have fallen 22% since 2005.

Perhaps the growth they are worried about is proportional, rather than absolute, as emissions from electricity generation and other sources decline faster. However, compared to cars and light trucks that account for over 60% of emissions from transportation, and for which many emission-reduction options are available, aviation is a small and rather challenging focus for further reductions.  Those will likely rely on advanced biofuels, along with additional gains in turbine efficiency and airframe weight reduction. 

The website for Solar Impulse 2 acknowledges that its flight was intended to highlight the earth-bound applications of renewable energy: "Behind Solar Impulse’s achievements, there is always the same goal: show that if an airplane can fly several days and nights in a row with no fuel, then clean technologies can be used on the ground to reduce our energy consumption, and create profit and jobs." Solar-powered air travel for the masses seems pretty far off, and certainly not something we can count on for cutting our emissions. 

Another Step Backward for Nuclear and the Environment

I don't normally do breaking news, but today's announcement by PG&E and a coalition of environmental groups on retiring the Diablo Canyon nuclear power plant in California within 8-9 years merits immediate comment.

Given the enormous social and political challenges PG&E faced in undertaking the re-licensing of the facility when its current operating licenses expire in 2024 and 2025, this action is understandable, though regrettable. I lived in California when Diablo Canyon was planned and built. It was sufficiently controversial in the 1970s, and the environment has only become more contentious. Extending the operating licenses of nuclear power plants to 60 years has become typical elsewhere, but the utility's board must have concluded that it was a non-starter in today's California.

However, we should not be misled by press-release language about replacing "power produced by two nuclear reactors...with a cost-effective, greenhouse gas free portfolio of energy efficiency, renewables and energy storage." Under California's extremely aggressive renewable energy and storage targets, the alternative energy mentioned here was coming, anyway, but it was intended to replace higher-emitting sources like out-of-state coal and in-state natural gas generation. Until there is an overall surplus of zero-emission energy--when?--the energy mix is a zero sum game.

This agreement--perhaps the best deal possible under the circumstances--thus represents the net loss of 18 billion kilowatt-hours (kWh) per year of zero-emission electricity. That's equivalent to 9% of all utility-scale electricity generated in California last year. The state went through a similar event in 2013 with the permanent shutdown of the San Onofre Nuclear Generation Station between L.A. and San Diego. As I noted at the time:

How much emissions will increase following the shutdown depends on the type of generation that replaces these units. If it all came from renewable sources like wind and solar, emissions wouldn’t go up at all, but that’s impractical for several reasons. Start with the inherent intermittency of these renewables, and then compound the challenge by its scale. Even in sunny California, replacing the annual energy contribution of the SONGS units would require around 7,200 MW of solar generating capacity, equivalent to nearly 2 million 4-kilowatt rooftop photovoltaic (PV) arrays. That’s over and above the state’s ambitious “Million Solar Roofs” target, which was already factored into the state’s emission-reduction plans.

Grid managers from the state’s Independent System Operator indicated that in the near term much of the replacement power for SONGS will be generated from natural gas. Even if it matched the mix of 71% gas and 29% renewables added from June 2012 to April 2013, based on “net qualifying capacity”, each megawatt-hour (MWh) of replacement power would emit at least 560 lb. more CO2 than from SONGS. That’s an extra 4 million metric tons of CO2 per year, or 8% of California’s 2010 emissions from its electric power sector and almost 1% of total state emissions. If gas filled the entire gap, or if the natural gas capacity used was not all high-efficiency combined cycle plants, the figure would be closer to 6 million metric tons, equivalent to the annual emissions from about 1.5 million cars.

So far, the state's environmental data supports this conclusion. Although offset by larger imports of low-emission power from out-of-state, there was a noticeable uptick in greenhouse gas emissions from in-state generation from 2013 to 2014. (See Figure 8 in the 2016 California GHG Inventory.) 

California will get more renewables either way, but shutting down Diablo Canyon when it still has decades of useful life left represents a net loss to California consumers, PG&E shareholders, and to the global environment. 

On Track for a Golden Age of Gas?

• The global energy industry must overcome significant new challenges if natural gas development is to achieve the vision of a Golden Age of Gas.
• Low energy prices and reduced investment are only half the battle as regulations complexify and organized opposition grows. 

Five years ago the International Energy Agency (IEA) issued a report entitled, "Are We Entering a Golden Age of Gas?" Gas development was booming, from both conventional resources and US shale deposits, and gas was widely seen as a vital tool for reducing greenhouse gas emissions. Much has happened since then, including a collapse in global oil prices, the signing of a new climate agreement in Paris, and a broadening of the anti-fossil-fuel focus of climate activists. If we're still on the path to a golden age of gas, the ride will be bumpy.

This is probably most evident across the pond, where Nick Butler, the Financial Times' respected energy analyst, observed this week, "Unless something changes radically, Europe has passed the point of peak gas consumption." He cited Germany's ongoing "Energiewende" (energy transition) which in order to maximize wind and solar and minimize nuclear power, ends up squeezing gas out between renewables and much higher-emitting coal.

Earlier this month France's Energy Minister announced she was pursuing a ban on imports of US shale gas--effectively any gas from the US--since France already bans domestic fracking. That strikes me as a textbook example of having to keep making bad decisions to be consistent with the first one, but it's their sovereign choice.

As the IEA defined it at the time, this Golden Age would entail faster growth in gas demand in every major sector, compared to the agency's main "New Policies" scenario in its then-current annual World Energy Outlook (WEO). They anticipated compound average growth of 1.8% per year, much faster than oil or coal, with gas consumption ending up 13% higher than the WEO's projection for 2035. That's like adding an extra Russia or Middle East to world gas demand within 20 years.

One gauge of whether that still seems realistic can be found in the US Energy Information Administration's (EIA) just-released 2016 International Energy Outlook. The EIA's long-term forecast actually has gas consumption growing slightly faster than IEA's Golden Age track in the developed countries of the OECD between now and 2035, but with a slower ramp-up to essentially the same end-point in the non-OECD countries.

Of course one forecast can't really validate another, so let's consider how some of the big uncertainties that the IEA identified in the 2011 report have shifted, starting with energy pricing. After oil's recent rebound, oil and gas have fallen by around half their 2011 US prices. That makes investments in oil and gas exploration and production considerably less attractive. Nearly $400 billion of projects have been canceled or deferred, globally, setting up slower growth in production from both gas fields and oil fields with associated gas in the near-to-medium term. This deceleration is evident in EIA's latest monthly Drilling Productivity Report for US shale.

With the contract price of liquefied natural gas (LNG) often tied to oil prices or competing with pipeline gas that has also fallen in price, large gas infrastructure projects like LNG plants look less attractive, too. We've already seen cancellations of new facilities in Australia and Canada. Fewer LNG export facilities are likely to be built in the US than previously planned. All this means less new gas reaching markets where it can be used.

Cheaper oil also reduces the attractiveness of gas as a transportation fuel. Although increasingly popular as a cleaner fuel for buses, natural gas hasn't made much headway in US passenger cars. However, this application has been growing in places like Italy and Iran, for different reasons.

Viewed in isolation, these price-related responses seem likelier to delay, rather than derail the expectations the IEA set out in 2011. The bigger challenges come from a set of issues the IEA identified a year later, in a follow-up report called "Golden Rules for a Golden Age of Gas." As Dr. Birol, now the Executive Director of IEA, indicated then, these boil down to the industry's "social license to operate."

Transparency, water consumption, emissions including methane leaks--all on IEA's list--are some of the key issues over which companies, regulators, NGOs and activists are sparring today. The UK is a prime example. Conventional energy production is declining rapidly and a large shale gas potential has been identified by the British Geological Survey, but every attempt to drill exploratory wells has encountered strong opposition.

A new factor the IEA did not anticipate is the emergence of political movements focused on fossil fuel divestiture and a "keep it in the ground" mantra. These may be based on unrealistic expectations of how quickly the world can transition to a zero-emission economy, but they illustrate the scale of a stakeholder engagement challenge the global oil and gas industry has so far failed to meet adequately. 

Just as social media are transforming politics, they are also altering the balance of power between organizations and their critics. The gaps that must be bridged if new gas development is to remain broadly acceptable to the public are growing in ways that will demand new approaches and new strategies to address. 

Considering the shifts in the global energy mix that will be necessary to reduce global emissions in line with the goals of last year's Paris Agreement, gas ought to have a future every bit as bright as the Golden Age the IEA described five years ago. Achieving that now likely depends less on the price of energy and the scale of available resource than on convincing regulators and the public that the trade-offs involved in obtaining its benefits are still reasonable.

Out of Reach Without Nuclear and Shale

• US emissions reduction goals for 2025 could not be achieved without nuclear power and the fracking technology necessary to extract shale gas. 
• Recent revisions by the EPA in its estimates of methane leaks from natural gas production and use do not negate the benefits of gas in reducing emissions.

In its lead editorial yesterday, the Washington Post took presidential candidate Bernie Sanders to task for his attacks on nuclear power and natural gas. The Post focused its critique on greenhouse gas emissions and the emissions trade-offs involved in substituting one form of energy for another. That speaks directly to one of the main reasons that Mr. Sanders' argument resonates with his supporters, but it ignores an even more basic problem. The energy contribution from shale and nuclear power is so large that if our goal is a reliable, low-emission energy mix that meets the future energy needs of the US economy, we simply cannot get there without them, at least not in any reasonable timeframe.

The pie chart below shows the current sources of US electricity in terms of the energy they generate, rather than their rated capacity. This is an important distinction, because the renewable electricity technologies that have been growing so rapidly--wind and solar--are variable and/or cyclical, generating only a fraction of their rated output over the course of any week, month, or year.

For example, replacing the output of a 2,000 megawatt (MW) nuclear power plant such as the Indian Point facility just north of New York City would require, not 2,000 MW of wind and solar power, but between 7,600 MW and 9,400 MW, based on the applicable capacity factors for such installations. Now scale that up to the whole country. With 99 nuclear reactors in operation, rated at a combined 98,700 MW, it would take at least 375,000 MW of new wind and solar power to displace them. As the Post's editorial points out, money spent replacing already zero-emission energy is money not spent replacing high-emitting sources.

At the rates at which wind and solar capacity were added last year, that build-out would require 24 years. That's in addition to the 36 years it would take to replace the current contribution of coal-fired power generation. It also ignores the fact that intermittent renewables require either expensive energy storage or fast-reacting backup generation to provide 24/7 reliability.

That brings us to natural gas, the main provider of back-up power for renewables, and the "fracking" (hydraulic fracturing) technology that accounts for half of US natural gas production. Fracking has transformed the US energy industry so dramatically that it is very hard to gauge the consequences of a national ban on it, even if such a policy could be enacted. Would natural gas production fall by a third to its level in 2005, when shale gas made up only around 5% of US supply, and would imports of LNG and pipeline gas from Canada ramp back up, correspondingly?

Or would production fall even farther? After all, one of the main factors behind the rapid growth of shale gas in the previous decade is that US conventional gas opportunities in places like the Gulf of Mexico were becoming scarcer and more expensive to develop than shale, which was higher-cost then than today. Either way, the constrained supply of affordable natural gas under a fracking ban would not support generating a third of US electricity from gas, vs. 20% in 2006. So we would either need even more renewables and storage--in addition to those displacing nuclear power--or, as Germany has found in pursuit of its phase-out of nuclear power, a substantial contribution from coal.

One of the primary reasons cited by Mr. Sanders and others for their opposition to shale gas, aside from overstated claims about water impacts, is the risk to the climate from associated methane leaks. Here he would seem to have some support from the US Environmental Protection Agency, which recently raised its estimates of methane leakage from natural gas systems.

Methane is a much more powerful greenhouse gas than carbon dioxide (CO2), so this is a source of serious concern. However, a detailed look at the updated EPA data does not support the contention of shale's critics that natural gas is ultimately as bad or worse for the climate than coal, a notion that has been strongly refuted by other studies.

The oil and gas industry has questioned the basis of the EPA's revisions, but for purposes of discussion let's assume that their new figures are more accurate than last year's EPA estimate, which showed US methane emissions from natural gas systems having fallen by 11% since 2005. On the new basis, the EPA estimates that in 2014 gas-related methane emissions were 20 million CO2-equivalent metric tons higher than their 2013 level on the old basis, for a year-on-year increase of more than 12%. This upward revision is nearly offset by the 15 million ton drop in methane emissions from coal mining since 2009, which was largely attributable to gas displacing coal in power generation.

In any case, the new data shows gas-related emissions essentially unchanged since 2005, despite the 44% increase in US natural gas production over that period. The key comparison is that the EPA's entire, updated estimate of methane emissions from natural gas in 2014, on a CO2-equivalent basis, is just 2.5% of total US greenhouse gas emission that year. In particular, it equates to less than half of the 360 million ton per year reduction in emissions from fossil fuel combustion in electric power generation since 2005--a reduction well over half of which the US Energy Information Administration attributed to the shift from gas to coal.

In other words, from the perspective of the greenhouse gas emissions of the entire US economy, our increased reliance on natural gas for power generation cannot be making matters worse, rather than better. That's a good thing, because as I've shown above, we simply can't install enough renewables, fast enough, to replace coal, nuclear power and shale gas at the same time.

What does all this tell us? Fundamentally, Mr. Sanders and others advocating that the US abandon both nuclear power and shale gas are mistaken or misinformed. We are many years away from being able to rely entirely on renewable energy sources and energy efficiency to run our economy. In the meantime, nuclear and shale are essential for the continuing decarbonization of US electricity, which is the linchpin of the plans behind the administration's pledge at last December's Paris Climate Conference to reduce US greenhouse gas emissions by 26-28% by 2025. That goal would be out of reach without them.

A Grand Compromise on Energy?

The idea of  a Congressional "grand compromise" on energy has been debated for years. A decade ago, such an agreement might have opened up access for drilling in the Arctic National Wildlife Refuge, in exchange for "cap and trade" or some other comprehensive national greenhouse gas emissions policy. By comparison, the deal apparently included in the 2016 spending and tax bill is small beer but still worthwhile: In exchange for lifting the outdated restrictions on exporting US crude oil, Congress will respectively revive and extend tax credits for wind and solar power.

Anticipation about the prospect of US oil exports seemed higher last year, when production was growing rapidly and threatening to outgrow the capacity of US oil refineries to handle the volumes of high-quality "tight oil" flowing from shale deposits. Just this week Michael Levi of the Council on Foreign Relations, citing a study by the Energy Information Administration, suggested that allowing such exports might now be nearly inconsequential in most respects.

Although little additional oil may flow in the short term, given the current global surplus, it's worth recalling that the gap between domestic and international oil prices hasn't always been as narrow as it is today. The discount for West Texas Intermediate relative to UK Brent crude has averaged around $4 per barrel this year, but within the last three years it has been as wide as $15-20. Oil traders will tell you that average differentials between markets are essentially irrelevant. What counts is the windows when those gaps widen, during which  a lot of cargoes can move in short periods.

No matter how much or little US oil is ultimately exported, and how much additional production the lifting of the export ban will actually stimulate, the bigger impact on the global oil market is likely to be psychological. Having to find new outlets for oil shipped from West Africa, for example, because US refiners are processing more US crude and importing less from elsewhere is one thing; having to compete directly with cargoes of US oil is going to be quite another. That's where US consumers will benefit in the long run, from lower global oil prices that translate into lower prices at the gas pump.

Finally, if OPEC can choose to cease acting like a cartel--at least for the moment--and treat crude oil as a normal market, then it's timely for the US to follow suit and end an oil export ban that originated in the same 1970s oil crisis that put OPEC on the map.

How about the other side of this deal? What do we get for retroactively reinstating the expired wind production tax credit (PTC), along with extending the 30% solar tax credit that would have expired at the end of next year?

We'll certainly get more wind farms, along with some stability for an industry that has been whipsawed by past expirations and last-minute extensions of a tax credit that has been a major driver of new installations throughout its 20+ year history. Wind energy accounted for 4.4% of US grid electricity in the 12 months through September, up from a little over 1% in 2008.

However, this tax credit isn't cheap . The 4,800 Megawatts of new wind turbines installed in 2014 will receive a total of nearly $2.5 billion in subsidies--equivalent to around $19 per barrel--during the 10 years in which they will be eligible for the PTC, and 2015's additions are on track to beat that. The PTC is also the policy that enables wind power producers in places like Texas to sell electricity at prices below zero--still pocketing the 2.3¢ per kilowatt-hour (kWh) tax credit--distorting wholesale electricity markets and capacity planning.

As for solar power, it's not obvious that the tax credit extension was necessary at all, in light of the rapid decline in the cost of solar photovoltaic energy (PV). In any case, because the tax credit for solar is calculated as a percentage of installed cost, rather than a fixed subsidy per kWh of output like for wind, the technology's progress has provided an inherent phaseout of the dollar benefit. Solar's rapid growth seems likely to continue, with or without the tax credit.

The big missed opportunity from a clean energy and climate perspective is that these tax credit extensions channel billions of dollars to technologies that, at least in the case of wind, are essentially mature and widely regarded as inadequate to support a large-scale, long-term transition to low-emission energy. I would have preferred to see these federal dollars targeted to help incubate new energy technologies, along the lines of the Breakthrough Energy Coalition announced by Bill Gates and other high-tech leaders at the Paris climate conference.

The current deal, embedded within a $1.6 trillion "omnibus" spending bill, must still pass the Congress and be signed by the President. It won't please everyone, but it is at least consistent with the "all of the above" approach that has been our de facto energy strategy, at least since 2012. It also serves as a reminder that despite the commitments at Paris to reduce emissions of CO2 and other greenhouse gases, renewable energy will of necessity coexist with oil and gas for many years to come.

The Keystone Rejection and the Shift Back toward OPEC

Although the International Energy Agency's latest warning of future energy security risks doesn't mention the Keystone XL pipeline, it provides important context for assessing President Obama's decision turning down that project's application. The IEA's newly issued global energy forecast indicates that if oil prices remain low until the end of the decade, it "would trigger energy-security concerns by heightening reliance on a small number of low-cost producers," a polite way of referring to OPEC. The Keystone verdict could help reinforce that shift.

I've devoted a lot of posts to different aspects of the Keystone issue. In a post last year on the State Department's Final Supplemental Environmental Impact Statement, I pointed out the pipeline's relatively modest potential to affect climate change, with a range of incremental greenhouse gas emissions (GHGs) equating to 0.02-0.4% of total US emissions. Even if the full lifecycle emissions of the oil sands crude it would have transported were included, they would still not have exceed around 0.3% of global CO2-equivalent emissions. For these and other reasons, I have consistently concluded that the decision would be made on political, rather than technical grounds, consistent with the symbolism the project has taken on with environmental activists during this administration.

Whether the Keystone rejection is attributable mainly to domestic political considerations or to positioning in advance of next month's Paris climate conference is a minor distinction. As the editors of the Washington Post put it, the distortion and politicization of the issue "was a national embarrassment, reflecting poorly on the United States’ capability to treat parties equitably under law and regulation." If the IEA's assessment of the trends underlying today's low oil prices is correct, we may come to regret last Friday's ruling for other reasons, too.

Recall that last year's oil-price collapse had two principal triggers: surging US oil production from shale deposits in Texas, North Dakota and several other states, and a decision by OPEC to forgo its historic role as balancers of the global oil market and instead to produce full out. The latter explains why oil remains below $50 per barrel, even though US shale output is now retreating.

Yet while shale production is expected to rebound once prices start to recover--whenever that might occur--the same cannot necessarily be said for conventional non-OPEC production from places like the North Sea and other high-cost, mature regions. Oil companies have canceled or deferred over $200 billion in exploration and production projects, while existing oil fields accounting for more than 10 times the output of US shale will continue to decline at rates of perhaps 5-10% per year.

The combination of all these factors sets the stage for a future oil market very different from what we've experienced in the past few decades. If OPEC and particularly Saudi Arabia assume the role of baseload, rather than swing producers, the price of oil will be set by the last, most expensive barrels to be supplied. That would constitute a much more normal market than one that has been dominated by OPEC production quotas, but it would also lack the margin of 3-5 million barrels per day of "spare capacity" that OPEC has typically held in reserve. That is a recipe for increased risk and volatility ahead.

If this comes to pass, the result might not be an exact re-run of the oil crises of the 1970s. The global economy is much less reliant on oil than it was four decades ago, especially for electricity generation, which as the IEA points out will increasingly come from renewable sources. However, oil will remain indispensable for transportation for many years. In a global oil market again dominated by OPEC, additional pipeline-based supplies from a reliable neighbor like Canada would be highly desirable, and the US Strategic Petroleum Reserve, which the Congress just voted to shrink in order to raise a couple of billion dollars of revenue, could become a lot more valuable.

The decision to reject TransCanada's application for the Keystone XL pipeline was ostensibly made on long-term considerations related to climate change, but it reflects a short-sighted view of energy markets. In that light, the President's conclusion that Keystone "would not serve the national interests of the United States" seems very likely to be revisited by a future US president.

EPA's Blown Call on Ethanol

• EPA's proposed revision to renewable fuel quotas achieves the appearance of compromise by cutting non-existent volumes, while still attempting to force more ethanol into the market than consumers seem to want.

Last Friday the US Environmental Protection Agency released its long-awaited proposal for untangling a broken federal Renewable Fuels Standard (RFS). Although it provides all parties with greater certainty, it fails to resolve the regulation's fundamental flaws. This is all the more disappointing for the duration of the wait involved, finalizing 2014's quotas 18 months late and leaving refiners and fuel blenders to operate for the first five months of this year on hints and guesswork about how much ethanol and biodiesel they would be required to sell in 2015.

The proposal meets at least one definition of a compromise, with most affected constituencies apparently disappointed or irate about the result. To someone unfamiliar with the situation, it might even seem that, as ethanol groups claim, the agency has leaned far in the direction of assuaging the concerns of the petroleum refining industry by cutting a total of 11 billion gallons from the 2014-16 quotas for ethanol and other biofuels. However, as EPA's accompanying analysis makes clear, the omitted volumes were unlikely ever to be purchased by end-users, given the decline in US motor fuels consumption since the statutes imposing the RFS were passed in 2005 and 2007. Nor do the facilities yet exist to produce the quantities of cellulosic biofuels that account for the lion's share of the proposed cuts.

EPA's documentation repeatedly cites the "intent of Congress." This seems to refer to the Congressional sessions that bequeathed us this policy, rather than to the current Congress, which is waking up to the fact that the program has largely been superseded by reality. The RFS was designed to address two problems: US fuel scarcity and transportation-sector emissions of greenhouse gases. The former has been overcome mainly thanks to the shale revolution, transforming the US from a net importer of refined petroleum products to the world's largest exporter.

As for automobile-related emissions, they are being managed more effectively by fuel economy improvements and new vehicle technology. The RFS may even be counterproductive in its overall emissions impacts, as noted in a press release from the Environmental Working Group. Nor are emissions the only issue for which crop-based ethanol may be doing more harm than good. Evidence points to periodic impacts on global food prices. It's hard to conclude we could divert 38% of the US corn crop without causing unintended consequences somewhere.

EPA's analysis of the snarl at the core of the existing RFS is perplexing. First it describes how ethanol has effectively reached its maximum possible penetration of the US market for ordinary gasoline containing up to 10% ethanol (E10)--the so-called "blend wall." It goes on to acknowledge that sales of gasoline blends containing up to 15% or 85% ethanol, respectively, remain minuscule relative to total gasoline sales. However, it then ignores these facts and persists in the hope that by continuing to increase its ethanol quota, albeit more slowly, it can convince consumers to embrace fuels for which they had little appetite even when gasoline cost $1 more per gallon than it does today.

As the Washington Post noted, most car manufacturers still warn automobile owners that using gasoline containing more than 10% ethanol could result in engine damage not covered by their warranties. Although I was pleased to see that the car I recently purchased is warranted up to 15% ethanol, I cannot envision buying a single gallon of E15 unless it was priced at a discount to E10 gasoline, reflecting its inherently lower fuel economy and range. As for E85, in only a handful of states does the market discount meet or exceed the fuel's 27% calculated deficit in delivered energy, compared to E10. Is it any wonder that for a decade E85 has failed to take off as envisioned by the EPA and previous Congresses?

The EPA does not have a free hand to rewrite this regulation in any manner it would like, to fit the greatly altered circumstances in which the US now finds itself. The agency may well believe it has gone as far in that direction as it could, although I suspect it could have justified freezing ethanol from all sources at current levels, and allowing cellulosic ethanol gradually to displace corn-based fuel as new facilities come online. However, no adjustments that EPA seems prepared to make can repair a biofuels policy that was fundamentally broken at its inception, due to its inherent contradictions with other policies and consumer preferences.

We have reached the point at which conflicting federal biofuel quotas, emissions regulations, and  chronically weak GDP growth have rendered the original goals of the RFS not just ambitious but unattainable. The EPA has taken its best shot at addressing this and come up short. It is now up to the US Congress and the Administration to work together to fix this mess, before the consequences of inaction put a damper on one of the few bright spots of the current economy.

Keystone XL Loses Another Round

The image that will stick with me from yesterday's failed attempt by Senator Mary Landrieu of Louisiana to avoid a filibuster on her bill to approve the Keystone XL pipeline is that of her Senate colleague, Barbara Boxer (D-CA) standing next to a blown-up photo of choking smog, presumably in China. Inconveniently, the greenhouse gases at the heart of this debate are invisible and global in effect, rather than local like the pollution from unscrubbed coal plants half a world away. Senator Boxer's smog ploy epitomizes the confusion and misinformation surrounding this project.

That extends to the White House, where the President's recent arguments against the pipeline reflect beliefs, rather than facts, and stand in contrast to the findings of his own administration on the economic and environmental impact of the pipeline, or of oil exports, should some of Keystone's oil be sold into the global market from the Gulf Coast.

Yesterday's defeat is likely to be more final for Senator Landrieu than for the pipeline. She goes into next month's runoff election as a distinct underdog, based on recent polling. The pipeline, however, will likely get another opportunity in the new Congress early next year, when supporters are expected to have an easier time coming up with the 60 votes necessary to bring a bill to the Senate floor for an up-or-down vote. The project may even benefit from having avoided a Presidential veto now, since the fig-leaf of letting the review process run its course would have been more transparent this time than when the President rejected the pipeline in 2012.

How Good Is The New Emissions Deal with China?

• President Obama's emissions deal with China sets an ambitious target for US CO2 cuts while leaving substantial headroom for emissions growth in China. 
• It will likely compound his problems, domestically, but could have significant influence on upcoming international climate negotiations.

Only an event like Tuesday's agreement between President Obama and his Chinese counterpart to limit greenhouse gas emissions (GHG) from the two countries could top the unexpected scramble in the US Senate to pass a Keystone XL pipeline bill as the big energy story of the week. The significance of the climate deal is open to interpretation, from both international and US political perspectives. Before exploring those, we should examine its consequences.

The White House announced that in exchange for the US agreeing to reduce "net greenhouse gas emissions 26-28 percent below 2005 levels by 2025", China would undertake to cap its GHG emissions by "around 2030." It also announced plans to step up a number of cooperative efforts with China in this area, including joint R&D and a jointly funded public/private carbon capture and sequestration (CCS) project in China. What does all this mean in terms of US emissions?

We need to start with the 2012 baseline in which net US emissions were already nearly 11% below 2005 levels. The current Annual Energy Outlook of the US Energy Information Administration (EIA), assuming the laws and regulations in force at the time it was produced, projects that US energy-related CO2 emissions will increase by 236 million metric tons (MT) by 2025, compared to 2012, leaving us at roughly 7% under 2005. Emissions from transportation would shrink, while those from industry would rise as the US economy grows by an expected 2.4% per year.

As I understand it that EIA forecast doesn't include the emissions that the EPA's "Clean Power Plan" for existing power plants would be expected to save if fully implemented. EPA targets reducing CO2 emissions from the US electricity sector--accounting for 39% of net emissions in 2005--by 25% by 2020 and 30% by 2030, compared to 2005. That would shave around 460 million MT from the EIA figure for 2025, getting us to nearly 15% below 2005. The additional savings to reach 26% below 2005 are thus in the neighborhood of 700 million MT per year by 2025. To put that in perspective, it's equivalent to the 2012 CO2 emissions from combustion in the entire US industrial sector, and exceeds total emissions of methane from all sectors, including agriculture, oil & gas, and landfills.

So unless I've done my sums wrong, or misinterpreted the government's data, the US/China deal commits to reducing US emissions by as much again as we've cut since 2005--largely as a result of a weaker economy and the shale gas revolution--after banking the expected savings from the 2011 fuel economy regulations, energy efficiency programs and renewable energy incentives, and an EPA plan for the power sector that is certain to run into strong opposition in the new Congress. That seems pretty ambitious to me, although it falls short of the 40% reduction recently agreed by the EU for 2030.

It's harder to assess what China's side of the deal means in practical terms. Its 2012 emissions were estimated at nearly 10 billion MT/yr, having grown by 8%/yr since 2004 and by 6%/yr since 2009. At that rate, even if its emissions peaked in 2030, they could double before starting to decline. If China's emissions growth declined to just 2% per year, consistent with the lower rates of growth in coal consumption observed recently, by 2030 it could still add nearly 4 billion MT/yr--equivalent to the current emissions of the entire EU, and 5 times the incremental US cuts to which President Obama just agreed. The most recent projection of China's emissions from the EIA had them growing by 5 billion MT by 2030 but essentially plateauing thereafter.

This falls substantially short of what would be required to keep global emissions within the range that climate models predict would limit average global temperature increases to 2°C, compared to pre-industrial levels. However, it goes well beyond China's previous commitment on emissions intensity at Copenhagen in 2009.

Now consider how this deal looks from the standpoint of US politics. Voters just resoundingly handed undivided control of the legislative branch of government to the President's opposition. Republican office-holders and those who just voted for them are likely to regard it as an unwelcome commitment of the US by a lame-duck President to a promise that only his successors could fulfill. In the process, it hands China and other countries a point with which to prod future US administrations should they fall short of its goals. In exchange, he got President Xi Jinping to admit that China can't emit CO2 limitlessly, but can still do more or less what it may have been planning, anyway. It's hard to see this making things easier in Congress for the President's existing environmental agenda.

The deal looks better from the perspective of international environmental and climate policy circles in the lead-up to the Paris climate conference, "COP21", at the end of 2015. One lesson from the Kyoto Protocol is that to be meaningful a global climate agreement must have a strong commitment from the world's largest emitters of CO2 and other GHGs. China and the US are the two biggest emitters, and the EU at #3 is effectively pre-committed. Together these three blocs account for over half of all emissions today. Having them on-side at the start raises the chances of reaching a  big agreement.

As others have observed, this deal makes it harder to argue against a global CO2 agreement based on China's relative inaction, while increasing pressure on other developing countries to agree to limit their own emissions. It also signals that despite political weakness at home, the White House will likely push for aggressive targets at COP21, setting up further conflict with Congress in the next election year. Finally, its timing is early enough to influence the negotiations but not so early as to permit close scrutiny of Chinese or US follow-through on its goals before the Paris talks begin.

Calibrating Solar's Growth Potential

• A new report from the International Energy Agency suggests the possibility of solar power becoming the world's largest electricity source by 2050.
• It is noteworthy that IEA thinks this could happen, but the growth rates required, let alone the policies necessary to support them, will be challenging to sustain.

In the wake of last month's UN Climate Summit in New York City, Monday's report from the International Energy Agency (IEA) on "How solar energy could be the largest source of electricity by mid-century" ought to be welcome news. At the same time, it conflicts with perceptions that some countries are already farther along than that. So IEA's indication of the feasibility of generating 26% of global electricity from solar energy by 2050 either looks quite ambitious or quite conservative, depending on your current perspective.

For me it always comes down to the numbers, without which it's impossible to grasp systems on the scale and complexity of global energy. IEA's high-solar roadmap--it's not a forecast--includes significant contributions from both solar photovoltaic power (PV) and solar thermal electricity (STE)--often referred to as concentrating solar power, or CSP--with the former making up 16% of global electricity at mid-century and the latter around 10%. As the detailed report from IEA indicates, achieving the headline result would require global installed PV capacity to grow 35-fold between 2013 and 2050, equivalent to an average of 124 Gigawatts (GW) per year of additions, peaking at "200 GW/yr between 2025 and 2040." That's a 6x increase in installations over last year.

To put that in a US electricity generation perspective, IEA projects that the US would have to hit one million GW-hours per year from PV--roughly what we currently get from natural gas power plants--by around 2035 to meet its share of the anticipated global solar buildup. US solar installations are on a record-setting pace of nearly 7 GW this year, but matching natural gas would require 120x growth in solar generation, or a sustained compound average growth rate over 25% for the next 20-plus years. That's not impossible, as recent PV growth has been even higher, but it won't be easy to continue indefinitely, especially without further improvements in the technology, and in energy storage.

The solar thermal portion of IEA's technology roadmap looks like a much tougher challenge. STE has been losing ground to PV lately, as the costs of the latter have fallen much faster than the former, for reasons that aren't hard to understand. Making PV modules cheaper and more efficient is analogous to improving computer chip manufacturing, while making STE cheaper and more efficient is more similar to manufacturing cheaper, more efficient cars or appliances.

One of the main reasons IEA appears to have concluded that STE could suddenly start competing with PV again is its inherent thermal energy storage capability, which enables STE to supply electricity after the sun has set. While I wouldn't discount that, it looked like a bigger benefit a few years ago, before electricity storage technology started to improve. Storage of all types is still expensive, which helps explain why fast-reacting natural gas power plants offer important synergies for integrating intermittent renewables like wind and solar power. However, it looks like a reasonable bet today that batteries and other non-mechanical energy storage technologies will improve faster than thermal storage in the decades ahead.

The upshot of all this is that getting to 16% of global electricity from PV by 2050 is a stretch, and the 10% contribution from STE looks like even more than a stretch. So how does that square with recent reports that Germany--hardly a sun-worshipper's paradise--got "half its energy from solar" for a few weeks this summer? A recent post on The Energy Collective does a better job of clarifying the significance of that than I could, providing links to German government data indicating that solar's average contribution in 2013 was just 4.5% of electricity--hence less than half that in terms of total energy consumption. The author extrapolates that at current rates of annual installations, it would take Germany nearly a century to get to 50% of its electricity from the sun.

Much can happen in 35 years that we wouldn't anticipate today. For now, solar PV looks like the energy technology to beat, in terms of low lifecycle greenhouse gas emissions and long-run cost trends. But whether it reaches the levels of market penetration the IEA's report suggests are possible, or tops out at less than 5% of global electricity supply, as their baseline scenario assumes, it must function within an energy mix that includes other technologies, such as fossil fuels, nuclear power and non-solar renewables. And that's true whether or not electric vehicles take off in a big way, which would significantly increase electricity demand and make the IEA's high-end solar targets even more difficult to reach.