As in most recent years, energy was constantly in the news in 2012. A post attempting to catalog every noteworthy story or event would be quite long. However, a few big trends stand out. For starters, it's a near-certainty that the average US gasoline price will set a new record for the second year running, in both real and nominal terms. Americans are responding by choosing more fuel efficient cars. Meanwhile, fundamental shifts emerged from obscurity into the awareness of policy makers and the public. US energy exports have become a mainstream topic of conversation, and the goal of energy independence--a concept with debatable meanings--has acquired renewed respectability after spending a couple of decades on the fringes of energy policy debate. Perhaps more significantly, our views of climate change and future oil supplies--once aligned--have diverged.
For renewable energy it has been the best and worst of years. Global overcapacity in solar equipment manufacturing drove down the costs of solar panels, at least partly counteracting reductions in government incentives, especially in Europe, and making solar power more competitive. The US is on track to add a record 3,200 MW of solar capacity this year, while China could add 5,000 MW. However, solar manufacturers' rapid expansion depressed their margins and extended last year's string of solar bankruptcies, with firms like Abound Solar, Konarka, Solarwatt, Q-Cells and others forced to restructure or liquidate in 2012. A similar, if less dramatic wave is working through the more mature onshore wind industry, which faces the expiration of a key US incentive, the Production Tax Credit, or PTC on December 31. In anticipation of that loss, wind developers have added 4,728 MW of new capacity in the US through the first three quarters of 2012, the most since 2009.
Energy played a complex and possibly decisive role in the US presidential election. Remarkably, President Obama successfully co opted his opponent's energy platform by embracing an oil and gas revival that his administration had done little to help and much to hinder, even though it appeared to conflict with his emphasis on renewable energy and climate change mitigation. Meanwhile, the shale gas revolution was creating hundreds of thousands of direct and indirect jobs and lowering energy costs across the economy, contributing to US manufacturing competitiveness. The resulting economic growth, while still below the level of other post-war recoveries, apparently helped the President make his case for a second term.
The inherent tension between surging US oil and natural gas production and concerns about climate change--fanned by Hurricane Sandy--reflects a major shift that occurred this year, at least as an influence on future energy policy. Recall that until recently, memories of past energy crises, combined with the influential Peak Oil perspective, shaped our expectations of resource availability and future production. This narrative of hydrocarbon scarcity complemented prescriptions for a rapid transition away from fossil fuels as the only viable solution to climate change, supporting a shared goal of a more sustainable energy economy based on renewable energy, smart grids and electric vehicles. The exploitation of unconventional oil and gas resources in previously inaccessible source rock--shale gas and "tight" or shale oil--poses significant challenges to both strands of that argument.
First, it undermines the notion of energy scarcity for at least the next decade, and probably well beyond. US natural gas production set a new record this year, and US oil production returned to levels not seen since 1997, putting increased pressure on OPEC's control over global oil pricing. Nor does the US have a monopoly on these unconventional resources. Canada looks like the next big shale gas play, with China and South Africa possibly not be far behind. The technologies that enabled the US shale gas revolution and its oil offspring are being transferred around the world.
Yet we also learned that US energy-related CO2 emissions have fallen back to 1992 levels, largely because of a dramatic reduction in the use of coal in power generation. While renewable energy sources like wind and solar power deserve some of the credit, natural gas-fired turbines--driven by cheap shale gas--have added three times as much net generation since 2007 as non-hydro renewables.
Shale gas and oil might not provide a long-term solution to global warming, but they could at least buy us the time to develop the innovations like improved electric vehicle batteries and low-cost grid-storage that will be necessary if renewables are to displace fossil fuels across the entire spectrum of their use--and dominance. They could also provide the time to develop and deploy the next generation of nuclear power, including small modular reactors.
I'd like to thank my readers for your continued interest and encouragement and wish you a happy holiday season.
Providing useful insights and making the complex world of energy more accessible, from an experienced industry professional. A service of GSW Strategy Group, LLC.
Showing posts with label solar bankruptcy. Show all posts
Showing posts with label solar bankruptcy. Show all posts
Thursday, December 20, 2012
Wednesday, July 11, 2012
The 2013 US Energy Agenda
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.
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.
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