海角大神

An Oft-Used Energy Slogan

Last week, Real Clear Politics and聽API聽hosted an energy summit in Washington, DC entitled, 鈥淔ueling America鈥檚 Future鈥�. It was intended to provide a quick overview of most of the key technologies and issues associated with an all-of-the-above energy strategy for the United States. Going through the highlights of聽the webcast聽gives me an opportunity to introduce my point of view to a new audience at聽Energy Trends Insider. I鈥檇 sum that up as 鈥淎ll of the Above鈥�, with asterisks for the proportions and situations that make sense.

This slogan, at least in the manner in which it has been espoused by politicians in both parties, has attracted fair criticism for being overly bland and safe. I suspect that critique reflects a general sense that our energy mix has聽always聽been composed of all of the above, or all of the technologies that were sufficiently proven and economic to contribute at scale at any point in time. However, as both our technology options and choice criteria expand, our understanding of the evolving energy mix is hampered by metrics and assumptions that are overdue to be revisited.

The summit鈥檚 first panel examined the technologies of the mix, in a 鈥渓ightning-round鈥� format of five minutes apiece. The panel covered oil, natural gas, coal, nuclear and renewables, led by wind power.聽

Wind Power Capacity vs. Generation

The interim CEO of the main US wind energy trade association,聽AWEA, cited his industry鈥檚 progress in reducing the technology鈥檚 cost, increasing the domestic content in its US value chain from 25% to 67%, and expanding its market penetration. Mr. Gramlich was also surprisingly forthright about wind power鈥檚 continued dependence on federal subsidies, a point to which I鈥檒l return in future posts.

He began with a statistic that wind power was聽#1 in new US electric generation capacity聽last year. This is more than just a talking point, but it calls for some refinement if we鈥檙e to see an accurate picture of the changing US electricity mix. When most generating facilities operated within a narrow band of expected utilization, say 60%-80% of the time, comparing their nameplate capacities like this was satisfactory. Exceptions such as 鈥減eaking鈥� gas turbines that only operate a few dozen or hundred hours a year were never the recipients of targeted government incentives.

Now, however, our energy mix includes technologies with effective utilization rates, or 鈥渃apacity factors鈥�, ranging from as low as 10% for solar photovoltaic (PV) installations in cloudy northern locations, to roughly 90% for nuclear power. Wind comes in around 20-35%, depending on site and turbine size. In terms of their likely annual power generation, new natural gas facilities actually led new wind farms by roughly 2:1 last year.

Natural Gas, Bridge Or Foundation?

Given the enormous and largely unanticipated natural gas renaissance in the US, that shouldn鈥檛 surprise anyone. In my聽first blog post聽over nine years ago I posed a series of questions, including whether we were on the verge of an energy technology breakthrough. I had in mind something involving renewable or nuclear energy, energy storage, or vehicle technology. The shale gas revolution聽was already starting to聽emerge from obscurity, but I, along with most other energy experts at the time, remained oblivious to it.

The new head of the聽American Natural Gas Alliance聽described gas as clean, abundant and affordable. At least the last two points should be uncontroversial by now, backed up by market prices and聽resource assessments. We tend to think of gas as a bridge fuel to a lower emission future, but I think we鈥檒l increasingly hear it called a 鈥渇oundation fuel,鈥� as Mr. Durbin did.

Solar Power鈥檚 Growing Pains

The spokesman from the聽Solar Energy Industries Association聽accurately referred to solar as our fastest growing energy source, though he didn鈥檛 explain how it would grow from聽0.1%聽of聽US generation聽last year to more than 1% by next year. He alluded to a plausible inflection point based on policy and innovation, but his enthusiasm that solar was expanding rapidly outside California and the Southwest ought to worry us.

Until PV prices fall much lower than they have, a surge of installations in places like Vermont and Wisconsin means that taxpayers and ratepayers are paying more than they should to make that happen. And the global competition and 鈥渟urvival of the fittest鈥� he touted has mainly resulted, not from capitalism, but from dueling government incentives for solar, especially in Europe and Asia. I鈥檓 much more positive about solar than the above might suggest, but like other renewables, it will cost less and achieve more for us in locations with聽high-quality resources.

Oil Output Expands But Loses Market Share

The discussion on oil was more globally focused, based on BP鈥檚 forecasts and annual聽Statistical Review. Contrary to the widespread view of oil鈥檚 continued dominance, it has been losing market share over the last 40 years 鈥� including the last 13 years in a row 鈥� and stands at its lowest market share in the US since at least World War II.

The representative from BP linked this performance to oil鈥檚 concentration in transportation fuel, where it has been squeezed out by efficiency, low economic growth (and to some extent biofuels, which got short shrift in the session). At the same time, the growth of North American production, another dividend of the shale revolution, puts increasing pressure on OPEC. I鈥檒l come back to this dynamic in future posts.

The Forgotten Renewable

Wind and solar aren鈥檛 the only, or even the biggest, renewables, despite the attention they receive. I was glad to see hydropower鈥搊ften the forgotten renewable鈥搑epresented on the panel, though I was disappointed by the absence of geothermal power. Both are more geographically constrained, yet have features that wind and solar could only wish for.

Hydro generated nearly聽7% of US electricity聽last year from just 3% of US dams, with significant potential for growth through retrofitting unpowered dams. The Executive Director of the聽National Hydropower Associationquoted Senator Ron Wyden (D-OR), the new chairman of the Senate聽Energy and Natural Resources Committee, as saying, 鈥淗ydro is back.鈥� That could prompt some interesting discussions.

Coal: Decline Or Resilience?

I鈥檓 glad I wasn鈥檛 there representing coal, which must surely be the least loved energy source today. It continues to grow globally, with US coal exports playing a role, but the domestic US story is a 鈥渄ecline narrative鈥� as the VP of the聽National Mining Association聽described it. He managed to find a note of optimism in the more efficient coal power fleet that will remain after 68,000 MW of old capacity retires by 2020, under pressure from various regulations and competition from natural gas.

Unfortunately, efficiency alone isn鈥檛 sufficient. From my perspective, carbon capture and sequestration (CCS) is the key to reconciling coal鈥檚 convenience and low energy cost with its high emissions. CCS wasn鈥檛 mentioned by name, but was only alluded to as 鈥渢echnology that does not exist.鈥� That dismisses it too lightly, as I鈥檒l explain when time permits.

Nuclear

The head of government affairs for the聽Nuclear Energy Institute聽spoke last in the lightning round on technology. (The subsequent聽panel on energy issues聽is worth your time, too.) He emphasized nuclear鈥檚 anchor role in the US electricity mix, with 12% of US generating capacity contributing聽around 20%聽of the electricity supply at a cost of 2垄 per kilowatt-hour (kWh).

Yet despite five new reactors under construction and a wave of license extensions, post-Fukushima the center of the nuclear industry is shifting to places like China and India. 66 reactors are under construction outside the US, mainly in the developing world, because that鈥檚 where demand is growing.

Conclusion

I鈥檝e worked in various aspects of energy for more than 30 years, and for much of that time our energy mix and the forces that drive it have been in a state of flux. With that in mind, my recipe for 鈥渁ll of the above鈥� 聽starts with what we have now, recognizes the聽inertia of existing fleets and infrastructure, and evolves as costs shift and our emphasis on environmental consequences grows.

Wind and especially solar will grow, but will add the most value when used with, rather than against the grain of their limitations. Nor will energy storage turn them into reliable, baseload energy sources like nuclear and coal, at least until it is much cheaper.

The US natural gas opportunity looks transformative in a way that renewables don鈥檛, yet, with value well beyond power generation. Coal will linger, but without effective CCS will remain vulnerable from many angles.

Meanwhile, oil remains the indispensable fuel for transportation, which is the cornerstone of our global economy. Yet its indispensability will erode in increments each year, as EVs eventually grow from novelty to significance and new biofuels start to emulate oil鈥檚 trump cards of convenience and energy density. It鈥檚 a great time to be talking about energy, as it has been for the last nine years.

Source: 聽鈥楢ll of the Above鈥� Energy Policy Must Be Weighted by Common Sense