I have seen a number of commentators over the last few days say that the American shale gas revolution means that the U.S. could simply announce new LNG exports and that would undercut Russian gas. House Energy and Commerce Committee Chairman Upton, for instance, said in a statement: “Expanding U.S. LNG exports is an opportunity to combat Russian influence and power, and we have an energy diplomacy responsibility to act quickly.”
Statements like this overstate the influence that U.S. energy can have on this crisis Ukraine. While it is true that a viable, functioning LNG export capacity would provide geopolitical benefits, we do not have it today and we should not think that the U.S. energy boom will help in this crisis.
The U.S. energy boom has already helped reduce Russia’s influence and increased European energy security, without a singe molecule of US Natural Gas landing on the continent. This is because, even if the United States does not directly supply Europe with oil or natural gas, because the U.S. no longer is demanding imports of liquefied natural gas (LNG) has freed up major suppliers like Qatar or Norway to send supplies to Europe.
Andrew Holland writes about how Europe can change Russia’s behavior by embargoing imports of Russian natural gas.
The production of oil and natural gas in the United States is booming. Next week, the American Security Project, where I am the Senior Fellow for Energy and Climate Policy, is releasing the 2014 edition of our “America’s Energy Choices” report (if you’re in DC, come to our event on Tuesday morning, January 28 for breakfast! RSVP here). Since we first began writing this report in 2011, there has been a sea change in the production of fossil fuels in the U.S.- particularly oil. This article builds off that report and a paper we are releasing detailing the “Five Energy Choices America Needs to Make.” CONTINUE»
A couple of weeks ago I had the opportunity to tour the Liquefied Natural Gas (LNG) facility at Cove Point, Maryland. Owned by Dominion, the Cove Point facility is currently an LNG import and storage facility.
As readers will know, there has not been that much demand for LNG imports to the U.S. over the last few years – the shale gas revolution has turned the U.S. from an economy looking to import increasing quantities of costly gas to one where a surplus of low-cost gas is looking to global exports. As such, Dominion has applied for the permits to expand the facility for LNG export. It has received approval from the Department of Energy for exports, but it is awaiting state, local, and final FERC approval before construction can begin. They expect to break ground on the new facility in the spring of 2014, with completion sometime in 2017.
A Brief History
When Cove Point was first built in the late 1970s, there was demand for imported gas from the only major supplier of LNG, Algeria. The 1970s had seen shortages of gas around the country. As it came on line in 1978, Congress passed legislation to deregulate the gas industry. With deregulation, domestic production increased and demand for imported LNG fell and most imports ceased by 1980. In the early 2000s, there was pressure in natural gas markets again, and Cove Point was reactivated as an import terminal in 2003. In ‘04 and ’05, Cove Point hosted almost 80 ships per year bringing in LNG from producers around the world. At that time, U.S. demand looked set to grow inexorably, with domestic supplies unable to meet demand. So, in 2004, Dominion embarked on a large expansion of Cove Point’s capacity, more than doubling its storage capacity. Once completed in 2009, markets had again turned against LNG imports, as the shale revolution pushed down prices and pushed up production. 2011 was the last commercial import of LNG; now two or three ships per year service the facility in order to keep their lights on and fulfil their secondary mission of providing a peak demand service (providing gas to markets in times of high demand).
I’ve been writing, researching, and talking a good bit about Arctic issues recently. You can see my piece in Alaska Dispatch, where I claim that the U.S. is “Failing to Meet the Challenges of a Changing Arctic” and I will have forthcoming pieces in the Georgetown Journal of Security Studies and elsewhere.
What comes across is a great disparity in intentions, ambition, and resources devoted to the region between Russia versus the United States. This is most apparent in the status accorded to the security forces.
The US Navy, when asked what they plan to do about an opening Arctic invariably respond by saying “why should we do anything” or “why would we build a new Navy for a new ocean?” They may have a point – there’s not that much up there to protect, and the international regime governing the Arctic is strong: conflict appears highly unlikely.
Below is the second of two posts by Robert Petroski and Brian Marrs about the future of nuclear energy (link to Part I). Petroski is a nuclear engineer, with a degree from MIT, and Marrs is a Power Markets Specialist, with a degree from Yale. They are colleagues of mine from the Atlantic Council’s “Emerging Leaders in Energy and Environmental Policy,” a Transatlantic Network of professionals in the energy field. In this post, they argue that the nuclear debate we are having today should reflect how much technology has changed and will change in the coming decades. They end by arguing that we have to remember, the real enemy is carbon; I couldn’t agree more!
Also, be sure to check out the podcast of our conversation over at the American Security Project, here.
The Innovation Imperative
The majority of today’s nuclear fleet will complete their tenure within the coming decades. As it does so, categorically dismissing nuclear energy technology means abandoning 50 years of collective experience, just as the world’s demand for energy has never been greater – and coal-based. We believe that nuclear technologies are currently evolving in the direction of increased simplicity and safety, and by doing so nuclear energy has the potential to overcome traditional shortfalls of highly uncertain costs and unknown risks.
The uneven history of nuclear energy, especially in the United States, has been due in large part to the growing pains of a new industry combined with those of a new nuclear regulator. The development and maturation of nuclear regulatory requirements led to design changes in nuclear plants, which were often conceived and implemented “on the fly”, because they occurred after construction of a plant had already begun. These design changes commonly took the form of increased numbers and types of backup systems, increasing the complexity of nuclear power plants. The result of these growing pains was an immense escalation in nuclear costs and construction schedules, which was further compounded by an attempt to build larger and larger plants to generate economies of scale.
Below is the first of two posts by Robert Petroski and Brian Marrs about the future of nuclear energy. Petroski is a nuclear engineer, with a degree from MIT, and Marrs is a Power Markets Specialist, with a degree from Yale. They are colleagues of mine from the Atlantic Council’s “Emerging Leaders in Energy and Environmental Policy,” a Transatlantic Network of professionals in the energy field. In this post, they argue against hyperbole about nuclear power from both opponents and proponents.
Reasonable discussion about nuclear power is hard to find. Sifting through the post-Fukishima rhetoric about nuclear power is difficult whether you are an energy markets professional or even a nuclear engineer. Depending on what you read, nuclear power is either an antiquated technology far too dangerous and too costly for society, or on the verge of a technological renaissance which promises clean, safe, proliferation-free power the world round. The energy industry is no stranger to broken promises or unanticipated breakthroughs. The punditry and associated polarization surrounding nuclear power comes at a time when regulators and investors must make critical decisions about funding nuclear innovation and renewing the global nuclear fleet, particularly that in the United States, the country on which this article most focuses.
It is time to set the hyperbole aside about nuclear power – then and only then can we begin to evaluate the potential and limitations of new nuclear energy technologies. However worthy, objections about the legacy of nuclear energy should not eliminate funding and market deployment for future innovations. All energy sources come with trade-offs. None of today’s (and likely tomorrow’s) energy technologies – nuclear included – offers a panacea for the security, environmental, and economic development challenges facing the 21st century. Nuclear power will either adapt to new concerns, perceptions of risk, and market conditions, or justly become obsolete.
This week, the EPA announced that it was adjusting the Renewable Fuels Standard (RFS) in order to reflect market realities. As originally proposed earlier this year, the rule called for 14 million gallons of cellulosic ethanol, but the final rule sets a requirement for 6 million gallons of cellulosic ethanol this year.
However, as all the news stories focus on how the EPA has “backed down”, what goes overlooked is that there is finally a cellulosic biofuel industry in which commercial production has started.
KiOR’s biorefinery in Columbus, Mississippi started commercial production in March using wood chips to produce cellulosic fuels, and Ineos just announced on July 31 that their Indian River BioEnergy plant in Florida has begun operations to make biofuels from plant waste. Both of these are now operating at full commercial scale. Whether they’re making money yet, we don’t know, but the fact that they’re producing large volumes of cellulosic biofuels may be a historic turning point. These developments are important steps towards developing a real advanced biofuel industry that can help move us toward a point where we have other options for how to fuel our cars and trucks.
An article I wrote was published yesterday, Why a Global Shale Gas Boom is Key to Combating Climate Change. Because I had actually written the article a week ago, I didn’t know that it would come out at the same time as the release of the President’s big speech on climate change. As I demonstrated in the post, the U.S. has been the most successful country over the last decade in reducing its emissions; most of that is due to fuel switching from coal to natural gas. Natural gas generates more than 50% less greenhouse gas emissions than coal, not even including the many harmful particulate pollutants coal emits. To achieve similar benefits around the world, we need to replicate America’s shale gas revolution around the world.
While most of the news about the speech will be about how Obama is planning to accelerate renewable energy, I believe the biggest area of near-term action on reducing emissions will come from some underreported sections that will encourage the replacement of coal with natural gas for energy generation, both in the U.S. and globally.
Reduction in Energy-Related CO2 Emissions
The United States has seen a remarkable run in reducing its greenhouse gas emissions over the last five years, reducing energy-related CO2 emissions from 2007 to 2012 by 12%, from six billion tons to 5.29 billion tons. While part of this reduction in emissions is attributable to a reduction in energy demand due to the economic downturn, another reason for this huge reduction is an increase in the use of natural gas for electricity.
In a story that is now familiar to most readers, the shale gas revolution in the United States has dramatically reduced the cost of natural gas. From a peak of $10.54 per million btu (mbtu) in July 2008, the spot price of gas at the well-head had fallen to less than $2/mbtu by April 2012.
Because utilities respond to price incentives, this caused fuel-switching of baseload electricity production from coal to natural gas, leading to a time in April 2012 when natural gas equaled coal as an energy source for the first time. This switch has partially been undone, with coal now producing 40% of electricity and natural gas 26% as gas prices have bounced back to $3.85/mbtu. Because burning natural gas for electricity produces half as much carbon emissions as coal, fuel switching is one of the main causes in the U.S. reduction in emissions.