I work on energy policy for a national security think tank, so I am often asked to talk about energy security. Last week, I participated in a conference in which we were asked to comment on “U.S. Energy Security: How Do We Get There?” As I listened to the presenters at the conference, I realized that how you viewed the problem of ‘Energy Security’ depends on how you identify it. We all seem to have determined that energy security is a problem, but we each had different understandings of what the term ‘energy security’ actually means! Of course, that means there were very different prescriptions for how to ‘solve’ the problems of ‘energy security.’
In the absence of a definition, everyone defines energy security differently –both speakers and listeners. It is something like the late Margaret Thatcher said about the politics of consensus: “it is something in which no one believes and to which no one objects.” Along those lines, I believe that ‘energy security’ has devolved into simply a buzzword: a phrase that everyone favors, but defines differently. Pundits, politicians, lobbyists, industry, and campaigners from across the political spectrum cry ‘energy security’ because it polls better than their preferred policies. I have done it as well. Listeners, then, are misled because, really, who could actually be against ‘energy security?’ It is like being against mom, America, and apple pie.
Europe’s Emissions Cap
This shows a fundamental misunderstanding of the European Emissions Trading Scheme (ETS) in particular, and the nature of a market-based emissions cap (AKA cap-and-trade) system in general.
Granted, the ETS is an imperfect cap because it only covers about 45% of total emissions in the EU – most notably it does not include emissions from home heating or automobile transportation. Importantly, though, it does cover major industrial emitters and utility-scale electricity production, which are the major users of coal.
(Read More: Global Carbon Dioxide Emissions — Facts and Figures)
However, the articles continually say things like this, in Friday’s Washington Post: “Green-friendly Europe has a dirty secret: It is burning a lot more coal.” The schadenfreude exhibited in these articles is unrelated to Europe’s actual record on climate policy.
What Can Obama Do?
The President has begun his second term in office by saying that he will act on climate change, stating in his inaugural address: “We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.”
However, the question now becomes: what can President Obama do about climate change? He made action on climate change a central argument during his 2008 campaign and early in his first term, but failed in the effort to pass major emissions reduction legislation through Congress. While the stimulus had many important clean energy sections, it is unclear whether these will result in lasting changes in our economy.
Market-Based Actions Are Most Effective
Having tried and failed to pass major climate legislation through Congress in 2009 and 2010, and knowing that a polarized Congress is unlikely to address this again in the next few years, I believe that the Administration will move towards a two-pronged approach that uses regulation at home, but prioritizes action on climate as a tool of international relations.
(Read More: Why Climate Change is a Matter of National Security)
A year ago, President Obama, under pressure from a deadline set by House Republicans, rejected the application of TransCanada for the Keystone XL pipeline that would pump Canadian crude from Alberta to the American gulf coast.
With a new decision on the Keystone XL pipeline due in the first quarter of 2013, according to the State Department — a date that may slip according to some observers — it is useful to assess the actual effects of not building the Keystone pipeline on Canadian oil production and North American energy markets.
Stopping the Keystone XL pipeline was touted as a big win for environmentalists, who had set their sights on Keystone XL as a big target. As Bill McKibben often quotes NASA scientist James Hansen, using the entire resources of Canada’s oil sands would mean “game over for the climate.” Once complete, Keystone XL would have a capacity of up to 1.1 million barrels of diluted bitumen per day – 54% of Canada’s total bitumen production (note: bitumen is the crude product from production in the oil sands). So, for groups like McKibben’s 350.org, the goal of stopping the pipeline was to slow and eventually stop the exploitation of Canada’s tar sands. The thought was that if environmentalists could stop the building of the Keystone pipeline, they could prevent Canada from having a market for their oil, and thereby production would slow and eventually stop.
Liquefied Natural Gas (LNG) Export Terminal Approval
Last year, the Department of Energy (DOE) granted Cheniere Energy a permit to export liquefied natural gas (LNG) from a terminal at Sabine Pass in Louisiana. The terminal is currently used as an LNG import terminal, but the company has plans to convert it into an export terminal, with exports beginning by 2015. The permit has been challenged by the Sierra Club, but is expected to be approved.
However, there are about 15 total other permit applications outstanding, with only the one permit accepted. After approving exports from the Sabine Pass terminal, the Obama administration put a hold on further approvals until a Department of Energy study on the economic implications of exports is completed. That study was originally due out in March, then the DOE said it would be released by the end of the summer, now the study is expected before the end of the year. (Read more: Investment Opportunities in Natural Gas)
Last week, I spent two days at the International Atomic Energy Agency’s 2012 Fusion Energy Conference in San Diego. The conference, sponsored by the U.S. Department of Energy’s Office of Science and General Atomics, brought together about 1000 fusion scientists from around the world to meet and discuss the state of the art in scientific research to develop fusion energy.
Fusion is a technology that holds great promise in meeting our energy needs. By fusing together two hydrogen isotopes – deuterium and tritium – enormous amounts of energy can be produced, as predicted by Einstein’s equation, E=MC2. The heat from this reaction creates steam to spin a generator just like any other electricity power plant. Since deuterium comes from ocean water, and tritium can be bred from lithium, fusion holds the promise of providing a nearly inexhaustible supply of energy, with no pollutants, no greenhouse gases, and no radioactive waste. There is no threat of a nuclear meltdown like there is with the nuclear fission reactors of today.
Recently, I sat down to speak with Vice Admiral (Ret.) Denny McGinn, the President and CEO of the American Council on Renewable Energy (ACORE). Adm. McGinn served for 35 years in the Navy as a naval aviator and test pilot, rising to command an Aircraft Carrier, and ultimately the 3rd Fleet. His final position on active duty was as Deputy Chief of Naval Operations for Warfare Requirements and Programs at the Pentagon, which helps scope and develop the Navy’s capabilities for the future.
State of the Solar Industry
We had a wide ranging discussion on renewable energy issues, touching on issues that will be familiar to regular readers of my blog column, including the rapid growth of solar power and the challenge of Chinese competition, wind power, the military’s transition to clean energy, and the politics of renewable energy. I’ve divided the interview into two blog posts. In this one I will talk about wind and solar, while I will focus on the military in the next.
We see this week news that Tesla is having trouble meeting it’s loan repayment schedule, and faces a need to raise more money on the markets. Combined with this week’s pronouncement from the chief of Toyota against electric cars and lackluster sales of GM’s Volt that have forced the company to reduce production, it seems there are more troubles ahead for electric-driven cars.
I believe this shows that pure electric cars are not yet ready for the consumer market. They are both too expensive, and they don’t meet the needs of consumers for range and performance.
Tesla and Fisker, in particular face consumer challenges that the traditional car makers do not face. As a start-up, they have to convince customers that they can both make a reliable car, and their small dealer network will be able to maintain the cars when they need servicing and repair. (See more: CBO: Electric Cars Will Flop, Despite $7.5 Billion in Subsidies)
The US government provides a tax credit of up to $7500 for purchasers of electric or plug-in hybrid cars. But, for cars that range in price from about $35,000 for the Leaf, to $45,000 for the Volt, to $57,000 for the baseline Tesla Model S, that does not drive the price down to a place where it would be competitive with high efficiency traditional gasoline-driven cars, or even hybrids, which are probably the source of the most competition.
The problem, in short, is that the battery-only cars (Leaf, Tesla, Fisker) are inferior cars at a higher price point.
The following article was written by Andrew Holland for Energy Trends Insider, a free subscriber-only newsletter published by Consumer Energy Report that identifies financial trends in the energy sector. Get you free subscription today.
The ethanol industry has seen its position in Washington severely weakened over the last year. The modern ethanol industry is a creation of Congress; the Renewable Fuels Standard (RFS), the ethanol tax credit, and a tariff on imported ethanol were all responsible for creating the ethanol industry we see today. We should note that this industry has seen some remarkable successes: it has replaced almost 10% of the country’s gasoline fuel supply, with an impact on prices that is marginal at best.
It is important to note that more advanced biofuels still receive tax support: cellulosic ethanol receives $1.01 per gallon in tax credits, but that is set to expire at the end of this year. A Senate bill would extend that credit for a year, as well as retroactively re-instate the $1 per gallon biodiesel tax credit that expired at the end of last year. The fate of these credits is up in the air, as Congress will have to consider a broad range of tax policy questions before the ‘fiscal cliff’ coming this year.
High Gas Prices During Election Season
Last week, reports from both Platts Energy News and Reuters said that officials in the Obama Administration are considering releasing oil from the U.S. Strategic Petroleum Reserve. The Platts report even said that a release was “imminent,” citing a meeting on Thursday at the White House with oil analysts. Other reports stated that the release could be up to 180 million barrels – six times as large as last summer’s.
Such a release would be contrary to the rationale of having Strategic Petroleum Reserves, and — coming only 60 days before an election — it would be a nakedly political ploy seemingly aimed only at alleviating a persistent political vulnerability: high gas prices.