Posts tagged “energy policy”
This is Part 4 of a series of posts analyzing and detailing federal investments in clean energy innovation. Part 1 defined “clean energy innovation.” Part 2 broke down the federal clean energy innovation budget. Part 3 took a look at federal investments in clean energy demonstration projects.
For the last couple of years, the lion’s share of debate on U.S. clean energy policy has focused on encouraging deployment – or large-scale construction and installation – of low-carbon technologies. By significantly deploying clean energy technologies, supporters say, the United States can encourage integration of emerging technologies in an energy market dominated by entrenched fossil fuel interests, spur cost-cutting economies of scale, and get started on lowering greenhouse gas emissions in the process. However, others argue that there is a necessity to designing well-constructed deployment incentives aimed at directly spurring innovation to address climate change.
A Quick Typology of Deployment Policies
Federal clean energy deployment incentives can be made available through grants and other annually appropriated programs. For instance, the State and Tribal Energy Programs at the Department of Energy (DOE) deploy building efficiency and renewable energy technologies within communities. The New Energy Frontier initiative at the Department of the Interior (DOI) deploys renewable and energy efficiency technologies on federal lands.
Innovation is Central to Making Clean Energy Cheap
The United States and the world face an urgent imperative to transform its energy system by developing and deploying low or zero-carbon technologies on a dramatic scale. And while developed regions like the United States and Europe might be willing to change their consumption patterns and businesses to incorporate clean energy (though not significantly), developing nations can’t afford to pay the necessary premium for this access. And they shouldn’t have to, as they try to gain access to energy of any kind. As such, the only way the entire global energy system can transition to clean energy is if its cost is lower and its performance is equal to or greater than cheap fossil fuels like natural gas, coal, and oil.
Unfortunately, today’s clean energy technologies like wind, solar, electric vehicles, smart grids, and energy storage are more expensive and oftentimes performance-limited compared to their fossil competitors. Solar and wind power are intermittent without energy storage and still require significant advances in energy conversion efficiency. Electric vehicles are up to double the cost of comparable gasoline powered cars, and significant infrastructure build-out like smart grids, charging infrastructure, and transmission lines are barriers to rapid deployment as well. (Read More: An Introduction to Fueling Innovation)
In last week’s Energy Trends Insider (ETI) I explained The Obama (Non)-Impact on Oil & Gas Companies. In addition to my article, Andrew Holland discussed How the Obama Administration Will Deal With Natural Gas Exports and Elias Hinckley concluded the issue with Increasing Talk of Climate Change and Carbon Taxes Impacts Energy Industry. As we have done previously, we would like to share a story from ETI with regular readers of this column. Interested readers can find more information on the newsletter and subscribe for free at Energy Trends Insider.
The Obama (Non)-Impact on Oil & Gas Companies
Following President Obama’s reelection, a number of fossil fuel stocks sold off based on the belief that Obama’s policies would prove harmful to the fossil fuel industry. But will the President manage to push through tough new regulations that raise the cost of production for fossil fuel companies? CONTINUE»
Can Oil Supplies Grow Fast Enough to Keep Prices in Check?
I, along with my editor Sam Avro, recently conducted a broad-ranging interview with John Hofmeister, former President of Shell Oil and currently the head of Citizens for Affordable Energy, a non-profit group whose aim is to promote sound U.S. energy security solutions for the nation. In the first part of this interview Mr. Hofmeister spoke of A Difficult Decade Ahead For Oil Prices and Supplies. In this installment, he sets forth his vision of a sound energy policy for America.
The Hofmeister Energy Plan
Mr. Hofmeister’s plan consists of the following elements:
- Set a national objective in the United States to get back to the production level of the 1970s and 80s of 10 million barrels a day;
- Reduce our imports by 5 million barrels a day by using natural gas as an alternative to the internal combustion engine oil products:
- Use compressed natural gas for trucking to displace 2 million barrels a day of imported oil, and,
- Convert natural gas to methanol for flex fuel engines to reduce imports by another 3 million barrels a day;
- Continue the journey toward more higher efficiency automobiles and continue the journey to more electrified vehicles as well, both batteries and hydrogen fuel cells.
The new energy policy will allow some or all of Japan’s 50 nuclear reactors, 48 of them currently shut down, to go back online during the 27-year transition period, as needed.
The Claim: President Obama Has Doubled Gasoline Prices
During the Republican primaries, a number of candidates made a claim that at first glance seems improbable: That under President Obama, gasoline prices have doubled. A current advertising campaign by the American Energy Alliance repeats that claim: “Since Obama became president, gas prices have nearly doubled. Tell Obama we can’t afford his failing energy policies.” Let’s examine that claim.
A Recent History of Gasoline Prices
We all remember $4/gallon gasoline under President Bush, so how could prices have doubled under President Obama? Let’s look at the recent history of retail gasoline prices. Barack Obama was sworn in as president on January 20, 2009. In the week that ended on January 19, 2009, the weekly retail gasoline price in the U.S. was $1.90/gallon. Most people don’t remember that given the recent history of high gasoline prices, but I will get to that. CONTINUE»
In Issue #7 of Energy Trends Insider, a reader asked about the potential implications of the Obama Administration’s recent announcement that they were considering a release of oil from the Strategic Petroleum Reserve (SPR). My view is that since it is an election season and gasoline prices have remained stubbornly high, the chance of a release from the SPR is high. Having a Democrat in the White House also increases the odds, as illustrated by this post.
If the Obama Administration orders a release, it would be the 2nd time the administration had tapped the SPR. In 2011 the Obama Administration ordered a release of 30 million barrels of oil in conjunction with a 30 million barrel release from other members of the International Energy Agency. At that time, oil prices were already well off their highs, and the impact was short-lived.
With the 2011 release, the price of West Texas Intermediate (WTI) dropped by 4% on the day the release was announced, but one week later the price was higher than it was before the release was announced. If you look at the data from the EIA, you can see the fleeting impact of that 30 million barrel release (the announcement was on June 23, 2011 when the price of WTI was $94.96). The price dipped, climbed back up, dipped again as summer driving season ended, but by year-end was back above $100/bbl.
Power to the States
Yesterday, I wrote about the shortcomings of the Romney energy plan, saying that by looking simply at supply-side, it only goes halfway; a real energy policy addresses both demand and supply sides. There is one part of the plan, however, that I want to highlight because I believe it deserves praise.
The section that stands out as genuinely new and innovative is Romney’s plan to transfer control over energy production on federal lands to states. A Romney Administration would allow states to “establish processes to oversee the development and production of all forms of energy on federal lands within their borders” with the exception of lands “specially designated off-limits” (presumably national parks and the like). Federal agencies would certify state’s regulations as meeting an “adequate” level, but would leave most of the decisions to the states themselves. Romney would then encourage a “State Energy Development Council” that would allow states to share best practices and work together. This idea of Energy Federalism would allow states – the “laboratories of Democracy” in Justice Brandeis’ terminology – to test different regimes for energy production.
Most energy projects never get beyond the development process. There are many reasons for this, but failure to obtain financing has derailed an increasing number of projects over the past few years. The most common reason is the fundamental economics of the project do not provide confidence in an adequate return being paid to investors. There is effectively no hope for obtaining financing for any energy project if the project developer cannot demonstrate sound economic fundamentals to a potential investor.
Mike DellaGala and Jonathan McClelland’s recent article in AOL energy does a great job laying out the building blocks for financing a solar project. While some of the specifics of a solar development don’t apply universally (for example, solar trading credits and the solar resource are uniquely relevant to solar), the broad principles cover the key aspects of the basic economic story for an energy project.
More challenging to understand than failed economic fundamentals is why some projects do not get funded even where a developer can demonstrate solid financial fundamentals and the potential for returns that appear to reflect the investment risk. Over the past three years there has been consistent talk of how much “money is sitting on the sidelines” looking for good energy projects. Energy investors are commonly heard to say “if the project is really that good, it will get financed,” yet some projects that appear to be good, or even to be very good, don’t ever find financing.
Following Mitt Romney’s release of his energy plan, I intended to offer a detailed critique. However, there are already numerous critiques out there that would not differ much from my own. My critique would have been a near mirror image of Michael Levi’s Pipe Dreams at Foreign Policy, so instead here I offer some qualitative comments on the plan — as well as how I feel it could be strengthened.
In a nutshell, Romney’s plan looks to me like half a plan due to all of the things it does not address. It is mostly a series of Republican talking points, some of which make sense, some of which are over-reliant on dreams of U.S. energy independence, and some of which, in my opinion, should be modified. The highlights of the plan are:
- Empower states to control onshore energy development
- Open offshore areas for energy development
- Pursue a North American Energy Partnership
- Ensure accurate assessment of energy resources
- Restore transparency and fairness to permitting and regulation
- Facilitate private-sector-led development of new energy technologies