Fossil fuels (except coal) + renewable energy + ancillary technologies = American Energy Model
My last column criticized both Democrat and Republican presidential candidates for polarizing the American energy debate, which implies there needs to be a middle ground. That middle ground is the American Energy Model.
Now, I’m not the first one to talk about the American Energy Model. According to Dr. Google that would be the American Petroleum Institute’s CEO Jack Gerard, who has argued that replacing coal with natural gas is a model for the world because of the lower pollution and GHG emissions, and the ability to keep electricity prices low with combined cycle power plants.
All that cheap American natural gas is the result, of course, of the “shale revolution” and hydraulic fracturing, which has also led to a doubling of US oil production in the last decade.
American oil and gas companies are way out in front of the world when it comes to shale oil and gas experience, technology, and expertise (for the record, Canada comes in at number two, but the two countries industries are so tightly integrated they may as well be treated as one for this discussion). “Ideas being developed here [the USA] could one day be deployed anywhere in the world, because countries from Argentina to China have their own shale reserves, and are looking to follow the US lead,” is how Ed Crooks described the potential of the shale revolution.
But the shale revolution alone isn’t enough for an American Energy Model.
We need to include clean energy and ancillary technologies like utility-scale battery storage and electric vehicles.
Fossil fuel champions too often dismiss renewable energy technologies – like wind and solar – as a passing fad ginned up by the environmental movement and supported by hydrocarbon-hating, subsidy loving, left-leaning politicians. This is a mistake.
The distinctive characteristic of emerging technologies is a falling cost curve. On that count, both unsubsidized wind and solar costs have fallen sharply in recent years. “The costs of renewable technologies – in particular solar photovoltaic – have declined significantly over the past five years,” the International Energy Agency said in a report called Projected Costs of Generating Electricity as reported by Bloomberg last summer. “These technologies are no longer cost outliers.”
The same trend is true of other non-fossil fuel technologies.
Take electric vehicles. Both Tesla Motors and General Motors recently announced EVs designed for the mass market, with a $35,000 price tag and 2oo mile range. The Model III and the Chevy Bolt will still cost more and provide less performance than comparable internal combustion engine cars, but the EVs are getting closer.
2015 was also a breakthrough year for utility-scale battery storage. A study by Lux Research estimates the global market for storage of solar-generated electricity to be $8 billion in 2026. American firms have made a number of technical breakthroughs, such as Vionx’s advanced battery chemistry.
Will the pace of clean energy innovation continue? Will cost curves continue to fall or will they slow down and stall?
Bill Gates thinks not enough research and development is being done – despite the frenzied pace of American innovation – which is why he launched his ballyhooed Breakthrough Energy Coalition at the Paris COP 21 conference in Dec. At least 19 governments and 28 leading world investors – including Facebook founder Mark Zuckerberg, billionaires George Soros and Saudi Prince Alaweed bin Talal, and Jack Ma of China’s Alibaba – signed up will billions of dollars on the table.
If nothing else, initiatives like the Breakthrough Energy Coalition will keep the public, governments, and investors focused on innovation and technical advances in clean energy.
Well automation reduces costs and boosts production for Permian Basin oil and gas companies. Installed systems from Plunger Lift Technologies Inc. of Midland, TX start at just $3,000.
The momentum behind clean energy technology combined with falling costs suggests a trend, not a fad.
Which is why the shale revolution and clean energy together should constitute the American Energy Model.
There is one final argument for thinking of oil and gas and clean energy as one model. As I’ve suggested in other columns, Prof. Vaclav Smil, the eminent energy scholar, is right when he says energy transitions – e.g. from fossil fuels to renewables – take a very long time, in this case many decades.
During the 5o to 75 years – or even longer – of transition the technologies compete. We’re seeing the trend already. Solar and wind compete with coal and natural gas for electricity generation. Batteries in EVs compete with gasoline-powered ICE vehicles.
Competition in the marketplace will improve the technology and eventually sort out the winners and losers.
In the meantime, American policy makers and business leaders should embrace both energy technologies – fossil fuels and renewables – as part of the American Energy Model. There are business opportunities to be seized in both that include good paying technical jobs, many of them at home in the United States even if the markets are overseas.
Coherent public policy that facilitated the American Energy Model would be an economic boon.
Let’s hope that Hillary Clinton, Bernie Sanders, Donald Trump, and Ted Cruz haven’t so polarized the energy that an all of the above (except coal), middle ground approach like the American Energy Model is impossible this election cycle.
America needs it.
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