Virginia, U.S.A. — Historical events have a way of jolting us – again and again and again – into the reminder that energy plays a big role in our well-being.
October marked two such events for the U.S. It was the one-year anniversary of Superstorm Sandy, the massive storm that knocked out power for days to millions in the Northeast. And it was the 40th anniversary of the oil embargo, the first time America experienced oil as a weapon used against it. In the time between, we’ve seen other altering experiences — Three Mile Island, natural gas price spikes of the 1990s, Enron, the Northeast Blackout, Fukushima, to name a few. We often stagger away with new resolve to secure a cleaner or more independent energy supply; to redouble renewable energy efforts.
Are there circumstances percolating now that will spill over and alter our energy future? What will give us the next jolt?
William Prindle, vice president at ICF International, sees it coming from today’s euphoria over natural gas, what he calls the collective “fracking delusions.”
“Especially in North America, but in many other regions of the world, hydraulic fracturing technology is pushing oil and gas production to levels not in any forecaster’s range even ten years ago,” he said. “The fracking boom is driving prices down for natural gas, and to some extent oil, and creating in some quarters a sense of ‘problem solved — game over’ when it comes to energy policy.”
Such nonchalance carries risk. It can lead to a turning away from renewables and energy efficiency and “let the worthy policies of the last 40 years wither,” he warned.
Natural Gas Loses Momentum?
In truth, today’s hoopla over natural gas might mask important market realties, according to Jigar Shah, author of the new book, ‘Creating Climate Wealth: Unlocking the Impact Economy’ and former CEO and founder of SunEdison. While many see these as glory days for natural gas, Shah says the industry may be about to enter its waning stage after a four-decade run as America’s defining fuel.
Shah defines four stages to the growth of an industry: 1) Pioneering: the industry first forms and technology is deployed. 2) Growth: Many companies enter the market with widespread acceptance of the product or service. 3) Maturation: Marked by company consolidation either through merger or attrition, the stage Shah puts natural gas in now.
The fourth stage is decline. “This is where a market runs its course — the predictions on when this will happen for natural gas vary, but most agree the momentum is largely gone,” he said.
Natural gas is inexpensive today, but the industry requires higher prices for profitability, Shah says “Almost every expert in the country puts a profitable natural gas industry at a price of at least $5.50/MCF. At that price, coal, wind, and solar is cheaper than new natural gas. This price will happen in the next five years and when that happens natural gas will forever be labeled a volatile fuel that can be hedged and therefore has no place as a mainstay in the electricity industry.”
What does this mean for renewable energy?
“All the while, renewable energy will be underappreciated and under the radar screen until like in Germany the incumbents are staring death squarely in the face. It is in that moment that people will realize that natural gas is not a bridge fuel of the future, but instead has already played the role of bridge fuel for the past 25 years,” Shah said.
The Sharp Tack
Fossil fuels have a history of economy-rattling price volatility. Price spikes often cause national and international soul-searching about energy resource balance. Stephen Cowell, chairman and CEO of Conservation Services Group, points to what happened between 2005 and 2008 when gasoline prices doubled.
“The rise in fuel price was the sharp tack that burst the bubble, causing a credit crisis and severe recession among other effects. From 2003 to 2008 the rise in energy costs was the only substantial change to the economy, and it pushed American homeowners on a tight budget over the edge. This situation ignited the sub-prime mortgage crisis,” Cowell said.
Appreciation of renewables often heightens when fossil fuel prices rise. So it’s little surprise that in 2008, alone, wind energy installations increased by 50 percent and the U.S. surpassed Germany as the leader in wind capacity.
This year brings a far more depressing story for the wind industry, largely because Congress has not renewed the federal production tax credit that is set to expire at the end of December. The U.S. installed only 1.6 MW of wind in the first half of this year, according to the American Wind Energy Association.
“Our behavior toward energy makes it appear that we are not taking renewable energy seriously. And that’s scary,” Cowell said.
We are failing, Cowell explained, to fully consider the repercussions of what he calls the fossil fuel cliff.
“The physical market structure for energy is fragile and prone to disruption, and this can have catastrophic effects. If the rest of the world catches up and starts consuming as much fossil fuel as the U.S. we will hit the fossil fuel cliff in 50-100 years,” he said. “That is a species-threatening reality. We’ll no longer have the ability to transport food and half of the human population will starve. The recent debt crisis may be a serious issue for future generations, but the fossil fuel cliff threatens our very survival.”
This is a big worry and a direction energy could take. But are there points of hope as well?
Prindle points to the rise in new energy management technologies and better energy analytics. “We are seeing intelligence (or at least the hope of it!) creeping into our devices, from GE’s smart appliances to the Nest thermostat, to remotely controllable lighting circuits. Meanwhile, cities and states are beginning to mandate energy performance data disclosure for larger buildings, and utilities are beginning to provide enhanced energy usage data to customers.”
These intelligent devices bring greater visibility and increase energy efficiency, opening a door for greater appreciation and adoption of renewable energy.
“I think that the biggest relevant historical event of the last 40 years has been the emergence of the energy efficiency resource across the entire U.S. economy,” said Ralph Cavanagh, co-director of the energy program at the Natural Resources Defense Council. “Ultimately, it exceeded the contribution of all other resources combined in meeting the energy needs of a growing US economy. It helped make renewable energy more consequential (by cutting sharply the quantity of fossil fuels that needs to be displaced), and it drove improvements in energy security and reliability that make us far less vulnerable today to volatile fossil fuel prices.”
Of course, it is often hard to see a pivotal event until it’s behind us. Some are hard to predict, like natural disasters. And technology is changing so fast, we are not always sure what questions to even ask about the future. But if history tells us anything, renewable energy will be one of the answers.
Lead image: Natural gas zone via Shutterstock