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Energy Abundance vs. Energized Politicians

12:00 AM, Oct 13, 2012 • By IRWIN M. STELZER
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We are entering an age of energy abundance. Or not. In keeping with the great tradition of economics, dubbed by Thomas Carlyle the dismal science, let me raise a cautionary note. What God has showered upon us, politicians can make unavailable. Not only because they have to balance our need for energy supplies adequate to support economic growth against the need to prevent unnecessary damage to the environment. More important from their point of view, they have to try to appease voters who want both cheap energy, which means coal, and greener sources that are more costly.

Oil Rig

Start with coal, a fuel that damages the earth surface when removed by strip-mining, causes deaths when removed from underground mines, and pollutes the air. Coal now fuels about 40 percent of the world’s energy production, which is rising rapidly—at the rate of one Brazil per year according to Robert Bryce, a senior fellow at the Manhattan Institute, a think tank. America styles itself “the Saudi Arabia of coal,” and with reason. A single mine in Wyoming produces three tons of coal per second, and we sit on enough coal to last us for 250 years.      

But America is at a turning point. If President Obama is reelected, it is certain that there soon will be no new coal-fired electricity generating plants built in the United States. If the Romneys take up residence at 1600 Pennsylvania Avenue, the new president will do all he can to relax restrictions on the mining and use of coal, and encourage development of clean coal technology. The danger posed by a Romney administration is that it might become excessively responsive to the “drill, baby, drill” crowd, which is not famous for its sensitivity to legitimate environmental concerns.

In any event, whatever American policy toward the use of coal turns out to be, it will matter very little to global emissions levels, since use of coal by emerging nations will continue to rise, most especially in China and India, as their need for more and more relatively cheap electricity soars, with a consequent worldwide increase in CO2 emissions. Bryce writes in his think tank’s City Journal, “Over the past decade, even if American emissions had dropped to zero, global emissions would still have increased.” Of course, just because you can’t do everything doesn’t mean you should do nothing, but if the cost of depriving us of use of our coal resources is to reduce emissions, it is a feckless enterprise if the cost of that self-denial is high. 

Natural gas is the other fuel with which America is amply endowed. New technologies are making vast amounts of shale gas available, driving prices so low that it is now cheaper than coal and, some say, is likely to remain so. The Department of Energy reports that in the first half of this year natural gas used for electricity generation rose 32 percent while coal usage dropped 18 percent. Despite soaring domestic consumption of natural gas, supplies are so plentiful that there is a multi-billion dollar rush to build terminals for exporting the stuff, and even to convert some import terminals to export facilities.

That has brought howls of anguish from the petrochemical and other industries that want to keep this cheap fuel at home, rather than make it available for overseas competitors. Meanwhile, environmentalists are girding for a battle to stop “fracking,” the new technology that makes shale gas economically available. In New York State, Artists Against Fracking, a group led by Lady Gaga, Paul McCartney, and Yoko Ono, has put its celebrity power—if you want television coverage of your congressional hearing, Lady Gaga is a surer bet than an environmental scientist of a coal company executive—behind environmental groups to force Governor Andrew Cuomo to review his decision to allow local counties, more desperate for new jobs than the celebrities, to give fracking the go-ahead if they find it is not a threat to their water supply. Best guess is that fracking will proceed very slowly if at all in the Empire State. And it is not a guess but a certainty that the Obama E.P.A. intends to get into the fracking regulation act, and not with the intention of speeding the development of shale gas resources. Environmentalists fear that the replacement of coal with natural gas will reduce emissions so much that enthusiasm for renewables will wane.

So adding shale gas to coal as environmental villains suits the Obama administration, as do restrictions on the storage of nuclear waste, and permitting policies that retard the development of America’s oil resources. The goal is to turn the energy economy green, heavily reliant on wind and solar power.

Green, in fact, is increasingly the color of choice for politicians around the world. Not even impending shortages of electricity capacity can deter the governments of Britain and Germany, to cite just two, from pursuing costly efforts to phase out more traditional sources of energy. In Britain, nuclear plants are reckoned to be so costly that without promises of subsidies, or permission to load costs on consumers’ bills, private sector companies will not build these plants. To meet promises for draconian cuts in emissions this and future governments will have to subsidize wind and solar power, neither source located near major consuming centers, and therefore requiring the construction of high-voltage transmission lines to move the power south.

In Germany, after the Fukushima disaster, Chancellor Angela Merkel reverted to her previous policy of phasing out nuclear power, calling for its replacement by 2022. Small problem number 1: The renewables surcharge that is loaded on German household utility bills is already unpopular and is set to go up still more, raising household utility bills by some 7 percent. Small problem number 2: The wind is in the north, consumers are in the south, and the almost 5,000 km of high voltage transmission lines needed to join supply with demand are wildly unpopular and tied up in litigation and by local opposition. Germany’s utilities, which will be around in 2022, when Ms. Merkel will have long been out of politics, know that renewables cannot meet Germany’s future needs, that the cost of carbon permits is so low that burning coal is economic,  that they will be held responsible for shortages and ever-higher prices, and so are building 23 new coal-fired power stations, with the blessing of Peter Altmaier, Germany’s environment minister who is concerned that expensive energy would slow Germany’s export machine.

In America, only a few utilities have opted to build new nuclear plants, while the more sensible ones rely increasingly on natural gas, and will continue to do so unless Fukushima recedes from memory, the government allows the nuclear waste depository facility in Nevada to open, and nuclear power becomes cost-competitive with gas and coal—all three highly unlikely. 

Meanwhile, the future of fracking is uncertain, and the government is severely limiting permits to drill for oil on federal lands and offshore. Environmental groups are suing to prevent the government from granting permits to companies that want to gobble up huge tracts of land for massive solar installations: the 45-story towers of the Ivanpah Solar project will take up 3,500 acres of land in the Mojave Desert and displace scores of desert tortoises, prompting the Western Watersheds Project to file suit to stop it. The path to lower CO2 emissions is also rutted with efforts by   local groups to prevent the construction of transmission lines to link wind farms with urban centers, and by the dire financial condition of many producers of renewable gear and electric vehicles who are finding it impossible to repay their government loans and subsidies because of higher-than expected costs and lower-than-expected demand.       

There’s more, but you get the idea. The age of nature’s abundance might prove to be an age of electricity shortages, of higher rather than lower carbon emissions as coal plants are pressed into service because renewables are too costly and unreliable and transmission lines unbuilt, supplies of natural gas are limited by restrictions on fracking, and petrol prices driven up by restrictions on drilling for new supplies of domestic crude oil. Dismal, indeed.

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