A New Energy Age
12:00 AM, Feb 23, 2013 • By IRWIN M. STELZER
“The tectonic plates are shifting” is a much over-used expression. But when it comes to the international energy industry, the expression is apt.
A Chesapeake Energy natural gas well near Burlington, Pennsylvania, April 23, 2010
AP Photo / Ralph Wilson
Here in America, where policymakers have spent decades worrying about over-dependence on oil from unstable or hostile regimes, a new technology—fracking—is producing such an abundance of supplies of crude oil that refineries are having difficulty processing all of the crude being produced, and talk of exports can be heard from Wyoming to Houston. As for natural gas, this writer remembers when supplies were so short that burning gas for decorative illumination was forbidden in some states and frowned on in others. Now the same technology that is making America the next Saudi Arabia (to borrow the jargon of overwrought analysts) is also adding decades of supplies of natural gas to its available resource base, driving down the price and making it possible for us to become a major exporter of natural gas. Unless, of course, the government accedes to the wishes of DuPont and other large users of natural gas and refuses to allow exports, no matter their potential for reducing our trade deficit.
The discovery of virtually unlimited supplies of natural gas comes at a convenient time—just when the Obama administration has decided to make the construction of new coal plants effectively impossible, and is to tighten regulation of existing plants to the point of making many uneconomic to operate. Natural gas has already taken a big bite out of the coal market, and is making it more difficult than ever to justify the construction of costly nuclear plants, especially since the administration refuses to activate the nuclear waste repository in Nevada, the home state of the leader of the Senate’s majority Democrats and an opponent of bringing nuclear waste into his state. A few plants will be built here, as some utilities reckon that their customers are willing to pay for insurance against a spike in natural gas prices, and they do have some non-trivial government subsidies. But most of the 60 reactors under construction worldwide are in countries such as China, Russia and South Korea, where governments can saddle taxpayers and customers with the relatively high cost of nuclear power as part of a national quest for energy security.
Meanwhile, in Britain energy shortages loom. Renewables have proved expensive and difficult to get built; coal is being phased out pursuant to made-in-the-UK green policies and orders from EU headquarters in Brussels; and nuclear power is so costly that one company has pulled out of a nuclear construction project, and another, France’s EDF, is insisting that the government guarantee it will be allowed to charge a price high enough to cover costs and a profit. Clearly, it is assuming that power from its nuke will be uncompetitive in energy markets.
Which leaves natural gas. Britain will be bidding against Asian countries for overseas gas supplies prompting, Alistair Buchanan, outgoing head of energy regulator Ofgem, to predict that imported gas will be extraordinarily expensive, especially if protectionists succeed in persuading President Obama to ban exports. Worse still, natural gas, now 30 percent of power-station fuel, will account for 60 -70 percent by 2020.
Germany is not in much better shape than Britain. Its pursuit of what are probably the greenest policies of any industrialised country, combined with the phasing out of nuclear to calm safety concerns, has the country headed towards severe energy shortages. And, paradoxically, has at least for now driven up reliance on coal—it seems that when the wind doesn’t blow and the sun doesn’t shine renewables are problematic sources of energy. Indeed, in order for its manufacturing industries to remain competitive in world markets Germany has decided it needs to keep energy costs down, and so is building some new coal-fired plants to replace older ones that are being retired. Those German plants will be among the 1,000 being planned worldwide, three-fourths of them in China and India.
Although renewables remain the power source of choice for greens, they require such massive subsidies that their role in meeting soaring electricity demand will remain incidental. Spain is only one country that has decided that it can no longer afford the subsidies that renewables require, and only Obama’s antipathy to fossil fuels, his war on climate change, and the political clout of some of his donors keep subsidies flowing to uneconomic solar and wind companies.