American Energy Policy Over Time Favors Renewables. But Natural Gas is the Immediate Winner

by | Mar 21, 2016

When Hillary Clinton commented that coal was losing its position in the American energy portfolio, she was exactly right. It is losing its status as the pinnacle of national energy policy — a fact reinforced by the latest data to come out US Energy Information Administration.

Just what is this most practical fuel to replace coal? Certainly, renewable energy is part of the country’s new energy fabric and one that is creating jobs and fewer pollutants in many parts of the country. But without a doubt, it’s been the expansion natural gas production that has lifted the country’s economic prospects while it has also been providing an environmental assist.

To that end, energy information agency says that over the last year ending in December 2015, natural gas produced produced 208,000 gigawatts per hour. Coal, meanwhile, fell by 226,000 gigawatts per hour. Renewables, by contrast, climbed just 10,000 gigawatts per hour even though it accounted most of the installations in the country; green energy does not generate electricity around the clock.

While both coal and natural gas each provide about 34 percent of energy needed to generated electricity, coal’s market share has fallen from more half in the last decade. Natural gas, on the other hand, has climbed from about a 15 percent share.

So, when Clinton spoke (poorly) and said at a town hall that “we’re going to put a lot of coal miners and coal out of business, right,?” she was referring to ongoing trends taking place in the energy sector. It’s no secret that coal’s decline has led to swarm of bankruptcies in that industry, with Peabody Energy saying it might be the next. It would follow Arch Coal, Walter Energy and Alpha Natural Resources, all of which have declared Chapter 11 in the last several months.

But from the ashes springs new life, correct?

“America’s abundant and low-cost unconventional gas-and-oil resources are a once-in-a-generation opportunity to change the nation’s economic and energy trajectory,” says a Harvard University and Boston Consulting study.

“The U.S. now has a global energy advantage,” they add, “with wholesale natural-gas prices averaging about one-third of those in most other industrial countries.”

To be sure, natural gas prices are extremely low right now, at less than $2 per million Btus on some exchanges. But those prices will not remain that cheap and they will likely gravitate to their historical averages. But a lot of energy managers say that as long as they remain below $6 per million Btus, their businesses will have a competitive edge, given that energy takes up a big part of their budget.

General Electric, for example, says that is expects 3,400 gigawatts of new electric generating capacity to be installed around the globe in the next 10 years, with much of that fueled by natural gas. As such, it expects gas-fired electric capacity to surpass that of coal, which has come under increasing pressures to use best available technologies — expenses that many utilities do not want to incur. Hence, they are retiring coal plants instead and using natural gas.

That’s happening already in the United States but it is also something likely to occur overseas: Africa, Asia and South America. GE reports that its natural gas units, for example, are far more efficient than coal on a life-cycle basis, meaning they can produce more electricity per unit of fuel.

“We have a huge participation in the natural gas value chain,” says Alberto Rostagno, marketing leader for GE’s oil and gas downstream technologies, in an earlier interview. “Therefore, the cheap, abundant and clean natural gas is very important to our future.”

None of this to say that renewables won’t gain increasing strength. The Federal Energy Regulatory Commission just reported — in a Renewable Energy World story — that 468 megawatts of wind and 145 megawatts of solar came into service just in January 2016. And while the country will need to continually invest in clean technologies, “renewables have not reached grid parity” yet, says Charles Bayless, former chief executive of Illinois Power and Tucson Electric Power Co.

Until then, natural gas is the primary fuel that will be used to generate electricity at home — and one that will also play a major role in reducing the country’s carbon emissions to meet the goal of the White House: 32 percents cuts by 2030.

Because former Secretary of State Clinton was part of the Obama administration, she almost assuredly supports the transition to a cleaner energy future — accompanied by an economic retooling program for those coal communities that have been devastated by the energy shift. Still, as she also noted in her town hall remarks, coal will continue to generate much of this nation’s electricity, albeit not at the levels it once did.

America’s energy mission has changed over the last several decades. Whereas reliability and affordability are still major components of public policy, cleanliness is also now just a critical. Over time, that will favor renewables. But, for now, natural gas is emerging as the winner.

Ken Silverstein is editor-in-chief of Business Sector Media, publisher of Environmental Leader and Energy Manager Today.

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