Energy Diversity - An Achievable Vision
Facts, Choices, and Challenges
A diverse supply of fuel and power, bolstered by additional strides in efficiency, will strengthen our economy and security while making important global contributions to a cleaner environment.
At the same time, our expectations must be realistic. Even fervent proponents of alternative and renewable energy sources would acknowledge this finding by the Energy Information Administration:
Despite the rapid growth projected for biofuels and nonhydroelectric renewable energy sources and the expectation that orders will be placed for new nuclear power plants for the first time in more than 25 years, oil, coal, and natural gas still are projected to provide roughly the same 86% share of the total U.S. primary energy supply in 2030 that they did in 2005...
The Energy Information Administration goes on to say that its projection assumes the status quo in policy. Yet experts are hard pressed to identify any policy change that would radically upset this projection.
Still, a more diverse energy supply is a laudable and achievable vision. Let’s look at all the options:
Coal
Coal fuels more than 40% of the world’s electricity and more than 50% of U.S. electricity. America’s 245-year supply of coal (containing more energy than that of all the world’s oil reserves) is why the United States has been called the “Saudi Arabia of coal.”
America imports very little coal and prices are relatively stable,especially when compared with other sources. The coal industry has developed ways to make this reliable, domestically supplied resource cleaner, including several methods to reduce sulfur, nitrogen oxides, and other impurities from coal. Today, technological advances enable companies to clean coal before it leaves the mine and coal companies to look for low sulfur coal. Power plants use “scrubbers” to clean sulfur from the smoke before it leaves their smokestacks.
Future “clean coal” technology will not only enable power plants to burn coal cleaner but also will capture and store the carbon that is left over so it does not get into the atmosphere.
Given that the burning of coal emits CO2, the use of coal as an energy source has come under attack in some quarters. Yet with abundant domestic supplies remaining and technology advancing, coal can and must be a major ingredient of our energy mix—even as we work to diversify that mix and manage the climate change risk.
Oil
Contrary to popular belief, the world is nowhere close to running out of oil. As we have seen, the same is true for the United States. Thanks to new exploration methods, reserve estimates are going up—even without new discoveries. The International Energy Agency, based on previous work by the U.S. Geological Survey, estimates that the world has 2.6 trillion barrels of oil, about 1.1 trillion of which are considered proven reserves.
There could also be an additional 1 trillion barrels of technically recoverable, ultraheavy oil, bituminous schist, and tar sands. These sources are becoming more viable in the marketplace due to high oil prices and technological advances.
Even though the resources picture is positive, America’s energy companies face challenges that are little understood by the public or by policymakers. Research, exploration, recovery, and operational costs are soaring. Global demand has placed a premium on equipment, technology, and human talent.
At the same time, 77% of the world’s oil reserves are owned by national oil companies. This means that U.S. private sector companies must compete with government-owned and protected monopolies.
In fact, just 6% of worldwide reserves are now held by investor-owned oil and natural gas companies. Exxon, the largest commercial oil company, ranks no higher than 14th on the list of reserve owners.
Policymakers should keep these facts in mind when they are tempted to saddle our energy companies with punitive taxes and restrictions. These are the same companies we are sending out into the world to compete for precious oil and gas resources and to develop new, clean, and diverse sources of energy.
Natural Gas
Ten years ago, policymakers helped promote a shift to natural gas as a cleaner alternative to coal and oil. Yet demand got ahead of the supply from the nation’s aging natural gas fields, catching many experts off guard. Government restrictions on production worsened the problem.
As a result, the United States has had the highest natural gas prices in the world in recent years. Approximately 85% of the natural gas consumed in the United States is produced from the nation’s gas resource base. Nearly all of the remaining 15% is produced in North America.
Furthermore, when natural gas prices rise, they affect not only energy costs but also the costs for fertilizer and chemical plants that use natural gas as a feedstock.
The result is less investment and fewer jobs. According to the National Academy of Sciences, chemical companies shuttered 70 facilities in the United States in 2004, and have tagged 40 more for closure.
Yet natural gas exploration is not allowed or is severely limited by government policies—such as the access restrictions on the Outer Continental Shelf and process impediments to development in the West.
The nation is home to abundant supplies of natural gas and a creative, efficient, and environmentally conscious industry. It is time to expand the development of this important resource, while also building facilities that allow greater use of the liquefied natural gas that is available around the world.
Nuclear Power
Global warming concerns and the safe performance of existing reactors have prompted consideration of an overdue expansion of nuclear power. Even longtime opponents are taking a fresh look.
Nuclear power is America’s second-leading source of electricity, providing 20% of our power. Today, more than 100 nuclear reactors operate in 31 states. Once a nuclear plant is constructed, its fuel and operating costs are among the cheapest forms of electricity available.
Nuclear energy power creates no air pollution or greenhouse gases, and there is growing consensus that it is an environmentally responsible choice.
More than 30 new nuclear reactors are on the drawing boards today. These new plants will be licensed and built using a new, more efficient licensing process. The nuclear energy industry also expects the federal government to meet its obligation, established in federal law, to develop storage and disposal facilities for used nuclear fuel. Although this program is behind schedule, the prospective disposal site—in a remote part of the Nevada desert called Yucca Mountain—is well-suited to long-term isolation of waste products, based on 20 years and $7 billion spent on scientific investigation and development of the site.
The growing demand for electricity, concerns about CO2 emissions, and the price volatility associated with other fuels used for production of electricity all intensify the need for new nuclear power plants in the years ahead.
Alternative Sources and Fuels
High hopes have been placed on renewable and alternative power and fuel, including wind, solar, biomass, ethanol, and hydrogen. These advances will take time to make up meaningful shares of our total energy supply.
Excluding hydroelectric power, renewable resources produced just 2.3% of the U.S. electricity supply in 2005. Biomass was responsible for 1.5%, wind for 0.44%, geothermal for 0.36%, and solar power for 0.01%.
This small percentage, however, should not deter vigorous research and development activities in these fields. The market for alternatives is spurring investment. Americans invested almost $30 billion in the alternative energy sector in 2006. American venture capitalists have invested seven times more on green technology than their counterparts in Europe.
- Hydroelectric power is already a plausible part of our energy mix, accounting for almost 7% of electric power generation. Some have called its future growth into question because of environmental concerns and growing battles over water as a scarce, precious resource. Yet its role is important and must be preserved.
- Wind energy is growing at 30% per year and could comprise 1% of the nation’s electricity by the end of 2007. Transmission is the biggest hurdle facing the expansion of wind energy. Some of the best sites to locate generators are in the Great Plains and Upper Midwest, far from population centers on both coasts.
- Solar power still accounts for only a fraction of the 1% of the electricity generation claimed by wind, but it may have greater long-term potential. Solar panels can be placed right where the power is needed and do not have to rely on a transmission grid. The sector has experienced 45% growth per year for the last decade, doubling in capacity every 18 months.
- Geothermal energy, a method of making energy from heat trapped deep in the ground, is another potential alternative. The future of geothermal energy lies in improving drilling techniques and technology, as the main expense is actually drilling the holes and building power plants on top of them.
- Biomass is growing as an alternative because it has the advantage of disposing of waste while creating energy. Energy is made through the process of converting plant matter into transportation fuel (biofuel) or electricity (biopower), usually by incinerating waste material or creating combustible gas through chemical processes.
Ethanol
Today’s most popular alternative to gasoline is ethanol, which is on track to grow to about 10% of our total gasoline pool in a few years. Corn-based ethanol reduces the CO2 emissions that a given vehicle is responsible for by about 10% (after factoring in the petroleum used in the farm equipment and the fertilizer used to grow and harvest the corn).
The United States now has 100 ethanol refineries, which produce 4.7 billion gallons a year, according to the Renewable Fuels Association. Construction is under way on 32 plants, which together will produce another 2 billion gallons.
This production represents diversification and is equivalent to creating a new Indonesia-level oil-producing country in America’s Midwest. But as the promising ethanol market develops, it is critical that government and industry decision makers continually evaluate its impact on the national and worldwide food supply.
Detroit is making flexible-fuel vehicles that can run on a blend of 85% ethanol and 15% gasoline or use conventional gasoline when the ethanol blend (called E85) isn’t available.
An estimated 3.8 million flexible-fuel cars are on U.S. highways today, according to the Alliance for Automobile Manufacturers. But due to significant costs and regulations, only 700 gas stations nationwide offer E85. The vast majority of flexible-fuel cars are still using conventional gasoline.
Making ethanol from other plants or from agriculture waste, called cellulosic ethanol, can more significantly reduce greenhouse gas emissions and avoid potential negative impacts on the cost and supply of food. Significant breakthroughs are still needed to make cellulosic ethanol cost-effective.
Hybrid and New Engine Technologies
Updated technology is also in the works: for instance, plug-in hybrids that will allow drivers to recharge batteries by plugging an extension cord into an outlet. But more research is needed.
Most scientists predict that hydrogen-powered fuel-cell cars will not be available to the public until decades beyond the 2020 goal set by President Bush. Engineers need to improve the large tanks needed to transport hydrogen fuel. A nationwide network of hydrogen filling stations would need to be constructed.
Automakers have already made progress in creating more fuel efficient vehicles, and most experts agree that additional strides are achievable. Corporate Average Fuel Economy (CAFE) Standards are currently set in law at 27.5 miles per gallon. Proposals to reform the CAFE system, which would allow standards to be raised, should be based on the principles of sound science, economic impact, and regulatory flexibility.
To secure America’s energy future, all options must be on the table and be given a chance to prove their viability in the marketplace. The pros, cons, costs, and unintended impacts of each option should be considered based on facts and not on rhetoric.
Americans have purchased almost half a million hybrid vehicles since 1999. Today’s hybrids are powered by a rechargeable battery and by gasoline, and they often combine other energy-efficient technologies to get the most out of each gallon of gas.