Published on January 25th, 2012 | by Silvio Marcacci4
Sweeping State of the Union Speech Creates Conflicting Energy Goals
January 25th, 2012 by Silvio Marcacci
Last night, President Obama’s State of the Union speech featured a comprehensive energy plan that calls for increasing virtually all domestic sources of energy. His “all of the above” energy approach is a pragmatic step toward increasing America’s energy independence and gaining ground lost in the global clean energy economy toward “a future where we’re in control of our own energy and our security and prosperity aren’t so tied to unstable parts of the world.”
But Obama’s energy goals raised an important concern for me — could they, ironically, keep renewables from reaching their full potential?
Late last week I found out I had been picked to attend a State of the Union Tweetup at the White House. It was an exciting chance to watch the speech from within the Eisenhower Executive Office Building and ask questions of an administration panel afterward. Unfortunately, I wasn’t called on during the Q&A, so I’ll do my best to lay out the concerns I would have raised last night in this post.
Increasing domestic fossil fuels
Obama began his speech by proposing broad increases in fossil fuel development. Citing U.S. oil production at its highest point in eight years with the lowest reliance on foreign oil since 1996, he directed his administration to open up more than 75 percent of the nation’s potential oil and gas offshore resources. This new development would come on top of several million acres that have been opened up to oil and gas exploration since 2009. “But with only two percent of the world’s oil reserves,” Obama said, “oil isn’t enough.”
That’s where America’s shale gas boom comes into play. Obama cited an estimate of 100 years’ domestic reserves and 600,000 new jobs from the natural gas industry by the end of this decade. The boom has been made possible by innovations in hydraulic fracturing, or “fracking,” but it has also raised concerns about water quality in Wyoming and Pennsylvania. He addressed this concern by saying he would “require all companies that drill for gas on public lands to disclose the chemicals they use.” Fracking chemical disclosure is a big step toward addressing the risks of fracking, but a larger concern remains with shifting toward a natural gas-dependent energy economy — supply.
The U.S. Energy Information Administration’s (EIA) Annual Energy Outlook 2012 slashed its estimate of unproved technically recoverable resources of U.S. shale gas to 482 trillion cubic feet from 2011’s estimate of 827 trillion cubic feet. This decline is largely due to a 66 percent drop in the estimated available resources of the East Coast Marcellus Shale play. The new estimate would still last decades at the current consumption rate of around 25 trillion cubic feet per year, but the conflict between EIA and Obama’s estimate does raise questions about the country’s long-term energy supply.
Obama quickly pivoted from federal support for stimulating natural gas innovation to a push for clean energy, saying “what’s true for natural gas is true for clean energy.” He credited his administration with positioning the U.S. to be the world’s leading manufacturer of high-tech batteries, doubling renewable energy use, and creating thousands of domestic jobs. Quoting a Michigan wind turbine worker, the president called renewables “the industry of the future” and pledged not to abandon efforts to boost clean energy.
Financial incentives play a large role in his vision. Obama called for both ending taxpayer subsidies to oil companies and passing clean energy tax credits to support renewables, as well as establishing a clean energy standard (CES) for the country. The CES effort stalled in Congress last year, but his call was quickly answered after the speech by Senator Jeff Bingaman (D-NM), who estimated releasing draft CES legislation within a few weeks.
Obama also called for passing clean energy tax credits, which seemed to be an indirect reference to the Production Tax Credit (PTC), which has created a wind power boom but threatens to stall the industry if it expires at the end of 2012. Obama also directed his administration to pursue clean energy projects on public land to power three million homes and announced the Department of Defense would make a clean energy purchase commitment equivalent to power 250,000 homes annually.
But while Obama’s achievements in boosting renewables and plans to incentivize new clean energy investments are notable, they seem to be in direct conflict with expanded natural gas development. The glut of natural gas now on the U.S. energy market has driven wholesale electricity prices down at an incredible rate, recently to a 10-year low. This is good for consumers and the economy, but MIT researchers recently concluded its also a disincentive against renewables, because the electricity they generate is not price-competitive with natural gas–fired power.
Natural gas is an important part of a realistic plan to boost domestic energy independence. If developed safely, it also represents a clear environmental improvement over coal-fired electricity. But by pursuing an even greater boom and “all of the above” strategy, Obama may wind up dooming his plans for expanding renewables.