The US Energy Information Agency is out with its new futurecast, the Annual Energy Outlook 2014. It’s packed with so many goodies that we hardly know where to begin, so let’s just start with that figure of 24%. It refers to the percentage of added capacity that EIA predicts will be accounted for by wind, solar, and other renewable energy from 2013 to 2040. Does that seem high to you? Low? And who gets that other 76%?
Wind turbines by Martin Abegglen.
Annual Energy Outlook 2014: Gas, Gas, And More Gas
To start with that last question, the Annual Energy Outlook 2014 lays out a reference case in which natural gas will account for the lion’s share of new capacity over the next 30 years. That comes to 73% from 2013 to 2040, with the remainder consisting of 1% coal plants (only those already under construction) and 3% nuclear.
EIA is on firm footing if the past is any indication. As EIA tells it, during the first five years of the Bush/Cheney Administration, natural gas accounted for “almost all” new capacity.
The driving force behind natural gas in those years was deregulation of the energy markets, which touched off a rush to build new power plants as independent producers edged into the market.
That would be from 2000 to 2005.
Now, here’s where it gets interesting. In 2005, Congress passed a comprehensive energy bill that included the now-famous “Cheney Loophole.” The loophole exempted oil and gas fracking from federal water resource protections, leaving a patchwork of state laws to fill in the gaps.
In some states, the absence of regulations touched off a fracking boom to match the power plant rush. Despite the frantic pace of drilling, though, EIA found that renewable energy still accounted for 42% of new capacity additions from 2006 up through 2012.
As for the Annual Energy Outlook 2014 prediction of a steep dropoff in renewables moving forward, EIA’s reference case is based on one scenario, in which the federal production tax credit for wind power is allowed to expire. Wind accounted for the vast majority of added renewable capacity from 2006 to 2012, so EIA predicts that loss of the tax credit will cripple the ability of the wind industry to add new capacity.
Noose Tightens Around Natural Gas
Okay, so EIA is the experts, but we’re wondering if they left a couple of things out of the equation when it comes to the competition between natural gas and renewables for a share of the new capacity market from 2015 on out.
First, although the Obama Administration has been crippled in terms of direct fracking regulation, EPA has started to seize enforcement opportunities relating to fracking as a general construction activity.
Second, in response to mounting evidence of significant health impacts, safety hazards (think: earthquakes), and negative effects on local property values, the anti-fracking movement is gaining steam on the local level. In New York, scores of communities have signed on to an anti-fracking strategy that was just upheld by the state’s highest court, and Pennsylvania communities also recently won an important legal victory relating to the use of local zoning laws.
Third, as US demand for fossil fuel flatlines, producers are putting pressure on the Obama Administration to enable more exports, which will exert more upward pressure on domestic prices over the long run.
Fourth, in the context of upward pressure on natural gas prices, consider that the cost of wind power, and the cost of solar power, have been on a sharp decline as new technology breaks into the market. We’re thinking that tax credit or no, wind and solar will beat fossil fuels moving forward, especially after the first offshore wind projects come online and the market for distributed solar heats up.
Fifth, add brand management to the bottom line and you’ve got a clear edge for wind and solar, as major US businesses (like Google and these 12 behemoths) and local governments rush to identify themselves with clean energy.
Ummm…we have a few more factors in mind but you get the idea. We’re thinking that at least some of today’s existing gas fired power plants will be replaced by renewables in the foreseeable future, especially taking into consideration the growth of the distributed renewable energy market. If you have any more to add to the pile, leave us a note in the comment thread.
As a reference case, EIA’s scenario builds on the past, but the future is going to look a whole lot different.
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