This year it has become vogue to champion zero-sum thinking on our country’s energy future. Picking winners and trashing some of our more abundant and efficient fuels will not bring this country more energy security and nor will it reduce prices or increase options for U.S. consumers and probably will not create more net jobs.

It remains essential to stress as a positive, partisan politics of the day aside, the diversity and balance of our current supply options that will sustain our country’s future energy supply. Oil and natural gas supply over 60 percent of our country’s energy and according to the Energy Information Administration’s (EIA) Annual Energy Outlook, this doesn’t look to change fundamentally over the next two decades. Natural gas particularly offers significant potential given what the latest Potential Gas Committee (PGC) calls an “unprecedented increase in magnitude of U.S. natural gas” in their latest assessment.

Some may call shale a “lone success story” but many recognize the potential of a total resource base of 1,836 trillion cubic feet which is the highest resource evaluation in the PGC’s 44-year history. In addition to the proximate natural gas resources in Canada, we now essentially have enough natural gas within our borders to satisfy over 100 years of demand. This continental resource bonanza has overarching implications – regarding supply security, demand diversification, jobs, clean-burning and efficient fuels and less reliance on countries such as Saudi Arabia and Venezuela for our energy future. The expansive tranches of onshore natural gas in shale formations help buffer our supply against seasonal vagaries of hurricane risk and add considerable reliability to future feedstock needs and electric power demand. Natural gas will undoubtedly play a growing role in new generation capacity additions between now and 2030.

Regarding price and volatility, it is imperative to note that supply diversity presents the consumer with more options and ultimately, lower prices. Coal currently provides for the majority of our baseload power – approximately 50 percent. However, natural gas is the peak generation fuel of choice and we now have the resources to guarantee future supply. Over the last year, for example, many users have exercised their fuel-switching capability to take advantage of lower natural gas prices (compared to coal). The EIA notes that while ‘more than 50 percent of the decline in coal generation during the first half of 2009 occurred in the Appalachian states where spot coal prices spiked late last year, natural gas generation in those same states was up by 80 percent during the first half of 2009.” The EIA’s Annual Energy Outlook for 2009 raised its projections for U.S. production and consumption of natural gas, “reflecting a larger resource base and higher demand for natural gas for electricity generation.” We have more gas than we thought and it is under-utilized. It is hard to cast aspersions at that prospect. If Russia or China discovered this amount of shale, I doubt they would regulate against natural gas even though they possessed between 14 and 19 percent of the world’s coal reserves.

Each fuel can argue its relative merits against other fuels based on various criteria. However, one only need to look at China’s attempts to secure oil sands in Canada and oil 60 miles off Key West to realize that we must recognize the true blessing of our ample and diverse resource base which can give us a more balanced and secure energy future. One Chinese official, Zha Daojiong, encouraged a more active management of oil and energy in China, noting that “It is fair to say that the threat from ineffective energy industry governance is probably as great as that from the international energy market.” While in Europe in 2006, Dr. Xavier Chen who chairs the Energy & Utility Policy Working Group stated to the European Union that “natural gas was being neglected as an important source of clean energy and lacks policy support from the government.” China has coal but it understands the need to diversify its supply of all energy sources. While it doesn’t seem appropriate to sing the praises of oil here at home, China is working to expand their Strategic Reserve as quickly as possible to meet 90 days worth of demand by 2020. China is also adding 20 nuclear reactors to increase its capacity tenfold by 2020. Like China, a country that knows a thing or two about the effect of energy security on economic growth and political stability, we need to be realistic and open-minded about expanding our energy options. 

Unconventional natural gas producers have done their part in adding decades to our country’s supply with the help of evolving technologies such as horizontal drilling and hydraulic fracturing. For now we have increased access to a fuel that is not just a ‘bridge’ fuel but a sustainable and growing portion of our energy matrix going forward. Like coal, natural gas supplies around a quarter of our country’s demand. Our resource base of natural gas added to our reserves of coal = a collective good, especially as our generation infrastructure becomes more economically and environmentally efficient. The nuclear option offers considerable potential but key decisions need to be made regarding safety and fuel disposal and timelines and budgets for new plants need to be considered. Renewables have potential growth and impressive percent gains but they are by no means a panacea as one can discern looking at their relative costs and projected absolute growth compared to fossil fuels. The expectations of ethanol bear note here while we consider the prospect of increased wind and solar supply. Remember that wind and solar, for all their current acclaim, currently satisfy less than two percent of our current electricity generation and less than one percent of our total energy demand. As Winston Churchill said, “An appeaser is one who feeds a crocodile, hoping it will eat him last.”

Hopefully our country’s demand-side infrastructure can adapt to our plentiful home-grown fuels and create new markets, such as natural gas vehicles, that can seize this opportunity. Balancing our political, economic and environmental objectives with our diverse supply will help deliver more optimal outcomes if we can distance ourselves from zero-sum thinking.

This entry was posted on Wednesday, October 14th, 2009 at 1:07 pm and is filed under Natural Gas, Supply and Demand. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.