Why We Must Produce More Energy at Home
By Joshua Trott, Chief Revenue Officer
2022 was a tumultuous year for energy on a global scale.
We felt it at the pumps with the highest fuel prices in decades, while thousands of Americans — and millions of Europeans — struggled to keep their homes heated in the winter cold. Solar development in the US was heavily disrupted due to post-pandemic supply chain issues, and paused even further because of governmental restrictions on goods coming from China. Coal usage in the developing world rose to new heights, thwarting the efforts of many of the biggest economies who made moves to diminish its impact on the planet. Russia rounded out the year by targeting energy production facilities as part of its invasion of Ukraine, with the goal of freezing citizens out as fighting drags on.
Energy has never been a more pressing issue than it is today. The energy crisis — vulnerable markets, rising prices, fuel shortages, a supply chain in disarray — is real. What has become abundantly clear over the last chaotic year, aside from the tenuous nature of a resource many have taken for granted our whole lives, is that the US must produce more energy at home. We must do this in order to preserve — and hopefully improve — the quality of life we enjoy, and also to secure our future as a global energy and economic power for generations to come. But how do we get there? What does a secure energy future look like? The short answer: It looks a lot like saving for retirement.
Politics & Polarization
The US has been plagued by a culture of polarization. Rather than allowing for multiple views, and for facts to stand on their own, we have become hooked on binary equations in which there are only black-and-white opinions about what is right and wrong. This leaves little room for inconvenient facts and zero tolerance for any shades of gray.
We sit on some of the largest gas fields in the world. But instead of sending this gas to New England, which would massively reduce cost and emissions from less-efficient fuels, we are bringing gas to New England from Trinidad.
The challenges we face in energy — both today’s pressing issues and the longer-term step changes required to enable the energy transition — cannot be discussed coherently, much less understood, if we don’t adopt a more streamlined, pragmatic view to solving them. We need to remove politics from the discussion and instead evaluate the data to drive decision-making.
Take coal, for instance. Somehow in the argument about renewables vs. traditional energy sources like Oil & Gas, about pipelines and fracking and other political hot potatoes, the reemergence of coal consumption in the 21st century has gone largely unnoticed. We’ve hit peak coal usage of any time in history, according to the International Energy Association — in developing nations like India and China, but also in European countries like Germany and France#, both of which have for years vowed to eliminate coal from their energy profiles. This is nothing short of shocking. Coal is the least environmentally friendly fuel we’ve got, and the increase in its use carries grave implications for a world working to meet ambitious goals for carbon neutrality and net-zero emissions.
The reason for the increase in coal consumption is complex, but has a lot to do with the rapid rise in the prices of natural gas and other fuels over the last year, which forced some countries and regions to turn to coal as a cheaper, more readily available alternative. In other words, it’s a by-product of the global energy crisis.
But our society isn’t talking about coal or the many countries that are firing up coal-powered plants. Instead, the loudest voices are busy advocating for or against domestic pipelines, arguing over hydraulic fracturing (known as fracking), and casting Oil & Gas companies as villains.
There is no silver bullet for the energy transition. It can’t occur overnight and will be a multi-year process. Finding pragmatic, incremental ways to move the chains down the field is where we should focus both our national conversation and our resources.
Finding Answers at Home
Energy security is achieved by limiting reliance on foreign providers. Simply put, this means producing more at home. This winter we’ve been importing natural gas from far-off places like Trinidad. It is making the journey by boat to the East Coast, where New Englanders are relying on it to warm their homes. And yet the United States has an abundance of natural resources including oil and the natural gas we are currently importing.
We sit on some of the largest gas fields in the world, including the Marcellus and Utica Shales in Pennsylvania. But instead of sending this gas to New England, which would massively reduce cost and emissions from less-efficient fuels (not to mention offsetting the carbon costs of shipping from the Caribbean), we are bringing gas to New England from Trinidad.
Why don’t we simply build a pipeline from Pennsylvania to Massachusetts? First, there is too much red tape and regulatory complexity baked into our system, at both the federal and state levels. For example, Australia and Canada both have similar environmental protections in place, but their permitting processes take 2-3 years, whereas ours average 7-10 years.
Another reason is the Jones Act, a 1920 federal law that regulates maritime commerce and requires goods shipped between U.S. ports to be transported on ships that are built, owned, and operated by United States citizens or permanent residents. This means foreign vessels — such as LNG carriers — are prohibited from delivering gas superchilled in the Gulf to customers in the Northeast. Utility companies recently called for emergency assistance from Washington to preempt a crisis this winter due to the archaic law, which has essentially cut the region off from some of America’s enormous shale output and left it more dependent on expensive imports.
The right regulatory reform can help the industry move faster and produce more, without sacrificing the environmental protections we have in place. But as long as we are dependent on foreign trade partners, we will always be at their mercy for the fuels we rely on.
A Simple Answer
Just like saving for retirement, a secure and prosperous future depends on diversified investment. Most financial planners would agree that putting all proverbial eggs in one basket increases exposure to risk and, worst-case scenario, catastrophe. This is why we must invest in an increasingly diversified portfolio of energy production and distribution right here in the US if we are to drive costs down and increase security at home. Diversification will also help to make the US a reliable source of clean energy for the world.
The lack of this rational portfolio approach is causing real pain right now, both in peoples’ wallets and in adverse impact on the environment. Within the US, some parts of the country saw a surge of more than 6,000% in wholesale power prices last year, driven by the lack of diversified investments in infrastructure. Among the results: exorbitant bills for the consumer and the burning of carbon intensive fuels (like heating oil) to compensate. The winter months are especially challenging in this scenario because renewables struggle to deal with the energy demand spikes caused by cold weather. Thus we’re left with severely limited options — the same way investing only in growth stocks and rejecting more sustainable long-term investments, like bonds, could have severe consequences for the portfolio holder.
Our well-being, both individually and as a nation, is so deeply and thoroughly reliant on power and transportation that the idea of losing the ability to get the energy we need is an existential nightmare. Without energy security, we have nothing. Oil & Gas, LNG, Wind, Solar, even Nuclear, are all sources of energy that must be responsibly leveraged. Our quality of life — and so much more — depends on it.
A secure energy future is directly tied to successfully navigating the energy transition as a planet. The US has already cut more emissions than any other country in the world by moving away from coal and reducing emissions from conventional Oil & Gas production. But we still have work to do. Regulatory reform, combined with increased investment in a balanced and diverse portfolio of energy solutions, is how we win our future.
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