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U.S. Energy Independence Day Dawns

Barry Worthington

Barry Worthington

The most significant US energy policy update in a decade, the Energy Policy Modernization Act 2016, will be introduced into the new Congress in January 2017. With provisions for accelerated permitting for oil and gas drilling, construction of export LNG terminals, as well as energy efficiency standards and grid-integration of renewables, the outlook for US energy security is bright, according to Barry Worthington, Executive Director of the US Energy Association (USEA), the US Member Committee of the World Energy Council. He predicts that business, not policy, will be the major driver of decarbonisation.

One of the first pieces of business for the new US administration will be to sign into law a wide-ranging piece of energy legislation, the Energy Policy Modernization Act 2016. The nearly 800-page bill tackles everything from the security of the electrical grid to exports of natural gas and is considered the first significant broad-based change in the nation’s energy laws in nearly a decade.

Executive Director of the US Energy Association (USEA), Barry Worthington says: “This is set to provide a big boost for badly needed energy infrastructure. There is also a strong energy efficiency component, which is long overdue. The Act has bipartisan support so it is likely to move fairly quickly – and become law in April or May 2017.”

Most prominent are the provisions on how best to speed up the export of domestically produced natural gas. “We’re anticipating a boost in construction of LNG terminals, due to the proposed streamlining of the permitting process,” says Worthington.

The bill will promote renewable energy by requiring operators of electricity lines, transformers, and other parts of the electrical grid to upgrade the system, with a focus on the creation of large-scale storage system

“Currently, under existing law and regulation, if the export destination is under a Free Trade Agreement, such as is the case for Korea, then permits for construction are almost automatic. If the export destination is not under a free trade agreement, then the process is considerably more complicated, including stipulations that the Department of Energy must evidence that the export is in the national interest. So, with the new Act, we’re expecting significant increases in LNG exports, especially to Japan and China. Strategically, this could lower European import dependency on Russian gas – especially for Spain, Portugal and Italy,” explains Worthington.

In November 2016, the US became for the first time a net exporter of natural gas. Platts recently reported that its proprietary data showed U.S. natural gas exports exceeding imports in early November, with the country’s gas balance netting an outflow of 1 billion cubic feet per day.

Boost for efficiency and renewables

Sustainable energy is not entirely neglected in the new legislation: substantial provisions are made for renewable energy and energy efficiency.

The bill will promote renewable energy by requiring operators of electricity lines, transformers, and other parts of the electrical grid to upgrade the system, with a focus on the creation of large-scale storage systems for electricity to accommodate the expanding production of wind and solar power.

Worthington also notes, that under the new administration: “I would expect other support for renewable energy projects, for example in expediting the permitting process and allowing windfarm development on federal property.”

In addition, the bill’s provisions to improve energy efficiency by reauthorising state energy programs and promoting investment in improved technologies such as smart buildings and smart grids have been welcomed by the American Council for an Energy Efficient Economy (ACEEE). According to the ACEEE, this could enable a market opportunity for the US to become a world leader in “smart” technologies including smart buildings, manufacturing, transportation, cities, and the grid.

“With the new Act, we’re expecting significant increases in LNG exports, especially to Japan and China. Strategically, this could lower European import dependency on Russian gas”

Worthington comments: “In terms of energy efficiency gains, we’re more than halfway now towards our targets. Much has been done to introduce standards in buildings and in transport.”

Significant gains in energy efficiency were made under the outgoing administration. In 2015, President Obama signed into law the Energy Efficiency Improvement Act, which includes the Tenant Star program with the potential to cut utility bills for landlords and tenants by an estimated 2 billion dollars by 2030 and reduce carbon emissions by nearly 12 million metric tons.

Introduced in 2015, efficiency rules for appliances and federal buildings, along with new standards from the Department of Energy (for new rooftop air conditioners, heat pumps, and furnaces) representing the largest gains of any energy-saving rule since the standards program began in 1987, are estimated to save the same amount of energy as all the coal burned in the U.S. to generate electricity in a year.

Business to drive decarbonisation

Although president-elect Donald Trump has made clear his support for US domestic energy projects in many respects – such as the intention to remove barriers to fossil fuel production – Worthington believes that the US will continue to decarbonise its energy system. However, he anticipates that policy will not be the primary driver of low carbon energy.

“I believe that America will continue down the path of decarbonisation. Fuel-switching from coal-fired to natural gas will continue, with or without the Environmental Protection Agency, the Clean Power Plan or the Paris agreement,” he says. “Our corporations are majorly motivated to reduce greenhouse gas emissions, and this is due to pressure from shareholders.”

This is evidenced by an open letter sent to Trump on November 16 and signed by more than 300 big businesses including IKEA, Starbucks Coffee, Gap Inc., General Mills, Hewlett-Packard Enterprise, Hilton, Kellogg Co., L’Oreal, Levi Strauss & Co., Virgin and Patagonia. The letter urges Trump to keep the Paris Climate Agreement, and requests support in building a clean and green economy.

Worthington reckons a generational shift in mindset will make an impact: “The energy industry’s workforce is also changing – we’re undergoing a significant replacement wave in our industry, as the 65 year olds are leaving and being replaced with 25-year-olds. The younger generation has a very different outlook.”

“Our corporations are majorly motivated to reduce greenhouse gas emissions, and this is due to pressure from shareholders”

Worthington says he is “impressed with the individuals that are advising the president-elect” and is looking forward to working with the new administration. He is upbeat and enthusiastic about the USA’s energy outlook: “In energy terms, we’re in a completely different world now than we were just a few years ago. In 1985, we thought we had a 30-year supply of natural gas and we were making plans for gas importation up to 2008. But the development of fracking technology and the shale gas revolution has changed all that – now we reckon we have at least a 100-year supply of natural gas, even likely that it’s a 200-year supply.”

“So we have the confidence of a huge supply base combined with low prices. And don’t forget, it’s not just shale gas, it’s shale oil too. With new policies in place to remove barriers to exploration, we see the pathway towards the US becoming a major energy exporter. This could happen within a few years, if not by 2020, certainly by 2025.”

by

The USEA is the U.S. Member Committee of the World Energy Council. It is an association of public and private energy-related organizations, corporations, and government agencies, and represents the broad interests of the U.S. energy sector. This article was first published in the December 2016 edition of World Energy Focus, a free monthly digital magazine produced by Energy Post.

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Clifford Goudey's picture
Clifford Goudey on December 9, 2016

A home can briefly become energy independent by burning the furniture. We need a smarter approach and a longer vision.

Worthington says, “now we reckon we have at least a 100-year supply of natural gas, even likely that it’s a 200-year supply.” Any energy plan that includes the burning of that fossilized carbon can not bring us energy independence. To meet that standard we must find a way to power our nation that does not leave a legacy of spoiled aquifers and a warmed planet. That means a rapid roll out of renewables, a continued decommissioning of dinosaur fossil-fueled power plants, and rapid transition to EVs and biofueled transport. Anything short of that is near-sighted pandering to the fossil energy industry.

Engineer- Poet's picture
Engineer- Poet on December 9, 2016

It means a rapid roll-out of nuclear power.  It’s a consensus that even the current far-too-lax GHG targets cannot be met without it.

Clifford Goudey's picture
Clifford Goudey on December 9, 2016

Can you afford nuclear? I can’t afford nuclear. Why opt for the most expensive alternative and the one that would take a decade to materialize?

Engineer- Poet's picture
Engineer- Poet on December 9, 2016

Funny, China can afford nuclear.

China has 20 nuclear plants under construction right now; the USA has 4.  Given the level of un- and under-employment in the USA, we could easily support a quintupling of our construction rate.

We could make our nuclear power a lot cheaper by getting rid of heaps of useless regulations.  The first plant at Vogtle was held up over a trivial difference between two versions of the same specification for concrete reinforcing bar.  Nuclear plants are required to have (and pay for) massive security apparatuses which no other industry so much as has, let alone has to support.  The industry has to pay for its own regulation at a rate of over $270 per staff hour, and has no control over how much regulation it gets slapped with.

We could do things almost as cheap as China if we got rid of all the parasites riding on the nuclear host.

Clifford Goudey's picture
Clifford Goudey on December 9, 2016

Funny, but “almost as cheap as China” does not appeal to me when it comes to nuclear power plants.

Regarding under-employment in the US, we’ve pretty much recovered from the spike caused by the Bush recession. Regardless, renewables employ far more workers per MW-installed than nuclear, so bring on the wind turbines and solar farms.

Engineer- Poet's picture
Engineer- Poet on December 9, 2016

Funny, but “almost as cheap as China” does not appeal to me when it comes to nuclear power plants.

There’s an NRC standard called NQA-1.  It radically increases the cost of everything certified under it.  What it doesn’t seem to do is actually increase the quality over COTS parts used in e.g. chemical plants.  We can and should do away with it, and all its costs.

Mass-production usually yields higher quality as well as lower prices because of learning curves and greater repeatability with increasing automation.  If we were going to build 440 GW of designs like the AP1000, we could do much better building 400 of them than building 8 (4 in the USA and 4 in China).  We’d be able to use it, too.  With the increase in off-peak electric load that would come from mass electrification of vehicles, we could easily see 440 GW of base load in the USA.

Regarding under-employment in the US, we’ve pretty much recovered from the spike caused by the Bush recession.

What you’re seeing is re-definition of unemployed people as “not working, but not unemployed”.  The US labor force participation rate has fallen from 66.4% in 2007 to 62.7% in Nov 2016.  Figuring maybe 200 million people in the relevant age bracket, that’s now about 75 million who could potentially be working, but aren’t.

At 5000 people per construction project, 20 of them going at a time would scarcely dent that number.  It would only be a blip in the 5.4 million increase in the last 9 years.

renewables employ far more workers per MW-installed than nuclear

To the point that, even paying them minimum wage with no benefits or employment taxes, the 209,000 workers who produced the USA’s 2015’s solar energy production would have cost over 12¢/kWh.  This is power only the rich can afford.  “Renewable” energy only exists because it’s subsidized by real energy.

Clifford Goudey's picture
Clifford Goudey on December 9, 2016

You wrote, “the 209,000 workers who produced the USA’s 2015’s solar energy production would have cost over 12¢/kWh.” Let’s take those figures as real, but realize that the PV panels those people build and install will last 25 years plus. So make that half a cent per kWh.

Engineer- Poet's picture
Engineer- Poet on December 10, 2016

realize that the PV panels those people build and install will last 25 years plus.

The cumulative installations of the last 25 years of subsidized solar generated much less than 1% of US electric consumption last year.

So make that half a cent per kWh.

The workers probably have an all-in labor cost in excess of $40/hour, more than 5x the minimum wage.  Make of it what you will… and realize that the inverters don’t last 25 years, but more like 7.

Hops Gegangen's picture
Hops Gegangen on December 10, 2016

Really, how many of those un/under employed are the mechanical engineers, metallurgists, electricians, and welders needed to assemble nuclear power plants?

Jesper Antonsson's picture
Jesper Antonsson on December 10, 2016

Regardless, renewables employ far more workers per MW-installed than nuclear

I guess you don’t realize that this proves nuclear to be cheaper? All costs ultimately comes from labor.

Darius Bentvels's picture
Darius Bentvels on December 10, 2016

With wind & solar those workers are only needed to construct. Therafter hardly any labor.
In addition: Far less expensive specialists needed for wind & solar construction than nuclear construction.

Nuclear continue to need many expensive specialists during operation, and also ‘burns’ expensive uranium.

So fully depreciated NPP’s still need ~$56/MWh (check the ZEC’s granted by NY-state), while the operating costs of solar and wind are at least 10 times less.
Which implies at least 10 times less CO2eq emissions for wind & solar!

Hops Gegangen's picture
Hops Gegangen on December 10, 2016

If the industry gets rid of those regulations, what happens to the cost of liability insurance? Could they even get any?

Clifford Goudey's picture
Clifford Goudey on December 10, 2016

You wrote, “The cumulative installations of the last 25 years of subsidized solar generated much less than 1% of US electric consumption last year.”

Funny you should bring up actual EIA data. Have you looked at the indicated trends? Nuclear has been stagnant or dropping from its peak in 2010. Wind output has seen a 127% per year growth rate since 2005. Solar output grew 22 fold between 2010 and 2015. That’s an annual growth rate of 185%.

Try extrapolating to 2020 or 2025 using those growth rates and you will see that nuclear becomes irrelevant – an unintended victim of the essential process of keeping fossil resources in the ground.

Darius Bentvels's picture
Darius Bentvels on December 10, 2016

Major part of accident & nuclear waste liability (actually near all) is shifted to the public and govt. Thanks to the special nuclear laws in all countries with Nuclear Power Plants (NPP’s) wich limit liability to unrealistic low amounts.

Without that, no NPP would be constructed as the insurance premium would become too high.

A major subsidy for NPP’s which represent a value of 1 to 5cent/KWh!

Bob Meinetz's picture
Bob Meinetz on December 10, 2016

EP, don’t know if you’ve seen this or not – Trump’s transition team seems to be favoring nuclear energy in a big way:

http://www.nytimes.com/interactive/2016/12/09/us/politics/document-Trump-Transition-Questionnaire-Energy-Dept.html

That the New York Times has its panties in a bunch over it doesn’t bother me in the slightest.

If he comes through on nuclear – and changes his mind on ~20 or so other positions – I will have to eat crow.

Jesper Antonsson's picture
Jesper Antonsson on December 10, 2016

Bentvels, what drives you to keep deceiving, and how can you live with yourself? It’s simply beyond me.

Darius Bentvels's picture
Darius Bentvels on December 10, 2016

I hate it when people misrepresent reality.

Jesper Antonsson's picture
Jesper Antonsson on December 10, 2016

No, you don’t. You love it and you reproduce it. You’re a classic internet troll.
http://www.dailymail.co.uk/sciencetech/article-3408616/Internet-trolls-sadistic-psychopaths-kick-abusing-people-online-Video-reveals-traits-cause-people-post-mean-comments-web.html

Mark Heslep's picture
Mark Heslep on December 10, 2016

we’ve pretty much recovered from the spike caused by the Bush recession.

Who is “we”?

US civilian labor force participation rate (BLS):

Mark Heslep's picture
Mark Heslep on December 10, 2016

Thanks for the link Bob. Questions 47-50: support existing reactors, premature closure, SMR, commercialize advanced reactors. Impressive. Somebody is exactly on-top of the current US nuclear power picture in Trump Transition.

I’ve seen several of forms of these question memos circulated by new, incoming senior management in my private sector career though rarely with such a degree of evident expertise in the formulation of the questions. The fact that the NYT reports these questionnaires were i) previously rare in government transition and ii) thought of as a “witch hunt” is tragic.

Mark Heslep's picture
Mark Heslep on December 10, 2016

Wind output has seen a 127% per year growth rate since 2005. Solar output grew 22 fold between 2010 and 2015. That’s an annual growth rate of 185%.

Both solar and wind enjoy large subsidies in the US from the federal government. As finance is finite, these can not continue indefinitely. Spot power prices in high wind share grids are increasing going negative due to the PTC for wind. Thus its unlikely the current installation rates will continue. See solar share in Germany for instance, now stalled at 8%, despite heavy government spending over the years and high electricity rates.

an unintended victim of the essential process of keeping fossil resources in the ground

Everywhere solar and wind have been significantly pushed by policy, fossil fuels receive a guarantee that they’ll be continually removed from the ground.

Mark Heslep's picture
Mark Heslep on December 10, 2016

If the industry gets rid of those regulations,

“Those” regulations are not the same as “all” regulations. EP notes a category that is useless, superfluous, and a hindrance (except as a boon to competitors and job security for regulators).

Bob Meinetz's picture
Bob Meinetz on December 10, 2016

Hard to deduce much from it Mark, especially now that WaPo is reporting Trump will likely choose Rex Tillerson (Exxon-Mobil CEO) for SOS.

I don’t see any indication whatsoever Trump will risk oil/gas sales in the name of nuclear, the environment, or even the economy. But I’ve never been on Twitter, and in 2016 that makes me uninformed.

Mark Heslep's picture
Mark Heslep on December 10, 2016

I can make some reasonable assumptions. Somebody went to the trouble in the energy section of the Transition team to bring on-board people who technically understand the state of US nuclear power, both at this moment and where it could reasonably go. They also had the judgement to prioritize the most important issues. It takes focus and direction from the top to bring in that kind of expertise this early.

Sending these questions to DoE sends a get-with-the-program message to the troops. By contrast, it also makes tactical sense to not have to the POTUS-elect making loud statements about a nuclear agenda, because as we know there are plenty of Bas type misinformers on the ground, both the fanatics and the fossil fuel proxies.

Oil sales have little to do with nuclear power, at least for some several years yet.

Engineer- Poet's picture
Engineer- Poet on December 10, 2016

EP, don’t know if you’ve seen this or not

No, I hadn’t (better link).  It does look like someone is very much on the ball.

The question is, where will they go with that ball?  We’ll just have to wait and see.

Mark Heslep's picture
Mark Heslep on December 10, 2016

…The US labor force participation rate has fallen from 66.4% in 2007 to 62.7% in Nov 2016. Figuring maybe 200 million people in the relevant age bracket, that’s now about 75 million who could ..

Or, with simply the same LFPR as in 2007, another 6 million would be working. (LF size is ~160 million, 2016 )

Engineer- Poet's picture
Engineer- Poet on December 16, 2016

Wind output has seen a 127% per year growth rate since 2005.

This is what you get when you offer massive tax credits and outright mandates for purchases.

Solar output grew 22 fold between 2010 and 2015. That’s an annual growth rate of 185%.

During which period it got even more massive tax credits and other preference like net metering, and in 2015 it was still just a fraction of one percent of US generation.

Nuclear has been stagnant or dropping from its peak in 2010.

This is because it has had an extremely hostile legal, legislative and regulatory environment with rigging of markets explicitly intended to shut it down and create a bigger market for natural gas (that is the purpose of Renewable Energy Mandates).  It turns out that if you include nuclear as clean energy under clean energy mandates, it does rather well.  Gas interests don’t like this one bit.

Wisconsin and California had legislative bans on expansion of nuclear power.  Wisconsin lifted its ban just last April, far too recently to have any effect on construction.  California has been trying to push Diablo Canyon out of business by prohibiting its use of seawater for cooling.  No fossil-fired plant faces such demands.

Try extrapolating to 2020 or 2025 using those growth rates

Any trend that cannot continue, won’t… and this can’t.  Wind is already saturating demand in many places during times of peak production.  The grid requires plenty of non-wind generation to generate reactive power and perform regulation.  Absent some wildcard like using abandoned deep-rock mines as reservoirs for pumped hydro storage, there’s no way to absorb surpluses of wind and allow more farms to enter the market.  The cheap ways we do have rely on local peculiarities and are not scalable.  Everything scalable costs way too much.

Ironically, the one invention that would let renewables expand their market share in a very big way is probably Cal Abel’s molten-salt-storage nuclear plant.  The molten-salt reservoir could absorb heat both from the nuclear reactor and from electric heaters run on very-low-priced wholesale grid power.  This would allow fine-grained and very fast regulation to track variations in RE output while the steam system ran at minimum.  When the RE output fell off, the heaters would shut down as the steam system ramped up.

I’ve not run this idea past Green advocates, but I know their reaction would be hysterical opposition.

Nathan Wilson's picture
Nathan Wilson on December 16, 2016

The Trump transition questionaire for DOE also had this insightful question:

55) EIA’s assessment of levelized cost for renewable technologies do not contain back-up costs for fossil fuel technologies that are brought on-line to replace the generatin when those technologies are down. Is this a correct representation of the true levelized cost?

57) Renewable and solar technologies are expected to need additional transmission cost above what fossil technologies need. How has EIA represented this in the AEO forecast? What is the magnitude of those transmission costs?