New ACEEE Analysis – Why Is Electricity Use No Longer Growing?

The dynamics of electricity use are complicated. But with the ongoing muddlings regarding U.S. energy policy and the looming specter of climate change, it becomes critical that we do understand electricity usage. A new ACEEE (American Council for an Energy-Efficient Economy) analysis by Steven Nadel and Rachel Young proposes that energy efficiency has become an important factor in U.S. electricity use. As noted by the authors:

Prior to the 1970s energy crises, electricity sales in the United States were growing by more than 5% per year, and as recently as the early 1990s, electricity sales were growing more than 2% per year. In the past few years, growth has essentially stopped: retail electricity sales in 2012 were 1.9% lower than sales in 2007, the peak year. Some observers have attributed this stalled growth to the 2008 economic recession, while others have suggested a variety of other factors. In this paper, we undertake several analyses to consider which factors best explain changes in electricity use in recent years. Our hypothesis is that the recession alone cannot explain the recent stagnation in electricity consumption. We instead hypothesize that electricity savings from energy efficiency programs and from other efficiency efforts such as appliance standards and building codes are having a broad national impact on electricity consumption in the United States, possibly contributing significantly to the recent decline in electricity consumption.

The white paper for this analysis is available at: Why Is Electricity Use No Longer Growing

Natural Gas and Climate Change

The rise in natural gas production, particularly in the U.S., has unquestionably impacted the global energy equation. Fueled by the unconventional-natural-gas revolution, natural gas is now a significant factor in the U.S. and global energy mix. As Sonal Patel summarized from the International Energy Agency’s (IEA) 2013 World Energy Outlook (WEO-2013):

By 2035, natural gas demand will outpace that of any other individual fuel and end up nearly 50% higher than in 2011. Demand for gas will come mostly from the Middle East-driven by new power generation-but also from Asian countries, including China, India, and Indonesia, and Latin America. Power generation continues to be the largest source of gas demand, accounting for around 40% of global demand over the period. New gas plants, meanwhile, are expected to make up around a quarter (or 1,000 GW) of net capacity additions in the world’s power sector through 2035.

Given the seemingly inevitable scenario of natural gas playing a significant role in the energy mix (and particularly in U.S., given the recent unconventional-natural-gas boom), how will its increased use influence climate change and future energy policies? The tenet that natural gas, being a cleaner-burning fuel, will lessen a carbon footprint has been bandied around for awhile now. Amy Harder, from National Journal, picks up this thread with:

First the aforementioned wisdom: Natural gas is unquestionably helping the United States reduce its climate footprint. Our nation’s greenhouse-gas emissions have dropped to levels not seen since the 1990s, thanks in part to this cleaner-burning fuel. Natural gas produces half the carbon emissions of coal and about a third fewer than oil. This is why everyone in the Obama administration, including the president himself, can’t talk enough about the climate benefits of natural gas.

Three disparate factors make the relationship between natural gas and climate change not so unequivocally simple and good. Concerns about methane emissions persist, but notwithstanding that challenge, two greater problems loom: First, shifting significantly away from coal to natural gas doesn’t get the planet anywhere close to the carbon-reduction levels scientists say we must reach. And second, while the natural-gas boom is great for the economy and the immediate reduction of greenhouse-gas emissions, it has deflated the political urgency to cut fossil-fuel dependence, which was more compelling when we thought our resources of oil and natural gas were scarce. We have a great problem of energy abundance.

Obviously, natural gas is not the total panacea for “fueling” the transition to a carbon-negative energy mix. But given the current and predicted production/market conditions, it will be a considerable part of the future global energy equation. There is more info over at websites like cooleffect.org for those who want to see what they can do personally to help their carbon emissions be reduced.

Rising Seas and Carbon Footprint Visualizations

National Geographic

National Geographic “Rising Seas” map of projected North American shoreline change from ice melt. Map from: http://tiny.cc/xc0z9w

New sets of interactive maps help to visualize both the impact of rising seas on the world’s coastlines and U.S household carbon footprints.National Geographic has posted a set of world-wide interactive maps that show new coastal outlines resulting from the premise of all ice melting and thus raising sea level approximately 216 feet. As noted by the authors:

There are more than five million cubic miles of ice on Earth, and some scientists say it would take more than 5,000 years to melt it all. If we continue adding carbon to the atmosphere, we’ll very likely create an ice-free planet, with an average temperature of perhaps 80 degrees Fahrenheit instead of the current 58.

Continuing on the topic of adding carbon to the atmosphere, University of Berkeley researchers, Christopher Jones and Daniel Kammen, looked at the spatial distribution of U.S. household carbon footprints. The researchers first point out the obvious in that carbon footprints in densely populated areas are typically low because of smaller residences, shorter commutes, and the availability of mass transit. Here’s the catch though – the suburbs have an unusually large carbon footprint and are always in serious need of carbon management. In fact, the footprint is so large that it negates the “green” urban core. As Jones and Kammen summarize:

As a policy measure to reduce GHG emissions, increasing population density appears to have severe limitations and unexpected trade-offs. In suburbs, we find more population- dense suburbs actually have noticeably higher HCF, largely because of income effects. Population density does correlate with lower HCF when controlling for income and household size; however, in practice population density measures may have little control over income of residents. Increasing rents would also likely further contribute to pressures to suburbanize the suburbs, leading to a possible net increase in emissions. As a policy measure for urban cores, any such strategy should consider the larger impact on surrounding areas, not just the residents of population dense communities themselves. The relationship is also log?linear, with a 10-fold increase in population density yielding only a 25% decrease in HCF. Generally, we find no evidence for net GHG benefits of population density in urban cores or suburbs when considering effects on entire metropolitan areas.

U.S. Average Annual Household Carbon Footprint by Household.

U.S. Average Annual Household Carbon Footprint by Household. “Source: UC Berkeley CoolClimate Network, Average Annual Household Carbon Footprint (2013)”

Top Five 2014 Energy/Environmental Priorities of the EU

I thought that it’s instructive for anyone interested in US energy/environmental policy to look at what the EU has on its 2014 agenda. Environmental journalist Sonja van Renssen outlines the top 5 EU energy/environmental issues. The issue priorities are:

  • The biggest issue on the agenda will be the climate and energy package to be unveiled by the European Commission on January 22nd.

  • ETS and how to include emissions from international aviation will also be high on the agenda, with  the European Parliament and the biggest Member States disagreeing on the way forward.

  • Shale gas will be back on the agenda with a long-awaited proposal to be tabled by the European Commission also on January 22nd.

  • In 2014, DG Environment’s priority will be waste and resource efficiency with a ‘circular economy’ package expected to be presented by environment Commissioner Potočnik in spring.

  • The alternative fuel strategy with difficult trialogue negotiations between the Council, European Parliament and Commission lying ahead.

View environmental journalist Sonja van Renssen talk about the energy/environment priorities:


 

A Snafu for US Gas Exports and US Energy Policy

A cost-overrun dispute on the expanded Panama Canal construction could be a big snafu for exporting US liquefied natural gas. Keith Johnson of the Seattle Times notes that:

The project is the expansion of the Panama Canal to allow more and bigger ships to pass through – for instance, the large tankers that carry liquefied natural gas (LNG). Today, only about 6 percent of the global LNG tanker fleet can pass through the canal; after the expansion, about 90 percent of tankers will be able to use it, according to a U.S. government study. The bigger canal would provide a quicker and cheaper way to ship natural gas from the U.S. Gulf Coast and East Coast to markets in Asia that are desperate to secure supplies of natural gas.

But those plans now could be jeopardized because of a dispute over cost overruns – which means America’s gas-export dreams could be in jeopardy, too.

Why is LNG a critical part of any talk about both US and global energy? LNG is produced when natural gas is cooled to approximately -260 F. As summarized by Charles Morris in his Reuters opinion, The Case Against Natural Gas Exports:

Natural gas, the cleanest of the hydrocarbon-based fuels, has long been a primary choice for heating and power generation, as well as an essential raw material, or “feedstock,” for a vast range of chemistry-based products, including every kind of plastic, synthetic cloth and high-tech composite materials.

More importantly to the LNG/natural gas discussion is that since the early 2000’s, US gas production has increased so much that it has largely outstripped any growth in consumption. As observed by Trefis analysts in their 1/3/2014 posting on Key Trends Impacting Natural Gas Prices:

The outlook for U.S. natural gas supply has changed significantly over the past few years, primarily due to the evolution of horizontal drilling and hydraulic fracturing; these techniques have enabled energy companies to tap the huge shale gas reserves in the U.S. at commercially sustainable rates. Widespread use of these techniques started only during the early 2000s in the Barnett shale play in north-central Texas. However, since then, natural gas production in the U.S. has ramped up much faster than the growth in consumption, which has led to severely depressed commodity prices by international standards.

Today, natural gas prices in the U.S. are less than half of that in the Europe and less than one-third of that in the LNG (liquefied natural gas) dependent Asian economies, such as Japan. Those hoping to make investments in oil and gas may want to use the services of a company like EnergyFunders with help from their elite operator teams and access to diverse, highly vetted investments through an easy-to-use online platform. Huge recoverable reserve estimates lead the EIA (authors note: US Energy Information Administration) to believe that shale gas would account for ~50% of the total natural gas production in the U.S. in 2040. Additionally, as the industry’s understanding of the shale resource basins continues to grow, leading to more productive wells, drilling costs are expected to trend lower. We therefore expect natural gas prices in the U.S. to remain depressed by international standards in the medium to long term.

The significant point here is that the price of US produced natural gas is much, much lower in the US than natural gas sold elsewhere. Charles Morris gives a summary of how the spot price of domestic gas is set:

The spot price of gas is set in the New York futures market, based on trades at a major Louisiana collection center called the Henry Hub. During the worst of the glut, the Henry Hub price dropped below $2 per thousand cubic feet (Mcf), well under the cost of production. But now new pipeline construction has broken the worst pipeline bottlenecks, and customer demand is rising, so prices have been hovering near $4 per Mcf for some time.

However, natural gas prices overseas are typically “oil-linked”, which means the price is coupled to the per-unit energy cost of crude oil. Morris further notes that in the global market:

Global oil and gas are not traded in free markets…World oil prices are carefully managed by the Organization of Petroleum Exporting Countries (OPEC) cartel. Knowing a good deal when they see it, the world’s largest gas producers, Russia and Qatar, both of whom produce gas more cheaply than the American shale industry can, keep gas prices resolutely oil-linked. It’s raining money for all of them.

Thus, one of the primary consequences of LNG exports is an expected rise in the domestic price of natural gas. Morris also points to Australia as the real world example of this:

Fortunately, we don’t have to rely on forecasts. There is a real-life experiment underway in Australia. They have been exporting natural gas for some time in modest amounts. But a number of big projects will start coming on line next year, and local gas prices have already tripled – though there is ample supply and there has been little change in production costs. Suppliers apparently “prefer to sell the LNG to the likes of Japan and South Korea who will pay a premium for it.”

Not surprisingly, a huge lobbying confrontation is occurring in Washington. The confrontation centers on the approval process for liquefaction installations (gas needs to be liquefied at cryogenic temperatures which “shrinks the volume by about 600 times, making the resource easier to store and transport through marine shipments”. The approval process involves both the US Department of Energy and the Federal Energy Regulatory Commission. According to the American Petroleum Institute:

As of October 1, 2013, the U.S. Department of Energy (DOE) had approved only four applications for permits to export liquefied natural gas (LNG) to non-free trade agreement nations. There are currently 21 pending applications, covering 19 facilities where U.S. businesses are seeking to build and operate terminals to process LNG for sales abroad. (A map showing proposed LNG export facilities is on the API website and is linked here.)

Interestingly enough, there is yet another sidelight to US LNG exports as outlined by the Sierra Club in An open letter to Energy Secretary Moniz on natural gas exports:

But the real game-changer for exporting LNG will be if the U.S. completes the free trade agreement called the Trans Pacific Partnership (TPP), which is currently under negotiation with 10 countries across the Pacific Rim. And Japan, the world’s biggest LNG importer, is likely to join the talks in July. The TPP and another pact the U.S. is initiating with the European Union (EU) are likely to require DOE to approve all gas exports, of any amount and without delay, to nations in the agreement. The TPP could be finalized as early as October of this year, and the U.S.-EU trade pact in 2015.

All in all, 2014 is already shaping up as a very interesting year for US natural gas, LNG exports, and US energy policy.