State of the Union: "All Out, All of the Above Energy"
Ed. note: This piece first appeared on Energy Outlook, Geoffrey Styles’ blog.
Anyone expecting the announcement of big new energy initiatives in this year”s State of the Union address was disappointed last night. What was new, however, was a welcome shift in the President”s emphasis on conventional energy–the fuels he referred to as “yesterday”s energy” in last year”s speech. Never mind that the resurgent oil production for which Mr. Obama took credit is demonstrably the result of events and policies that preceded his inauguration, or that his administration has pursued policies that have held back faster development. If his remarks signal a return to federal energy policy that expends more than 10% of its effort on the sources that account for more than 80% of the energy we use, we should applaud him. The other new ingredient last night was an effort to ground the rationale for greater support for renewable energy in the argument that it took federally sponsored R&D to make the shale gas revolution possible–R&D that ironically wouldn”t have occurred under the research priorities this President has set for the Department of Energy. I hope President Obama is serious about an “all-out, all-of-the-above strategy” for energy, because that”s precisely what we need.
The best way to put that in perspective is with the figures in the 2012 Early Release of the Annual Energy Outlook from the Energy Information Agency of the DOE. It was released just in time for the President”s speech, and there are few coincidences in today”s Washington. The reference case of their forecast for 2035 shows the US consuming 10% more energy within 24 years–an improvement from the 16% predicted in last year”s Outlook. It also shows the contribution of renewable energy in the mix increasing from 6.7% today to 8.3%, including mature hydropower. So even after two more decades of strong emphasis on clean energy, oil, gas and coal would continue to provide 80% of our energy. It”s clear that there”s a disconnect between the lofty rhetoric of last night”s speech and the analysis of the government”s energy experts. I”ll leave it to you to assess whether the discrepancy is due to unrealistic expectations, inadequately ambitious forecasting, or some combination of the two.
A couple of other points from the State of the Union are worth noting. The President called for Congress to “Pass clean energy tax credits,” presumably a reference to the Production Tax Credit (PTC) for wind and other renewables that expires at the end of this year. Yet he didn”t devote a word to whether the PTC should be restructured and gradually phased out in light of the steadily narrowing competitive gap between renewable and conventional power, let alone the kind of major tax reform he alluded to later in the speech. Mr. Obama also called for a Clean Energy Standard in lieu of a comprehensive climate bill. This is small beer when most of the states with attractive renewable energy resources already have fairly aggressive state-level Renewable Portfolio Standards. Meanwhile, the development of 3 million homes” worth of clean energy sources on public lands that he is directing his administration to allow equates to less than 1% of US electricity demand–helpful, though hardly transformational.
With little likelihood of a divided Congress enacting much that is new on energy this year, the President”s remarks last night are mainly interesting for what they suggest about the energy platform on which he will run for reelection this fall. In terms of clean energy, that seems to mean more of the same from 2008 and the last three years, but with much less emphasis on climate change than we heard in his last campaign. The new element is his pivot to embrace rising oil production and the possibilities created by shale gas, even as he cautiously distances himself from the technologies (hydraulic fracturing and horizontal drilling) that make these two trends possible. Although this might appeal to independent voters, it”s also vulnerable to deflation by fact-checking and stands in tension with his rejection–for now–of the Keystone XL pipeline. And if tensions in the Persian Gulf or some other oil hot spot were to increase, so would the scrutiny applied to the administration”s energy policies. I”ll take a much closer look at those policies when the campaign heats up.