The landscape for the U.S. energy markets has changed substantially over the past few years. The market is experiencing rising consumer and industrial demand from emerging markets while new technologies are opening up resources.
There is no end in sight for the growing demand for energy. The Paris-based International Energy Agency reports that given current usage and with no changes in policy, the total global demand for energy will rise by about 35 percent over the next 25 years, with the bulk of that coming from developing economies.
Meeting that demand creates many challenges. Despite the rising cost of gasoline in the United States, energy sector veterans say there are as many reasons for optimism as there are for caution. Sophisticated thinking regarding energy will go beyond just fossil fuel supplies to also include energy efficiency and renewable sources. Federal funding is still regarded as having a crucial role in research and development, and energy security will be a high priority.
New technologies have opened up accessibility to unconventional resources such as shale gas and research continues into renewable energies, says Don Paul, former vice president and chief technology officer at Chevron.
Hydraulic fracturing, or fracking, has unlocked tremendous amounts of natural gas, with much of it centered on the Marcellus deposit in Pennsylvania and surrounding regions. The increased oil production from the Bakken field in North Dakota has in part turned the United States into a net exporter for the first time since 1949.
Andy Milnes, head of supply and trading for BP Americas, says the global energy picture must be viewed two ways. First, emerging markets are growing on the back of coal usage and that is a huge environmental concern; he calls it “the biggest challenge we face over the next 20-30 years.”
These regions will demand the energy to allow them to grow, but the environmental impact must be mitigated and so far that is not happening, Milnes remarks.
Second, the story in the United States is “quite a remarkable situation,” he states. The shale gas deposits will reduce the country’s dependency on unsecure places to import oil, also, efficiency is rising and there is more use of fossil-fuel alternatives.
Milnes adds that the United States and other Western nations should be leaders in responsible energy usage. He says global leaders need to ask themselves: “‘Where do you want to be? Where will we be in 20 years’ time if that energy growth in emerging markets materializes?’”
Part of the solution is to change attitudes toward energy usage, say Milnes and Paul. For instance, in the United States, the idea of auto mobility is a statement of personal independence and wealth, Paul explains. But the Asian paradigm on auto mobility is still being written. “They have the scope to do it differently,” he notes.
Some experts advocate taking a hard look at comprehensive legislation regarding energy, which neither political party has done. The United States must have a diverse portfolio of energy options that includes fossil fuels, nuclear, renewables such as wind, solar and biofuels, along with advocating for energy efficiency.
There is a lot of talk about how the United States can become energy independent, but Paul disagrees with this goal. He questions why the United States should be independent of the world’s oil system in an otherwise globally connected economy. Furthermore, he notes, energy independence would not make the U.S. market immune to global price fluctuations.
“If you were a U.S. producer …and prices spike, you sure aren’t going to sell it locally for less than you could ship it out for,” says Paul.
Milnes says U.S. energy self-reliance is not feasible for the next 25 to 35 years because many more technological improvements are needed in renewable energy before that can be considered. He suggests that reducing energy dependence should be a part of energy policy, along with limiting environmental damage as much as possible and developing renewable energy.
The most important factor in the energy debate is reducing coal use, Milnes says.
Natural gas supplies are plentiful enough to be considered a substitute for coal, Paul says, but to reduce greenhouse gases in a strategic manner, nuclear energy should be an alternative. “Nuclear energy comes with its own “complexity,” he concedes, considering the Fukushima nuclear plant disaster in Japan and what to do with the waste.
The fracking method to remove natural gas has come under fire for potential groundwater pollution because of surface spills. As this is still a relatively new technology, the scientific community needs to work with the industry and government to coalesce on the issue.
Research and development is painstaking and lengthy, so having public/private partnerships are vital to advance new technologies, Milnes says. Despite the problems surrounding Solyndra, a renewable energy company that took federal dollars but went bankrupt, these efforts are still vital.
“I think the role of the government to continue to fund in the basic science and sciences that support energies are crucial….because they can do it over a long term. And companies are not going to do it,” Paul says.
But funding for the sake of funding is not the answer, either. Careful choices must be made. “I think the challenge for any subsidy is not to extend an inefficient technology, but to stimulate new technologies and more efficient renewable energies,” Milnes concludes.