- Global Competitiveness
Frank Verrastro: Energy Policy: What We Need To Talk AboutOctober 30, 2012
The director of the Energy and National Security Program at CSIS sounds out the semantics on U.S. energy policy.
As the political rhetoric surrounding U.S. energy “independence” heats up, it is worth pointing out a few things to help provide much needed context. After all, there are plenty of things at play here in the coming months and years—resource access and regulatory policy, fuels choices, infrastructure build out, industrial policy, imports and exports, tax and investment decisions, the role of nuclear, subsidies for alternatives, efficiency priorities, SPR policy, environmental concerns and the use of energy as a geopolitical or foreign policy tool.
For starters, the United States is already over 80 percent (up from 70 percent a decade ago) self-sufficient when it comes to energy production and use. We are routinely described as the Saudi Arabia of coal, and have the largest nuclear fleet in the world. We are the world’s largest natural gas producer and the third-largest oil producer. Renewables account for roughly 10 percent of our energy mix and we have in place a variety of efficiency standards, mandates and incentive programs. That said, our transportation fleet is more than 94 percent dependent on liquid fuels, mostly petroleum based, and as oil is a globally traded commodity, changes in worldwide supply and demand consequently impact U.S. consumer prices.
In an attempt to limit that impact, we have routinely looked to conservation, fuel switching, and CAFE standards to alter the demand curve; and to incentives, access, technology improvements, alternative fuels and higher prices to stimulate additional supplies. Projections indicate that we will be a net exporter of natural gas (and possibly oil) in the not too distant future.
Last year, fossil fuels (coal, oil and natural gas) accounted for roughly 80 percent of global energy consumption. Renewables, including nuclear, made up the rest. And while the growth in solar and wind has been enormous, the base remains small and intermittency and infrastructure challenges remain large.
And this phenomenon is creating a new American energy reality, allowing the nation to increasingly become more energy self-sufficient.
But realizing this vision requires that policymakers successfully tackle a number of complex issues. Here are what I believe are the most important:
Resource access and development policy: The United States is resource rich when it comes to energy forms, so the issue here is how much do we make available for development, at what price, over what period and under what type of regulatory regime?
Infrastructure build out: This is a key consideration for realizing the benefits of the current boom in unconventional oil and gas development. Crude oil needs to get to refiners and natural gas to utilities, industrial customers, processors and other end users. That requires pipeline interconnects and new midstream infrastructure and involves permits, environmental assessments and managing “above ground” impacts of local communities through which pipes and railways travel.
Fuel choices and the use of mandates and incentives: Power generation, industrial uses, feedstocks, transport and heating/cooling account for the bulk of domestic energy usage. With ample new supplies of fossil fuels on the horizon, policymakers will be confronted with the choice of how and whether to employ federal tools (e.g., subsidies, mandates, incentives, etc.) to stimulate fuel diversification choices and support nascent industries, an especially tricky proposition in an era of reduced federal budgets, but one which needs to be discussed in the context of near and longer term diversification and cleaner future fuels and transport options.
Export policy for oil and gas: With the projected influx of both lighter domestic crudes and Canadian oil sands, Gulf coast refiners will be pressed to match incoming crude quality with existing processing equipment and product demand needs.
The management, composition and use of the SPR: As we approach an era of oil self-sufficiency or limited import exposure, reexamining the utility, size, composition and use of the Strategic Petroleum Reserve (along with a series of other statutes and policies conceived in time of markedly different circumstances) is also warranted.
Reconciling the perpetuation of fossil fuels with climate needs: So far, we seem to be, except on the margins, in an “either-or” debate. But achieving a truly sustainable and secure energy future while preserving quality of life standards requires that we confront this issue head on in a clear-eyed way.
The ability to access these enormous unconventional resources has produced significant economic and security benefits, but also exposed some considerable risks and challenges. Ingenuity and technology, well timed investment and research can help mitigate some of these adverse impacts. However, responsible development, prudent policy and effective regulation can together provide the framework for allowing this development to move forward in a way that affords us the breathing space to develop and dispatch the next generation of cleaner burning/lower carbon fuels.
Frank A. Verrastro is senior vice president and director of the Energy and National Security Program at the Center for Strategic and International Studies in Washington, D.C.
This is an edited version of an article that first appeared at CNN’s Global Public Square and is reprinted with permission from CSIS. To read the original version, click here.