President Biden will attend the global climate treaty talks in Glasgow, Scotland starting this week. And other industrialized nations are concerned about whether the United States has created the policy framework to achieve net-zero carbon goals by 2050. Given that the power sector contributes the most CO2 in this country, is it moving fast enough to green itself?
This question goes to the heart of President Biden’s infrastructure and climate proposal. Experts say that the pace of change is too slow to achieve the goals of COP26, which are to limit temperature increases and to avoid the worst possible effects of climate change. But others worry that an ill-considered blueprint to achieve carbon neutrality will backfire. Witness Europe, which has moved forward at all costs and which is now short natural gas.
“The market is not configured on this transition,” says Arshad Mansoor, chief executive of the Electric Power Research Institute, during a virtual conference held by the United States Energy Association on Friday. “The reason we have this much wind and solar is because of incentives,” he continued, in response to this reporter’s question who served as a panelist. “It needs to change more urgently. We are seeing changes but not at the speed we need.”
President Biden’s objective is to generate 80% clean energy by 2030 and 100% by 2035. He says that a $23 trillion economy will be created as a result. Power companies contribute about 39% of all CO2 emissions in the United States. The president’s plan would reward utilities that make the switch to cleaner generation — everything from deploying renewables and battery storage to building nuclear plants and carbon capture and storage. Natural gas has done most of the heavy lifting, so far, by replacing coal that has nearly twice the emissions.
To be clear, getting to net-zero does not mean the abolition of fossil fuels; rather, it means offsetting their emissions. Electrification of the economy is critical: today, 20% of all energy used in homes and industry is electric, says Mansoor. But that number could potentially be as high as 60% in 2050. To that end, the electric grid must be modernized or expanded to manage the increased demand: four-times more renewables and an electric transport sector, which is now responsible for 30% of all CO2 releases.
Proper Planning
According to S&P Global Market Intelligence, 70% of the largest U.S. electric and gas utilities now have net-zero goals: Alliant, Ameren, American Electric Power , CenterPoint Energy, Duke Energy, Edison International, Exelon Corp, PPL Corp., Sempra Energy, Southern Company, and Xcel Energy are some of the leaders.
The shift to electrification means more sales and greater revenues for utilities. But it also means more investment. What is the role of government?
“Our electric demand has been relatively flat even as society and the economy has grown,” says Branco Terzic, managing director of BRG. “Now we add the electric vehicles. We are grappling with making the transition and then having to add new capacity. If we put the incentives in the wrong place, we will get the wrong result … The transition from fossil fuels will be painful and expensive.”
The United States has reduced its annual energy-related CO2 releases by 14% since 2005 — even as the U.S. economy has grown by 28%. Think about that: the traditional argument is that environmental rules constrain the economy. But if the investments in environmental improvements lead to new industries such as wind, solar, and electric vehicles, then that paradigm is changing.
But proper planning is a must. Europe, for example, has been single-minded about reducing its CO2 emissions and it has thus increased the amount of wind and solar it generates. But enter the perfect storm: COVID-induced supply chain disruptions, calmer winds in the North Sea, and shortages of coal and natural gas. And now the Europeans could be at the mercy of the Russians and Gazprom that just completed the Nord Stream II gas pipeline that empties into Germany’s Baltic coast. In 2020, the United States exported 5.28 trillion cubic feet of LNG to 32 countries. While it’s the highest on record, it’s just a small part of Europe’s total.
“Natural gas plays far too important of a role,” says Suriya Jayanti, international energy counsel for the U.S. Department of Commerce. “We can’t stop investing in it overnight. It has to be phased out. Coal is the obvious choice (to go.)”
She adds that energy companies make 30-year investments in plants based on economic reasoning and by extension, environmental externalities. That is, they understand that the transition to a low-carbon future is real. Therefore, they don’t let the current “political bickering” impede their business blueprints. But where does that leave natural gas in a world trying to achieve net-zero by 2050?
The Right Job
In 2020, the U.S. Energy Information Administration says that the electric power sector accounted for about 38% of total U.S. natural gas consumption. Moreover, the natural gas pipelines can also transport hydrogen — up to 20% by volume. The goal is not to leave any stranded infrastructure and to possibly retrofit those systems to meet the needs of a low-carbon world. Natural gas is also used to firm up wind and solar when the weather does not permit it. If it replaces all the coal plants in the world, that would displace 6 billion tons of CO2.
“Companies want to build pipeline and facilities,” says Sheila Hollis, Acting Executive Director for the United States Energy Association. “They want an opportunity in the international market. But reality strikes when you try to slog through the regulatory process. When you get down in the trenches of this battle, it is heavily lawyered and hard-fought. It is a tremendous slog to get to ‘yes.’ Then it goes through the appellate process. After 10 years, they may throw in the towel.”
Where does this leave U.S. policymakers, who are intent to vote along party lines? Is the United States moving fast enough to reach its net-zero targets? Should utilities be given even more incentives to make the transition even faster? Or, should the United States move more cautiously? Should the U.S. stifle domestic shale production? Or should it encourage development and export the fuel to help feed energy starvation and to displace coal usage both at home and abroad?
The natural gas industry says that the transition to net-zero will take at least 30 years. Even then, the aim is “less gas” as opposed to “no gas.” Moreover, the American Gas Association says that natural gas systems deliver three times more energy on the coldest days of the year than does the electric system on the hottest days. Freezing temperatures and no heat are unthinkable.
The International Energy Agency, however, is calling for no investment in new fossil fuel supply projects and for “the immediate and massive deployment” of clean technologies. Solar photovoltaic installations should reach 630,000 megawatts by 2030 while wind energy should hit 390,000 megawatts — four times the record set in 2020. Energy efficiency improvements, too, are vital — enough to reduce energy use by 4% a year through 2030. And carmakers should only build electric vehicles by 2035.
The drive toward clean energy and net-zero is steady and strong. But as it stands now, the United States cannot meet the timelines set by COP26. It can get a lot done with the current policies and technologies. But to do the job right, more motivation and more funding is critical — everything from energy efficiency to renewables to electric vehicles. Until then, natural gas will have a key role in this country and it will remain at the core of any well-planned energy transition.