http://www.renewableenergyworld.com/rea/news/article/2015/02/carpe-diem-low-oil-and-gas-prices-could-be-a-clean-energy-opportunity?cmpid=WNL-Friday-February6-2015
[links in on-line article]
Carpe Diem: Low Oil and Gas Prices Could Be a Clean-Energy Opportunity
Clint Wilder, Clean Edge
February 05, 2015
The recent dramatic plunge in oil and natural gas prices, to their
lowest level since the global recession in 2009, has some observers
worried about the effect on clean tech. Conventional wisdom has it that
renewables have a tougher time competing when fossil fuels are cheap,
making grid parity (in the case of natural gas-fired electricity) more
elusive for solar and wind power.
But could it be that the current environment — with gasoline at less
than $2 a gallon in much of the United States — is actually a good time
to double down on policies to move away from fossil fuels to more
renewables and efficiency?
That’s the conclusion of a special report on energy in the January 17
issue of The Economist headlined “Seize the Day.” “The fall in the price
of oil and gas,” writes the venerable magazine that dates back to 1843,
“provides a once-in-a-generation opportunity to fix bad energy
policies.” Chief among these policies are fossil fuel subsidies, at
least some of which were born out of decades-old governmental fear of
oil scarcity and soaring prices (I’ll let others debate how many came
from mere lobbying power). The Economist calls fossil fuel subsidies a
“rathole” which swallowed an estimated $550 billion from governments
across the globe last year. “Falling prices provide an opportunity to
rethink this nonsense,” the magazine continues. “Why should American
taxpayers pay for Exxon to find hydrocarbons?”
The Economist is not a big fan of subsidies for clean energy either, and
Ron Pernick and I recommended phasing out all energy subsidies in the
Seven-Point Action Plan presented in our 2012 book Clean Tech Nation.
Renewables and efficiency could compete on their own merits on a truly
level playing field, if that is ever possible in the energy sector. The
recent plummet of oil and natural gas prices may be grabbing headlines,
but it’s nothing compared to the (longer-term) drop in the cost of solar
PV panels — by a factor of five in the past six years, according to the
International Energy Agency.
Returning half a trillion dollars to global government coffers could
obviously fund myriad infrastructure projects including grid
modernization (plus projects like schools and hospitals, which nations
like India and Indonesia are doing after cutting fuel subsidies). But
low oil prices also create the opportunity to modestly raise taxes on
fossil fuels without major economic (and one hopes, political) pain.
This idea has been proposed in Congress — somewhat amazingly, by members
of both parties. Sen. Bob Corker (R-Tennessee) recently co-sponsored a
bill that would raise the gas tax by 12 cents over two years. Other
prominent Republican senators like South Dakota’s John Thune and
(really!) Oklahoma’s Jim Inhofe have said a gas tax increase is on the
table. America’s bridge and highway infrastructure is crumbling, and the
current 18.4 cents-per-gallon tax has not been raised in more than two
decades.
And the Congressman from my northern California district, second-term
Democrat Jared Huffman, introduced a bill last month — the Gas Tax
Replacement Act of 2015 — that would replace the current per-gallon levy
with a tax based on the carbon content of all transportation fuels
throughout their life cycles. Huffman thinks that low oil and gasoline
prices create an opportunity to open debate on the issue of a carbon
tax, and he says some Republicans are quietly supporting the idea.
In California, a de facto carbon tax on transportation fuel went into
effect at the beginning of this year – and drivers hardly even noticed.
The ‘tax’ resulted from bringing fuels under the state’s landmark carbon
cap-and-trade system. That change was vehemently opposed by the state’s
petroleum industry, which warned of 75 cent-per-gallon price jumps which
would devastate low-income drivers. Instead, the tax amounted to a few
cents, an increase dwarfed by plunging prices at the pump.
In the electricity sector, the slow-but-steady transformation of the
century-old centralized generation model is also upending the
traditional price-comparison calculus of renewables and on-site
generation vs. centralized natural gas plants. “Low gas prices can help
accelerate distributed generation by making options like CHP [combined
heat and power] and fuel cells more cost-effective,” says Richard
Kauffman, chairman of the New York State Energy Research and Development
Authority (NYSERDA). Kauffman is helping lead New York’s efforts to
shift utility incentives from new generation plants to demand-side
management and better grid capacity utilization, which currently
averages just 54 percent in the state.
Speaking in a January webinar produced by policy advocacy group Vote
Solar, Kauffman noted that utility Con Edison was able to scrap plans
for $1 billion in substation upgrades in the Brownsville section of
fast-growing Brooklyn, saving ratepayers several hundred million dollars
by ramping up distributed generation and demand response assets instead.
The plan was approved in December by state regulators, whose Reforming
the Energy Vision (REV) program is creating new incentives for utilities
to focus on the demand side.
“For years, utilities and regulators have operated under the assumption
that demand is fixed or growing, and we need production to meet it,”
Kauffman said. “We don’t really need to think about the world that way
any more.”
It’s a changing and increasingly complex world indeed, one in which
fossil fuel vs. clean energy price comparisons don’t tell the whole
story. And the calculus of energy and climate politics and policy may be
shifting too. The November election of the new GOP-controlled Congress
inspired a spate of stories about the high percentage of climate deniers
now in office, but then a New York Times/Stanford University/Resources
for the Future poll released last week found that 74 percent of
Americans — and a surprising 51 percent of Republicans — say the
government should be taking strong action on climate change. And 67
percent (including 48 percent of Republicans and 72 percent of
independents) say they’re less likely to vote for climate-denier candidates.
Few expected oil prices to fall 60 percent in six months. Not many
predicted a bold, defiant (if light on specific energy and climate
policies) State of the Union address from President Obama after his
party’s midterm election setback. And I’d guess even fewer expected The
Economist to recommend sweeping energy policy changes to propel
clean-energy growth while we’re awash in cheap oil. Here’s to the
unexpected. Let’s do this.
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