Clean and market-competitive energy

Debate has raged for years about the best way to reduce U.S. carbon emissions.  As illustrated in the U.N. climate talks in Paris, few realize that U.S. carbon emission levels are falling faster than those in other industrialized nation, and we are doing this as our economy grows.

The reason is simple: America has largely bought into shale gas “fracking”, which is both clean and inexpensive.  On the other hand, coal is cheap, but not very clean – while wind and solar are clean, but expensive.

{mosads}Thus, U.S. utilities are moving away from coal and towards natural gas.  Renewables are growing somewhat, but require governmental mandates and taxpayer subsidies.  Another problem: wind and solar are only intermittent energy sources.

The shift to greater use of natural gas for electricity generation has been a climate triumph. When generating electricity in place of coal, natural gas produces just half the carbon emissions.  In 2005, coal produced more than 50 percent of our electricity. Today, it’s 35 percent and falling. The result: emissions from the nation’s power plants are at a 27-year low.

We are starting to see a model emerge that allows us to reduce emissions without wrecking our economy. The key to this approach is producing clean energy alternatives that are market-competitive. The shale gas revolution exemplifies this approach.

If we can combine a reliance on market-competitive clean energy with a surge in funding for critically important energy R&D, we just might be onto something.  A promising step was the announcement at the Paris climate talks by Bill Gates, and other billionaires and governments, of a doubling in investment in clean energy research.

However, most current alternative energy technologies simply cannot compete in the marketplace. We lack the tools needed to address rising emissions on a global scale. Developing nations, India is an example, acknowledge the climate challenge, but refuse to deny hundreds of millions of people with little access to electricity, the cheap and reliable power provided by coal. In fact, India is looking to double its own coal production within a decade.

The bottom line: we have to make clean energy less expensive, rather than hoping developing nations will voluntarily choose more expensive, but lower-emitting energy options. Whether you live in Chicago, Beijing or Mumbai, consumers want to pay less for energy, not more.

Of course, many renewable energy advocates would like to see us abandon market principles altogether. They are pushing renewable energy mandates, subsides, and incentives. While President Obama has fallen for this line of thinking, it’s the wrong path forward. When governments pick energy winners and losers we not only drive up energy prices, but slow the pace of innovation.

Another case history is Germany’s mandated shift towards renewables , which exemplifies the perils of government intervention in the energy marketplace.  German electricity rates are now nearly the highest in Europe, and households have been hit with an annual $250 surcharge to subsidize renewables.  So, German industry is fleeing an increasingly bleak business environment. While renewables now generate about 30 percent of German power, electricity prices for a three person household have risen 68 percent since 1998.

It’s possible that electricity produced from wind and solar power will eventually be market- competitive.   In some sun-drenched and wind-swept regions of the country it is getting closer, but with subsidies.  As we wait for these technologies to mature, we should lean on the market-ready tools we already have, namely huge amounts of clean and inexpensive natural gas.

America can be the climate leader the world needs if we focus on energy innovation and reducing emissions through market principles, not heavy-handed governmental mandates and subsidies.

Porter is an energy and environmental consultant, based in Savannah, GA.   Earlier, he was an EPA assistant administrator in Washington DC.