US energy Independence Day dawns

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Barry Worthington

Barry Worthington

The most significant US energy policy update in a decade, the Energy Policy Modernization Act 2016, will be introduced into the new Congress in January 2017. With provisions for accelerated permitting for oil and gas drilling, construction of export LNG terminals, as well as energy efficiency standards and grid-integration of renewables, the outlook for US energy security is bright, according to Barry Worthington, Executive Director of the US Energy Association (USEA), the US Member Committee of the World Energy Council. He predicts that business, not policy, will be the major driver of decarbonisation.

One of the first pieces of business for the new US administration will be to sign into law a wide-ranging piece of energy legislation, the Energy Policy Modernization Act 2016. The nearly 800-page bill tackles everything from the security of the electrical grid to exports of natural gas and is considered the first significant broad-based change in the nation’s energy laws in nearly a decade.

Executive Director of the US Energy Association (USEA), Barry Worthington says: “This is set to provide a big boost for badly needed energy infrastructure. There is also a strong energy efficiency component, which is long overdue. The Act has bipartisan support so it is likely to move fairly quickly – and become law in April or May 2017.”

Most prominent are the provisions on how best to speed up the export of domestically produced natural gas. “We’re anticipating a boost in construction of LNG terminals, due to the proposed streamlining of the permitting process,” says Worthington.

The bill will promote renewable energy by requiring operators of electricity lines, transformers, and other parts of the electrical grid to upgrade the system, with a focus on the creation of large-scale storage system

“Currently, under existing law and regulation, if the export destination is under a Free Trade Agreement, such as is the case for Korea, then permits for construction are almost automatic. If the export destination is not under a free trade agreement, then the process is considerably more complicated, including stipulations that the Department of Energy must evidence that the export is in the national interest. So, with the new Act, we’re expecting significant increases in LNG exports, especially to Japan and China. Strategically, this could lower European import dependency on Russian gas – especially for Spain, Portugal and Italy,” explains Worthington.

In November 2016, the US became for the first time a net exporter of natural gas. Platts recently reported that its proprietary data showed U.S. natural gas exports exceeding imports in early November, with the country’s gas balance netting an outflow of 1 billion cubic feet per day.

Boost for efficiency and renewables

Sustainable energy is not entirely neglected in the new legislation: substantial provisions are made for renewable energy and energy efficiency.

The bill will promote renewable energy by requiring operators of electricity lines, transformers, and other parts of the electrical grid to upgrade the system, with a focus on the creation of large-scale storage systems for electricity to accommodate the expanding production of wind and solar power.

Worthington also notes, that under the new administration: “I would expect other support for renewable energy projects, for example in expediting the permitting process and allowing windfarm development on federal property.”

In addition, the bill’s provisions to improve energy efficiency by reauthorising state energy programs and promoting investment in improved technologies such as smart buildings and smart grids have been welcomed by the American Council for an Energy Efficient Economy (ACEEE). According to the ACEEE, this could enable a market opportunity for the US to become a world leader in “smart” technologies including smart buildings, manufacturing, transportation, cities, and the grid.

“With the new Act, we’re expecting significant increases in LNG exports, especially to Japan and China. Strategically, this could lower European import dependency on Russian gas”

Worthington comments: “In terms of energy efficiency gains, we’re more than halfway now towards our targets. Much has been done to introduce standards in buildings and in transport.”

Significant gains in energy efficiency were made under the outgoing administration. In 2015, President Obama signed into law the Energy Efficiency Improvement Act, which includes the Tenant Star program with the potential to cut utility bills for landlords and tenants by an estimated 2 billion dollars by 2030 and reduce carbon emissions by nearly 12 million metric tons.

Introduced in 2015, efficiency rules for appliances and federal buildings, along with new standards from the Department of Energy (for new rooftop air conditioners, heat pumps, and furnaces) representing the largest gains of any energy-saving rule since the standards program began in 1987, are estimated to save the same amount of energy as all the coal burned in the U.S. to generate electricity in a year.

Business to drive decarbonisation

Although president-elect Donald Trump has made clear his support for US domestic energy projects in many respects – such as the intention to remove barriers to fossil fuel production – Worthington believes that the US will continue to decarbonise its energy system. However, he anticipates that policy will not be the primary driver of low carbon energy.

“I believe that America will continue down the path of decarbonisation. Fuel-switching from coal-fired to natural gas will continue, with or without the Environmental Protection Agency, the Clean Power Plan or the Paris agreement,” he says. “Our corporations are majorly motivated to reduce greenhouse gas emissions, and this is due to pressure from shareholders.”

This is evidenced by an open letter sent to Trump on November 16 and signed by more than 300 big businesses including IKEA, Starbucks Coffee, Gap Inc., General Mills, Hewlett-Packard Enterprise, Hilton, Kellogg Co., L’Oreal, Levi Strauss & Co., Virgin and Patagonia. The letter urges Trump to keep the Paris Climate Agreement, and requests support in building a clean and green economy.

Worthington reckons a generational shift in mindset will make an impact: “The energy industry’s workforce is also changing – we’re undergoing a significant replacement wave in our industry, as the 65 year olds are leaving and being replaced with 25 year olds. The younger generation has a very different outlook.”

“Our corporations are majorly motivated to reduce greenhouse gas emissions, and this is due to pressure from shareholders”

Worthington says he is “impressed with the individuals that are advising the president-elect” and is looking forward to working with the new administration. He is upbeat and enthusiastic about the USA’s energy outlook: “In energy terms, we’re in a completely different world now than we were just a few years ago. In 1985, we thought we had a 30-year supply of natural gas and we were making plans for gas importation up to 2008. But the development of fracking technology and the shale gas revolution has changed all that – now we reckon we have at least a 100-year supply of natural gas, even likely that it’s a 200-year supply.”

“So we have the confidence of a huge supply base combined with low prices. And don’t forget, it’s not just shale gas, it’s shale oil too. With new policies in place to remove barriers to exploration, we see the pathway towards the US becoming a major energy exporter. This could happen within a few years, if not by 2020, certainly by 2025.”

Editor’s Note

The USEA is the U.S. Member Committee of the World Energy Council. It is an association of public and private energy-related organizations, corporations, and government agencies, and represents the broad interests of the U.S. energy sector. This article was first published in the December 2016 edition of World Energy Focus, a free monthly digital magazine produced by Energy Post.

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