“To expect the unexpected shows a thoroughly modern intellect.”
In the not-too-distant past, common knowledge supported the conclusion that renewable energy, energy efficiency and energy storage were, at best, viable at some remote future time. However, with the developments in technology and reduction of costs, that remote future has snuck up on us. Recent reports from researchers and investors demonstrate that the future appears to be now. The question is, how will we respond?
The U.S. Energy Information Administration (EIA) recently published its Annual Energy Outlook 2015. The EIA presents its analysis of trends in energy supply, demand and costs through 2040, based on its forecasts and estimates. In the two years since the 2013 edition, trends toward greater reliance on renewable energy technologies and the increasing importance of natural gas seem to have solidified.
Some of the trends the EIA identifies include the forecast that by 2028 the United States will export as much energy as it imports, led by crude oil and natural gas production. Part of the equation relates to improved fuel economy standards and other energy efficiency processes that push down domestic use, eventually leading the U.S. to be a net exporter of crude oil by 2020. The U.S. will also increase exports of natural gas, which along with growth of industries reliant on natural gas, will result in increases in the cost of natural gas.
The EIA anticipates that electricity costs will increase even as demand increases only very slowly. Use of renewables and energy efficiency will continue to grow rapidly, keeping costs down as fuel costs represent the largest portion of expense for generation. The total share of renewables will grow from 13 percent in 2013 to 18 percent by 2040. U.S. carbon emissions will stay below 2005 levels through 2040.
A March report, titled: “Financing the Future of Energy,” for the National Bank of Abu Dhabi provides support for some of EIA’s conclusions. Prepared by the University of Cambridge and PwC, that report focuses on providing guidance to banks about the future trends of global energy demand with a focus on the Gulf region. While discussing trends in the context of finance, the developments it anticipates track the EIA’s forecasts.
According to the financing report, the authors concluded that renewable technologies are more advanced than most people think and that in some parts of the world, “they are now competitive with hydrocarbon sources.” For example, Dubai’s utility built utility-scale photovoltaic solar that is competitive with oil at $10 a barrel and natural gas at $5 per 1 million British Thermal Units (MMBtu). In the medium term, energy storage technologies, like batteries, will add value to those renewables. Speaking of batteries, Tesla announced that it will begin manufacturing batteries for use in storage of energy from wind and solar. Finally, efficiency technologies and energy management will further ease fossil fuel use.
Yet, for some reason, many still attempt to stymie the development of these technologies, even as they take off in other regions and countries. I noted recently the headwinds Gov. Rick Snyder is facing from the Michigan Legislature for his energy initiatives. On April 29, Michigan State Rep. Aric Nesbitt held a hearing on legislation he introduced that would eliminate utility energy standards, among other things. These efforts seem to fly in the face of what researchers and investors are finding and planning for.
Those who follow the energy industry, like the EIA and financiers, anticipate the continued rise of renewable energy technologies, storage solutions and energy efficiency. At the same time, the U.S. will soon become a net exporter of energy, taking advantage of its existing natural resources and resources freed up by the use of renewables and efficiency. This is occurring much faster than people previously thought possible.
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