Monday, December 31, 2012

Counting Down Top 12 Energy Facts of 2012: 3, 2 & 1

On the last day of this year, the Top 3 Energy Facts of 2012, one of America's most important and best energy years in decades, are:

3. The low, low price of natural gas and the positive impacts that bargain-priced gas had on our economy and environment is the number 3 energy fact of the year.  The natural gas spot price is likely to average $2.73 for a thousand cubic feet in 2012, down from over $8 for the whole year of 2008 and a high of $13 in July, 2008. Simply astonishing.

The low natural gas price caused a substantial shift from coal-fired generation to natural gas power plants this year and slashed carbon emissions and toxic air pollution.  It boggles the mind why anyone who wants to reduce carbon emissions right now would oppose shale gas production.  Nothing has cut US emissions more than low natural gas prices made possible by the shale gas boom.

And the US has lead the world in cutting carbon emissions since 2006.  Indeed, in Europe and Asia, where there is still no shale gas production, natural gas prices are 3 to 5 times US levels, and coal consumption and carbon emissions are soaring.

The rest of the world so far has said no to shale gas and keeps saying yes to more and more coal. In fact, as the war against shale gas continues, the IEA now projects that coal will soon surge pass oil as the world's leading source of energy.

Back in America, by cutting consumer costs for heating and for electricity by about $1,000, and by generating tens of thousands of new jobs from New York to California, low natural gas prices helped to keep America out of recession in the spring of 2012, as our economy slowed down considerably as a result of high oil prices and fear created by the Euro crisis.

One thing that low natural gas prices did not do is hurt new wind or solar construction.  The wind and solar industries had record years for building new generation in 2012.

Another thing that the low natural gas prices did not do is cause substantial use of natural gas in transportation.  The glacial switch to gas for transportation continued in 2012, even using gas to run vehicles cost consistently $1.50 per gallon less than gasoline.

America remains addicted to more expensive, often foreign, and dirtier oil.  The market is broken and needs smart policies to accelerate greatly the shift to cleaner, cheaper, domestic fuels for transportation.  That is an important lesson of 2012.

2. The re-election of President Obama ranks as the number 2 energy fact of 2012.  President Obama and Governor Romney offered starkly different energy paths for the country, and energy was a prominent part of the Presidential campaign.  In a real way, embraced by President Obama and assailed by Romney, clean energy and green jobs were on the ballot.   Their energy differences, however, were broad and specific, including climate change, renewable energy, energy efficiency, government policies to use more natural gas, and the role of the government in energy markets.

Romney opposed the Natural Gas Act (the Pickens Plan), criticized federal rules for gas production like the EPA's 2012 gas drilling air rule, and opposed extending the wind production tax credit. Romney attacked solar, wind and "green jobs" in multiple ways, while supporting current tax breaks for oil and gas production, and promising to repeal the historic Obama auto fuel efficiency standards and repeal the EPA's Air Toxic rule that benefits gas, nuclear, renewable energy, and modern coal plants but requires old coal plants to clean up or close. In his GOP nomination acceptance speech, Romney also used the fact of rising sea levels to mock President Obama's concern about climate change, pandered to climate deniers, and made clear that climate change was not at all on his agenda.

By contrast, President Obama ran on an energy platform that differs from Governor Romney on everyone of the foregoing issues.  So what does the President's victory mean for energy in the next four years?

First, renewable energy will be supported by the federal government. That matters a great deal. Clean energy and green jobs were on the Presidential ballot in 2012 and they won.

Second, climate change will be a significant issue that will be addressed in a number of ways. Climate science was on the Presidential ballot, and it won.

Third, energy efficiency in autos, buildings, appliances, motors, generation will be a focus for policy-makers and markets. President Obama's policies are powerfully shaping energy consumption and the demand side of US energy markets.  Energy efficiency was on the Presidential ballot, and it won.

Fourth, the federal government will play a major role in regulating the environmental impacts of energy production.  Described recklessly by some as a "rogue" agency, the EPA and federal regulation of the environment was on the Presidential ballot, and it won.

Fifth, the domestic oil and gas boom, that began in 2008 and that gained strength in the President's first term, will grow bigger in the President's second term.  Oil imports will continue to decline as a result of more domestic production, rising fuel efficiency, and growing adoption of oil substitutes like biofuels, electricity, and natural gas.

Sixth, rising natural gas usage may be boosted by full adoption of the Natural Gas Act and the EPA Air Toxic rule.

1. Our top energy fact of 2012 is a an American triumph!

This year saw another stunning drop in US energy related carbon pollution, with emissions on track to fall nearly 4% from 2011 levels, down about 200 million tons this year, and nearly 12% lower than 2005 levels. The United States committed at the Copenhagen Conference to cut carbon emissions by 17% from 2005 levels and is well ahead of schedule. Indeed, no country in the world comes close to matching the US in reducing carbon emissions during the last 6 years.

America's carbon triumph stands on three legs: renewable energy, energy efficiency, and natural gas.  All three have boomed since 2008, and all three have displaced significant amounts of coal and oil that are much more carbon intensive.

Though more renewable energy has played a substantial role in cutting US emissions from 2005 levels, renewable energy power production did not reduce carbon emissions in 2012, since total renewable energy production will be lower in 2012 than in 2011, as a result of a big drop in hydro production this year.  Even as biofuels, wind and solar boom and bulk up, hydro remains the dominant renewable energy source in the US.

With total renewable production down this year, the nearly 4% drop in carbon emissions in 2012 is a result primarily of natural gas reducing the use of coal to make electricity and rising energy efficiency.  Low-priced natural gas in 2012 cut the electricity generation market share of coal from 43% in 2011 to about 37% this year.

It must be said that, had every state with shale gas resources followed New York's moratorium example, coal would not have seen much decline from its 2011 level, or even its 48% market share in 2008, and US carbon emissions would have been much higher in 2012. The shale gas revolution and bargain-priced gas, that surging shale gas production created, have been essential to slashing US carbon emissions.

Combining with natural gas to lower emissions was also energy efficiency in 2012.  For example, every new vehicle bought in 2012 was about 20% more fuel efficient than the one it replaced, and 2012 saw auto sales climb back over the 14 million mark for the first time since the near depression of 2008-2009.

Though some suggest otherwise, America's sharply reduced carbon emissions are not the product of a smaller economy.  The US GDP has been growing every quarter since July 1, 2009, and the US economy in 2012 will be bigger than it was in 2007 or 2005.  The economy is bigger but has cut its carbon emissions by about 12%.

The US economy more and more is running on cleaner energy--renewable energy and natural gas--and rising energy efficiency performance.  Indeed, in 2012, carbon emissions fell nearly 4%, and the unemployment rate fell significantly as well, reaching 7.7% in November, the lowest level in 4 years.

That is a true American triumph and the Top Energy Fact of 2012!


  1. Concerned ScientistDecember 31, 2012 at 9:27 AM

    A good top 3! All are good news from my point of view. Happy New Year John and good luck with your campaign!

  2. I love low natural gas prices and the positive impact they are having on the North American economy. It is terrific that they are lowering the cost of living and, in effect, giving all consumers a rebate that enables them to spend more money in just about all other areas of the economy.

    It's obvious, however, that natural gas suppliers are NOT as happy with the low market prices for the commodity that they produce. The number of drilling rigs focusing on gas production has dropped by more than 50% from the peak in 2009 or 2010. ExxonMobil keeps telling its analysts that the XTO purchase was a good long term investment; they promise that will be proven when (not if) gas prices recover as a result of demand increasing and supply failing to keep up.

    There might be as much as 90 years worth of CURRENT consumption left in the ground in the United States, but that does not mean that suppliers are willing to extract those resources so fast that they over supply the market. They have no incentive to maintain a price that is 25% of the price of competitive distillate fuels on a "per unit energy" basis. It is unlikely that they will keep drilling and pumping fast enough to keep prices less than 1/3 of the prevailing price in Europe and less than 1/5 of the price in Japan.

    It is especially unlikely that anyone will continue providing the required financing if the sales prices are not high enough to pay back the borrowed money used to drill recent wells.

    It is good for the climate if natural gas replaces old coal, but it is not good if temporarily cheap natural gas is used as an excuse not to invest in new nuclear plants or if cheap natural gas results in a company like Dominion deciding to close a well operated and well maintained nuclear plant like Kewaunee.

    Rod Adams
    Publisher, Atomic Insights

  3. With higher gas prices even more windfarms would have been build and will be built. I think low gas prices are bad for society in the end.

    1. Higher gas prices would help wind (wind had a record year for new construction in 2012, despite the low gas price) but also coal. In 2005, there were 150 new coal plants in serious development. Most of those plants were cancelled because the gas price collapsed due to shale gas in 2008 and made then uneconomic. Then the low gas price has reduced operations from already built gas plants. Public policy in the forms of RPS and PTC is needed for wind and renewable energy. President Obama won on that platform too.

    2. The above should read: "Then the low gas price has reduced operations from already built coal plants." Low gas price means that gas plants run more and coal plants less.

      A higher gas price in 2013 will mean that coal regains from gas plants some lost market share.

  4. I've got a fact of the day too. coal to gas switching only responsible for 11% in emissions reduction.

    1. We discussed that study in this blog earlier in the year and offered different calculations from myself and others. It also does not look at 2012 at all. Essentially if total electricity consumption remains stable, a 1% decline in coal's electric generation market share reduces carbon emissions by about 40-45 million tons in one year. If zero carbon renewables (not biomass) replace the coal, then the reduction is 40 to 45 million tons. If gas replaces the coal, then the reduction is about 20 million tons. Coal's market share has declined from 52% in 2000 or 48% in 2008 to 37% in 2012. What took its place? Over that time, substantially gas. Gas's generation market share rose from 16% in 2000 to about 30% in 2012. Coal has declined 15 points and gas has gone up 14 points. As a result of declines in hydro in 2012, renewable energy generation actually fell in 2012, despite major growth in wind and solar.

      US energy related carbon emissions are down about 700 million tons since the peak in 2007 or 2005. Any reasonable analysis would say that gas displacing coal and some oil is responsible for at least 50% of the total decline. Not all of it. But a lot of it.

  5. "No country in the world comes close to matching the US in reducing carbon emissions during the last 6 year".
    But seen over a somewhat longer periode germany did much better:
    -24% of GHG compared to 1991. US: +9% ( comp. to '90)and +3% (comp. to '95.)See: .

    1. US energy related carbon emissions will be at or below 1995 levels by the end of 2012. Emissions are down another 200 million tons at least this year.

  6. No doubt Germany has done the best in the world over the longer term. And its economy has grown significantly too. But in the last year it has had rising coal use, as it struggles to compensate for closing 7 or 8 nuclear units, and because coal is much cheaper than gas in Europe.