Not All Heroes Wear Capes—Ken Bone Tries To Bring Energy Policy Into Political Discourse

If you were distracted by Ken Bone’s swagger, mustache and red sweater, you might’ve missed his important question ― “What steps will your energy policy take to meet our energy needs while at the same time remaining environmentally friendly, and minimizing job loss for fossil power plant workers.”

If you live in the United States, you have access to electricity, heat, running water and transportation fuel without a second thought. As you flip your light switch or turn on your car engine, the geopolitical, environmental and economic impact is seemingly invisible. However, to the world’s global leaders, the availability of energy and its sources are a paramount concern. Without access to sources of energy (coal, oil, natural gas, wind, solar, nuclear, geothermal, biomass, hydropower) there is no modern economy. When the power is out, you are not only unable to charge your phone, but also cannot develop that new app, manufacture an American made car or even sit behind a desk to hit ‘Reply All’ to an office email. The following is a primer on the basics of energy policy, which will hopefully set the stage to futher the discussion started by Mr. Bone’s question.

Meeting U.S. Energy Needs ― Geopolitically Driven

Since Winston Churchill switched the fuel source for the Royal Navy from coal-powered to oil-driven, crude oil (a type of oil that is refined into various petroleum products including gasoline) has been the controlling commodity that influences worldwide energy price (although some markets have been able to, arguably, decouple the price of crude from natural gas). Crude oil products are used for transportation, and generally not for electricity generation in the United States (the primary fossil electricity and heat sources in the U.S. are coal and natural gas).

Crude oil is available in great quantity in the Middle East, and Saudi Arabia can produce a barrel of oil at a much lower average cost than other oil producing nations, for example, Russia, and the United States. Hence, the United States’ protracted involvement in the Middle East. The higher the availability of oil, the lower the price. A group of oil producing countries joined together to form the Organization of Petroleum Exporting Countries (“OPEC” members include Algeria, Angola, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela) to control crude oil availability and price.

Since the advent of horizontal drilling and hydraulic fracking (”fracking”—a method of oil, natural gas and mineral recovery that has become environmentally controversial) in the mid-2000s, the United States has experienced a “boom” in domestic energy resource availability. This development combined with advancements in solar and wind technologies may allow the U.S. to become energy independent within the decade—meaning that the U.S. may not need to import energy sources from other countries. In short, the U.S. with its domestic resources (fossil and renewable) may be able to meet energy consumption needs, but will likely still import based upon price.

Thus, over the last few years, it has been the strategy of Saudi Arabia to keep the oil pumping on high to increase supply, lower price and hurt the competitive ability of U.S. energy suppliers. Since many OPEC nations were also starting to feel the price squeeze, OPEC recently agreed to curb supply causing oil prices to stabilize. Russia also recently agreed to join in on the OPEC ‘supply freeze’ causing oil prices to surge further. The move by OPEC and Russia will be interesting to observe since Iran (an OPEC member) is now seeking to gain market share after international sanctions have been lifted (part of the reasoning and compromise of the Iran deal to quell the threat of nuclear capability).

Remaining Environmentally Friendly

Mr. Bone, a national treasure, seemed to be concerned about the impact of energy policy on the environment—a topic that can be broken down into pollutants that are harmful to human health and degrade water and land resources and climate change pollutants.

Water and Land Pollutants

Fracking has been a great source of debate in the environmental community since this oil and gas recovery method involves pumping a large quantity of water and other substances into the ground to cause the shale in the ground to fissure to release gas and pump out oil. These fracking fluids are sometimes registered as trade secrets; thus, regulators may not truly know the composition of these pumped liquids. There is also concern that the fissures below the surface may disrupt the belowground watershed and cause the fracking fluid to seep into groundwater—an extremely controversial topic with mountains of evidence on both sides.

Neither candidate has addressed these particular concerns related to fracking, but both generally support energy independence—a component of which may involve fracking. Each may argue that horizontal fracking is a component of the geopolitical strategy.

Climate Change Pollutants

Different energy sources have different carbon emissions profiles that contribute to climate change. Regarding electricity and heat generation, coal releases the most carbon, and natural gas provides a lower-carbon fossil alternative when burned. Renewable energy, like wind, solar, hydropower and nuclear (the most controversial of the renewable sources) emits zero carbon. There are also transportation fuels that are considered renewable, like corn-based ethanol and soybean-based biodiesel.

Energy policy surrounding climate change is extremely complex and has an electricity and heat generation component, and a transportation fuel component. In 2015, the world’s leaders signed a climate agreement in Paris (the Paris Agreement) where each country committed to a certain level of climate emission reduction (China, Saudi Arabia, and Russia were among the signatories).

With a reluctant Congress, President Obama’s chief method of complying with the U.S. commitment has been to allow the Environmental Protection Agency (EPA) to promulgate a rule that limits carbon emissions from power plants, known as the Clean Power Plan. The Clean Power Plan encourages states to: 1) retire coal plants, 2) switch to natural gas for fossil heat and electricity generation and 3) develop more renewable energy.

Prior to the Clean Power Plan, there was no federal direction on how to deal with climate change, and each state has been managing the climate issue differently. Renewable generation progressive states like California, New York, Colorado, and Massachusetts, have passed laws that make solar and wind power attractive. Other states have refused to pass such policies—generally coal states such as West Virginia. Thus, the states with favorable policies have laid the groundwork to comply with the Clean Power Plan rule. West Virginia and 28 other states sued the EPA, claiming that the EPA overstepped its boundaries. The case is pending in the U.S. Court of Appeals for the D.C. Circuit (the court directly below the Supreme Court). The litigation will likely be appealed to the Supreme Court and may meet a bench of eight Justices. If the Justices tie 4-4, the decision of the Appeals Court will stand, highlighting the importance of the Supreme Court nomination process.

Also moving through the U.S. Court of Appeals for the D.C. Circuit currently is litigation involving the Renewable Fuel Standard—a program passed by President George W. Bush. Every year the EPA has to set a volume for the amount of ethanol, biodiesel and other biofuels that should be mixed with petroleum transportation products to lower the emissions profile of domestic vehicles. This litigation, when appealed, may also meet a panel of only eight Supreme Court Justices—demonstrating the importance of the nomination process again.

Unsurprisingly, Mr. Trump would throw out the Clean Power Plan, and Secretary Clinton endorses President Obama’s policy. Regarding the Renewable Fuel Standard, Mr. Trump once advocated also throwing out this policy but backed away from the position when confronted by big-agriculture. Secretary Clinton believes that the Renewable Fuel Standard requires a pragmatic approach.

Economic

To address both the environmental and geopolitical issues, the economic question is two-fold: 1) how to prevent job loss, and 2) how to keep energy costs affordable for citizens and businesses.

Job Loss

The transition from coal has been the story of coal worker that are unfortunately caught up in the larger energy story. Secretary Clinton’s position has been to retrain these workers so they could have viable jobs in the modern energy economy. For example, according to the Solar Foundation, in 2014 solar industry supported over 174,000 jobs, the majority of which are located in states facilitated by supportive policies.

Mr. Trump would preserve coal as an electricity generation source, and thus the current jobs of coal workers. This position appears to be one of preservation, since, in the United States, only 3 megawatts (a very small amount) of coal generation was built in 2015, perhaps demonstrating that the domestic industry is moving away from the resource (for contrast 8,186 megawatts of wind came online during the same period).

Affordable Costs

The price of electricity and heating varies greatly by state. Mr. Trump may argue that with coal generation set to retire due to the Clean Power Plan and other climate pressures, that electricity and heat prices will rise since coal is generally the cheapest generation source. However, a study by Deutsche Bank concludes that solar generated electricity in most states will reach ‘price parity’ with fossil sources.

The energy source is not the only part of the energy story. Energy infrastructure for electricity and heating (utility infrastructure) is divided into: 1) generation, the generator of energy, i.e. the coal plant, natural gas plant, solar or wind facility; 2) transmission, the large wiring that accommodates heavy voltage and runs for long distances; and 3) distribution, the lower-voltage power lines that you find in your neighborhood that connects to your home. This energy delivery system is highly regulated to attempt to ensure reasonable pricing, and many state grids will need to be modernized to accommodate an influx renewable energy. Renewable energy is more difficult for the utility grid to manage― renewable energy is only generated by a solar panel when the sun shines and a wind turbine only turns when the wind blows, making the generation ‘intermittent.’ Thus, natural gas plants usually ramp up and down to accommodate renewable energy coming on and off the grid. Also, the grid system in a modern energy economy will need to be updated to accommodate large amounts of rooftop solar energy (in the past the utility just sent energy in one direction—into your home; however, with rooftop solar, the energy customer will now send energy into the grid system as well). These modernizations could provide for a great number of jobs.

Mr. Trump has apparently warmed to the idea of renewable generation in the second Presidential debate but has discussed the challenges to renewable energy in the past. Secretary Clinton would see a greater influx of renewable generation and the grid system modernized, stating that the United States has the ability to become a ‘clean-tech super-power.’

Conclusion

In summary, the energy issue is complex and touches all aspects of American life. Ken Bone clearly understands this and, being the hero America needs, brought the topic into our Presidential discourse.

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