Energy Policy – Midwest Moderate

I subscribe to a variety of publications, some quite pricey including an investment newsletter that monitors the global energy sector, called Oil & Energy Investor by former CIA analyst Dr. Kent Moors.

While I will not be passing on stock tips, I find his insights into the global energy picture to be illuminating. And a good way to monitor the practical implications of policy decisions.

He is an advocate for a balance of energy sources, and more recently has stressed the need for what he calls, “interchangeable energy resources.” We will explore that topic more in the future.

But today, I wish to focus on his current observations about solar.

He points out that nobody associated with the incoming administration has said anything negative about solar.

He points out that solar has made significant gains in the past number of years and has reached what he calls, “Grid Parity.” Meaning that the solar is now on an even footing with most other energy sources when it comes to production and distribution costs. He notes that most of that progress has occurred in the private sector without governmental subsidies.

That said, where subsidies do exist has been on the local level, by state and federal tax credits designed to stimulate installation of solar on homes and businesses. The end users.

These subsidies have been largely motivated by the desire to lessen the adverse effects of climate change. And that is clearly an item taht appears to be on the Trump admins chopping block.

When compounded by congressional budget cutters eager to eliminate subsidies to ordinary people, a new set of challenges occur.

While it seems as though the new admin is more than willing to cut taxes and loosen regulations on the fossil fuel industry, they are less willing to share the wealth with individual homeowners and businesses seeking to do the right thing by the climate.

The strange thing about all this, as Dr Moors points out, is that the largest oil producers, Saudi Arabia and the United Arab Emirates have developed some of the world’s largest solar generating complexes. They are diversifying their energy resources, recognizing their long term sustainability.

While renewable may have an immediate challenge in the next few years, their ultimate role seems to be inevitable.

As such we can and should be doing everything we can to assert the role of solar as part of an interconnected multi faceted energy strategy.

A strategy that also offers the promise of genuine NEW job creation in both the manufacturing and construction sectors throughout the entire United States and not just energy rich communities.

And such a strategy would certainly be a viable asset to a long term policy of true energy self sufficiency for the nation.

president_ttrrump

Cartoon via: http://theweek.com/?utm_campaign=newsletter&utm_source=cartoon&utm_medium=11_17_16-tw_banner

It is probably premature to discuss any Trump policies at this point in the game. Much of what was said one day was during the campaign was changed the next to the point it is any body’s guess as what final policies will be pursued.

Instead we need to pay attention to the tea leaves, and in particular watch who gets appointed to what and then, see what they have to say.

What we do know is that he played up the idea of being opposed to the so called “War on Coal.”

The cynic in me senses this was merely a phony campaign gambit to win votes.

Barges loaded with coal outside Pittsburgh, Pennsylvania -Bloomberg

It is clear the majority of lost coal jobs are due to automation according to Bloomberg news. in an article: The EPA Doesn’t Kill Coal Jobs. Better Mining Does

The near term great promise of American energy lies not with coal but with fracking and shale innovations. And it is here that the most likely progress toward energy independence exists. In the long run, I still believe in solar, wind and other alternatives.

The bad news for coal lies in the historically low costs of oil and natural gas.

The abundance of such new energy has destroyed the cartel price of oil, and in the process resulted in prices that undercut coal’s chief advantage, price. Any increase in domestic production only serves to further undercut coal’s competitiveness.

If Trump was able to increase oil and gas exploration, which is in my mind doubtful. It would only serve to further increase the glut that is now causing many existing producers into bankruptcy.

This fact is why I think the talk of new oil and gas production is pure fiction. Should increased oil and gas supplies be developed in the US, it could only decrease coal’s role.

There is one option Trump could pursue. That would be to restrict imports of oil from outside the US via tariffs or other restraints.

That would exclude the world supply of energy from US markets, raising prices for energy here at home, and incidentally at the corner gas station.

It would make it possible for oil companies now going bankrupt to get more per barrel for their production, and possibly revive and justify expansion of new exploration and exploitation of reserves on public land previously unavailable under Obama.

But there are many drawbacks to that scenario. Too many to pursue at the moment. But let’s touch on one.

There actually has been a growth of manufacturing during Obama’s admin. Some of that was due to unanticipated costs manufactures encountered managing their offshore efforts, international currency issues and notably the availability of low cost energy in the US>

The lower energy costs during that decade, especially in energy-dependent industries such as iron and steel and chemicals, made reshoring a money-saving option for some manufacturers. Large-scale production of shale gas in North America helped cut natural gas prices by 25% to 35% over those 10 years. But overall energy costs in many countries outside of North America are anywhere from 50% to 200% higher than they were in 2004. For the U.S., less expensive natural gas translates into more affordable electricity and lower prices on the raw materials used to make ammonia, hydrogen, methanol, and other materials used in the petrochemical sector. This is a significant cost factor because petrochemicals serve as the base for thousands of industrial and consumer products, including plastics, rubber, paints, fertilizers, detergents, textiles, dyes, and solvents.

See: 4 Reasons Companies are Bringing Manufacturing Back to the U.S.

Will Trump’s pronouncements in favor of growing our domestic energy resource end up costing us the manufacturing growth he would like?

Time will tell, but I suspect he may become dismayed at the complexity of energy economics.

Right now the oil lobby and coal lobby have his ear. Perhaps he will prove immune to their persuasion and run a course independent of lobbyists influence. Perhaps not.

Should he pursue a balkanized energy policy that builds a tariff wall around the US, the result may well be a boost in domestic oil prices. The cost may be some of the recent manufacturing growth spurred by lower domestic energy costs. But even more potent may be the anger that will ensue at the gas pumps across America.

That gas price increase would become in essence a tax on ordinary Americans to pay for the tariff wall.

trump_bring_back_cfactory_joss

Category: Energy Policy

Solar’s Place in the US Energy Balance is Uncertain

Will the End of the War on Coal be Paid for At the Gas Pump?