The painful pinch of skyrocketing gas prices is hitting just about everyone’s pocketbook. Right now, the average national cost of gasoline across the nation has surged to over $5 per gallon, reaching all-time records and soaring 50% higher than a year ago.
And if you think gas is expensive in the United States, take a look at Canada. Even with its huge excess oil production, average prices are still US $8.50 per gallon and analysts are predicting the price has not peaked. The truth is that oil and gas are global commodities and they are priced accordingly, whereas electricity must be generated regionally.
A chief cause is the economic sanctions against Russian-produced oil, following Vladimir Putin’s illegal invasion of Ukraine and subsequent war. Russia is the world’s largest oil and natural gas exporter and the war they unleashed has thrown energy markets into turmoil.
The timing has many fuming as the Biden administration and countries across the world are driving towards a full-scale transition to green energy, sustainability and decarbonization. Indeed, there are strident efforts to ramp up fossil fuel production in response to price pressures.
But experts agree this approach is ultimately short-sighted. We know that quick fixes inevitably lead to crash and burn results. To that end, beyond the litany of scientifically proven consequences of destroying our environment, fossil-fuel production takes many years to develop and is extremely expensive when compared to renewable generation. You simply don’t know what the input cost is going to be and that uncertainty has a cost. Renewable-generation assets are clean and require one-time capital expenditures with minimal ongoing operating costs. We are solving the problems with intermittency.
“What people aren’t talking about is that the increase in the cost of renewables is much, much less than the increase in the price of fossil fuels — all of them, whether it be coal, gas, or diesel,” said André Gluski, chief executive of AES Corp., during the renewable energy company’s recent earnings call. “So actually, renewables are more competitive today than ever. And in almost all cases I can say that the energy from renewables is the cheapest energy.”
This sentiment is shared by other leaders, such as Hardeep Singh Puri, Minister of Petroleum of French utility giant Engie, who recently spoke at the World Economic Forum in Davos. “Renewable energy…will reinforce European energy independence, because it is energy that is produced locally,” Puri said. “We need to deal with all these crises simultaneously, without allowing the solution of one crisis to exacerbate the other crisis… (We) have (to) accelerate the green energy transition.”
María Mendiluce, CEO of the We Mean Business Coalition, added to this view by telling CNBC that gas is more expensive than wind and solar energy. “One could think that, because of the energy crisis, it makes sense to invest in fossil fuels, but it’s rather the opposite,” she said, adding poignantly that clean energy yields energy security, more jobs, a healthy environment and is cost competitive.
On a personal note, the solar panels I installed on my house three years ago save me ever-increasing amounts of money every year. Best of all, they cost me nothing to install. In the strategies below, I explore how visionary leadership and smart approaches will shift the green transition into high gear and relegate unconscionable gas prices to the dustbin of history.
There are more than 50 countries today, including our own, that offer a wide array of financial incentives to scale up renewable energy and efficiency technologies. Look no further than Elon Musk and Tesla. Sales of regulatory credits have generated more than $5 billion for Musk’s Tesla since 2008. And Tesla buyers have received total federal tax credits worth an estimated $3.4 billion. Leaders today must look at existing incentives and partner with the private sector in becoming even more creative in expanding the scale and scope of these offerings. Rebates, grants, performance incentives, tax credits, loan guarantees, green banks and the like are all powerful and proven. Right now, they can become even more robust if countries look to each other for success stories and implement similar strategies.
In the EU for example, International Energy Agency (IEA) data shows a short-term grant program covering 20% of installation costs for solar photovoltaic systems would increase the annual output from rooftop solar systems by up to 15 terra-watt hours (TWh). To put that in perspective, an additional 35 TWh from new renewable projects over the next year would bring down the use of natural gas by six billion cubic meters (bcm).
Arguably, the most versatile energy source is that which flows from water. Anna Shpitsberg, deputy assistant secretary for energy transformation at the U.S. Department of State, recently described hydrogen energy to CNBC as a “game-changing technology.”
Hydrogen has a diverse range of applications and can be deployed in a multitude of contexts. Goldman Sachs commodity business unit leader Michele DellaVigna recently told CNBC that, “We need something that takes today’s role of natural gas, especially to manage seasonality and intermittency, and that is hydrogen.” From heavy transport, to heating, to industrial power supplies, to spaceflight, hydrogen’s potential is vast and powerful. DellaVigna added that a recent Goldman Sachs report projected hydrogen could total 15% of the global energy market making it a $1 trillion+ market annually by 2050.
Bank of America is far more bullish. The firm believes collectively, when you count associated products such as hydrogen fuel cell vehicles, the hydrogen energy industry will provide a total market potential reaching $11 trillion by 2050. And massive firms normally associated with big oil and/or fossil fuel producers such as such as BP, Siemens Energy and Shell are all taking a giant leap into the giant pond of green hydrogen production today.
While this may sound way off the future, the hydrogen revolution is well under way 130 miles south of Salt Lake City right now. As this is written, engineers are on-site designing a huge cavity in the ground called a salt dome - a column of salt surrounded by sedimentary layers. This hole in the ground will be filled with hydrogen, making it potentially one of the largest renewable energy reservoirs in the world.
The spike in oil prices is lining the pockets of oil and gas producers with extraordinary profits. In 2022, global net income from oil is anticipated to be a staggering $2 trillion higher than in 2021 and two-and-a-half times the average of the past five years. As mentioned above, if companies like BP, Siemens and Shell are chomping at the bit to invest in hydrogen, why not take their mutually beneficial corporate and social responsibilities further and put those mountains of money into sustainable sources?
To that end, the IEA points out that if the, “global oil and gas industry were to invest this additional income in low emissions fuels, such as hydrogen and biofuels, it would fund all of the investment needed in these fuels for the remainder of this decade!” Most major oil and gas companies have been investing in alternative energies for decades. Now just think of the relatively quick and impactful potential of taking this massive financial windfall and diversifying further into clean energy. As the IEA notes, this is a “once-in-a-generation opportunity…to adapt to the new global energy economy that is emerging.”
A major source for alleviating the concurrent crises of war, carbon emissions and climate security is widescale investment in nuclear energy. This is particularly the case for small modular nuclear reactors.
“Nuclear power remains the only carbon-free energy source that can be operated on sovereign soil, 24 hours a day,” notes Mark Nevitt, an Associate Professor at Syracuse University and former U.S. Navy commander. “Further, a recent study at the Massachusetts Institute of Technology looked at 1,000 scenarios for the United States to achieve net-zero emissions domestically (and) nuclear offers the most affordable path to achieve this goal.”
What’s more, nuclear energy has also been highlighted as an excellent option by the Paris Climate Agreement for transformational energy action. Tapping into this clean power source today is vital.
I’m kidding of course; most people are not going to accept lower standards of living to save the planet. However, everyone prefers to get the same product or service for less money, and this is what energy efficiency does.
In basic terms, energy efficiency means using less energy to get the same job done, while simultaneously, cutting energy bills and reducing pollution. Many businesses and people in their homes use more energy than they actually need. Energy efficiency is one of the easiest ways to eliminate energy waste and lower energy costs.
As an example, ENERGY STAR rated LED light bulb use up to 90% less energy than an incandescent light bulb, while providing the same illumination. Whether it’s efficient appliances, well-designed data centers,, employees working from home, or process improvements on the factory floor, the output per unit of energy is smaller today than it was 10 years ago and this improves every year.
Spikes in energy prices drive energy efficiency improvements, particularly when people believe the costs will remain high. Smart policies can incentivize a steady investment in energy efficiency, while cushioning the effects of price spikes on consumers and businesses.
Germany imports 55 percent of its natural gas from Russia. Hungary, Finland and Bulgaria rely on Russia for more than 75 percent of their oil. Europe today is in a rock and a hard place. They have no choice but to go green - to invest in renewables, storage, and efficiency or be held hostage by a dangerous dictator. Radically shifting their economies to technological advancements in onshore and offshore wind turbines, solar panels, electric vehicles, battery storage and other clean methods is essentially an imperative.
Here in the United States, we have spent the last 150 years installing a multi-trillion-dollar fossil-fuel energy delivery system (i.e., pipelines, generation plants, transmission, distribution systems, ports, terminals, etc.). This investment in infrastructure is a blessing and a curse. It limits our ability to rapidly change to 100% renewable energy, but it provides energy stability and an ability to support industries in a way that few countries can. We need to take advantage of what we have without standing in the way of newer, cleaner forms. And we must export energy and technologies to a world desperate to maintain their independence.
What this current crisis has done is awaken leaders across the United States and the West, as well as the public generally, to the fragile nature of our energy supply. Our reliance on oil and gas has provided a false sense of security and energy independence. We need to look to the future to diversify energy supplies and aggressively invest in efficiency, renewables, hydrogen, nuclear, and consider innovative ways to fund new sources.
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