Go to Top

Unstacking The Power Deck

Without having ever implemented the Paris accord, cap-and-trade or a draconian national mandate for the use of renewables, the United States is steadily reducing its greenhouse gas emissions.

Its not-so-secret weapon: fracking.

Yes, the same technology that has made the U.S. one of the globe’s top oil and gas producers, and an increasingly significant energy exporter, is driving down our carbon dioxide emissions. Most of this is happening via the substitution of natural gas for coal, which emits much more carbon per unit of energy produced. For instance, The Wall Street Journal recently reported that Minnesota Power, which formerly got 98 percent of its electricity from coal, has shut down six of its eight coal-fired units as it transitions to a combination of natural gas power plants and renewable sources. Duke Energy Corp, based in North Carolina, drew 32 percent of its power from a combination of gas and renewables in 2016, and expects that percentage to grow to 44 percent by 2026. Nationwide, gas and renewables together already meet 40 percent of power needs.

At the same time, American carbon dioxide emissions last year hit their lowest level since 1991.

Those changes and their results have largely been made possible by natural gas’ ability to take on the “base-load” power that coal previously provided. As hydraulic fracturing opened up major reserves of natural gas in the United States, prices dropped accordingly. Energy providers have also grown more efficient at using natural gas, furthering its appeal.

Full disclosure: Palisades Hudson manages oil and gas partnerships for several of our clients. While our work in the energy sector certainly informs our point of view, our long familiarity with the technology involved also gives us an increased appreciation of the risks and benefits associated with that technology. As I have written before, certain critics of fracking are really critics of using any sort of fossil fuels at all, regardless of the real-world practicalities involved in abandoning them completely.

Besides displacing coal, cheap natural gas has all but frozen the once-anticipated revival of nuclear power. More than a half-century into the atomic age, we still do not have a long-term solution for the disposal of radioactive waste from the operation and the eventual retirement of nuclear power stations in this country. Between those unquantified and unaccounted costs and the exorbitant price of constructing new nuclear plants in accord with modern safety standards, new nuclear power development simply makes no sense. The technology that once promised power that would be too cheap to meter has become a dead end.

While it displaces coal – which is certainly not good news for states and communities that rely on coal for their livelihood – gas actually fosters greater reliance on wind and solar energy for power production. There is a reason the figures that the Journal cited lump together natural gas with renewables. Wind and solar are not stable and reliable enough to meet demand on a 24/7 year-round basis, which is what we expect when we turn on a light switch or plug in a curling iron. Battery storage, while improving, is nowhere near close to being able to hold sufficient renewable power to bridge the gap between the time it is produced and the time it is needed. But gas turbines have long been used for on-demand “peaking” power precisely because they can be brought online quickly. This capability now allows gas to play a supplemental role to renewables in generating base power.

And with all of this, thanks to fracking, energy prices have fallen sharply in many areas of the country. You just might not notice this in places like metro New York City, where the exorbitant costs of inefficient monopoly distributors like Con Edison always seem to eat up any savings from the competitive generating side.

Contrast the change in America’s power sources with Germany, where mandates for renewables, the rapid abandonment of nuclear after the Fukushima disaster, and the concurrent lack of local and cheap fossil replacements have driven power costs to some of the developed world’s highest levels. Notably, fracking is banned in Germany. Even as prices rise, Germany has also failed to achieve meaningful reductions in carbon dioxide emission levels.

And contrast the national picture with California, which just extended its vaunted cap-and-trade program by 10 years to 2030. Net emissions from California’s covered industries, like Germany’s, have barely budged according to some analyses, and may have even increased locally because most of the offsets to local emissions are accomplished by buying credits elsewhere – such as by planting new forests in South Carolina, for example.

The state could sharply reduce its permitted emissions, or it could require more local offsets. But either would promote “leakage” – meaning the expatriation of California businesses, and ultimately residents, to other places with friendlier rules.

As Susan Shelley noted in The Orange County Register, cap-and-trade is best seen as a revenue-raiser for politically favored projects, from affordable housing and tree-planting in poor neighborhoods to Gov. Jerry Brown’s fantasy of a self-funding bullet train between metro Los Angeles and San Francisco Bay. The program shifts the costs to everyone inside and outside the state who buys California-made goods and services. It’s just that those of us outside the state have a wider range of alternatives, so the burden falls more heavily on lower-income Californians. They also live with the other undesirable byproducts of greater local emissions; they don’t get much immediate relief from trees planted in the Appalachians.

So it’s one of the greater ironies of our climate debate that the places with the least-stacked power generation deck are making the most rapid progress toward reducing carbon dioxide emissions. The actual benefit, if any, of such reductions is a subject for other days and other columns. But it’s worth taking note of which approaches actually accomplish their stated goals, and which are proving to be more effective as smokescreens for funding other priorities.

, , , , , , , , ,