By May 13, 2015 Read More →

Energy infrastructure: Obama needs to get over fixation with renewables

America has become global oil and gas superpower, Obama energy plan should recognize new energy infrastructure reality

When Barack Obama says “energy infrastructure,” does he mean everything but oil pipelines? That would seem to be the case with the Administration’s new four-year energy plan.

energy infrastructure

Joe Biden, Vice President of the United States of America.

The White House’s new strategy is designed to fight climate change, modernize power plants and find new ways to ensure a steady supply of “safe energy.” Vice-President Joe Biden says the nation’s energy infrastructure is incredibly outdated and must be fixed.

“Approximately 1 million people were employed in energy transmission, storage, and distribution jobs in 2013. By making smart investments, there is the potential to support 1.5 million additional energy sector jobs,” the White House said in a press release.

It didn’t take long for the American oil and gas industry to take up the President’s challenge.

“We welcome the administration’s call to action on infrastructure, now we need them to act – our industry is ready to go to work,” said API President and CEO Jack Gerard.

“Essential infrastructure improvements in just the oil and natural gas area could, over the next decade, attract as much as $1.15 trillion in new private capital investment, support 1.15 million new jobs, and add $120 billion on average per year to our nation’s GDP.

But the Administration’s plan – and the President’s attention – seems to be focused squarely on other forms of energy, and oil and gas gets scant attention, despite America becoming the world’s leading producer of oil and natural gas combined, which is steadily reducing dependence on foreign oil.

energy infrastructure

Jack Gerard, president and CEO of the American Petroleum Institute. Photo: Handout.

Solar and wind are exciting new energy technologies. And America is playing a leading role in their development and deployment, which is exciting news for the long-term growth of the industry and jobs that rely on cheap power – which renewable energy will be some day.

But solar and wind cannot escape the technology adoption curve that all technologies, even in this speeded up Internet Age, must go through. At the beginning, new technologies are expensive and offer few if any benefits over existing technology; only innovators, who are all about the coolness of the technology and care little about cost, support it. But with succeeding generations the technology improves and even though it is more expensive than the dominant technology, it offers benefits to early adopters that offset the higher cost. As the new technology approaches price parity, more and more consumers buy it.

Where are wind and solar on the adoption curve? Wind is well into the Early Adopter stage and solar is headed in that direction. It will take decades for renewables to reach Majority Adopter stage, at which point the technology is widely diffused in an economy and is displacing the older technologies.

My best guess is that renewables won’t hit Majority Adopter status for another 50 years. Maybe more.

And even if they do, all they will do is displace coal for power generation. Most utilities are not even incorporating electrified transportation – such as electric cars – into their 20-year baseload projections.

energy infrastructure

American President Barack Obama.

All of which argues for a long life for petroleum. In fact, the International Energy Agency predicts global consumption of oil will increase from 90 million  to 104 million bbls/day by 2040. The IEA also says the global energy industry will require $48 trillion of investment over the next 20 years.

American energy interests, like the Texas Railroad Commission, are busy organizing to ensure the North American industry gets its fair share of that opportunity.

And that means oil and gas infrastructure can’t be a footnote in the American government’s energy strategy, which was released April 21..

As Gerard argues convincingly, America needs pipelines like Keystone XL to fully realize its energy potential.

“Pipelines are one of the safest modes for transporting product and we need more of them,” he said. “Keystone is but one example of a pipeline that, if approved, could benefit consumers by increasing the amount of fuel to the market place while stimulating job and economic growth, and all without costing taxpayers a dime.”

President Obama has talked about an “all of the above” approach to American energy. Oil and gas infrastructure – including pipelines – are a big part of “all of the above” and it’s time for the Administration to stop downplaying it.


Posted in: Markham on Energy

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