Introduction
The goal of this report is to analyze the American energy industry’s response to the global 2008 financial meltdown, and evaluate results of its commitment to clean energy in tandem with eco friendly policies in place to promote clean energy.
Mirroring its system of government, the United States energy policy is decentralized to a degree and determined by federal, state, and local entities in the United States, which address issues of energy production, distribution, and consumption, such as building codes, energy penalties, and gas mileage standards. Energy policy may include legislation, international treaties, subsidies and incentives to investment and public transportation, guidelines for energy conservation, taxation and other public policy techniques.
POLICY DISCUSSION
According to the National Petroleum news, in a 2009 report by the Congressional Research Service, the three main goals of energy policy in the United States post 2008 financial meltdown were stipulated be to assure a secure supply of energy, keep energy costs low enough to meet the needs of a growing economy, and protect the environment while producing and consuming that energy (N.P.N).
These three goals conflict with one another due to difference in priority individuals and groups place on the aforementioned goals. Although the American federal government is involved in making policy decisions, it adopts a laissez-faire approach towards stringent regulations and instead, institutes a system of incentives and penalties for violation of/ failure to meet stipulated goals.
The three main goals can be further expanded into six policy areas and the overall goal of policies passed in each area is explained below:
I. Exportation of Natural Gas: The American government attempts to discourage natural gas exportation. Currently in 2015, 98% of all natural gas produced in the United States is consumed in the United States. This is frictional however, as business interests value natural gas exportation over environmental concerns associated with its production.
II. Energy efficiency improvement: The American federal government aims to to decrease energy consumption and increase energy efficiency.
III. Domestic supply of fossil fuels: The American federal government aims to increase the domestic supply of fossil fuels and promotes this through federal regulations such as the Clean Air Act and Clean Water Act.
IV. Increased use of renewable energy: The American government ultimately encourages the replacement fossil fuels with renewable, or cleaner, energy sources by offering tax and real estate incentives for companies that embrace renewable energy in their operations. For a while, this goal focused on the transportation sector and the use of biofuels. Unfortunately, biofuels have begun to fall out of favor as their greenhouse gas effects were discovered to be much more elevated than expected in multiple studies. To aggravate the situation, some studies predicted that biofuel production put pressure on food prices and production due to the fact that both food and biofuel production compete with each other for the same resources such as water and land. Government programs that subsidize the research and production of energy have increased use of photovoltaic, wind, biomass, and solar energy for electricity generation. Because these renewable energy sources are not economically or technologically feasible on industrially large scales, the federal government has offered subsidies them through loan guarantees and grants.
V. Oil and natural gas prices: The American federal government aims to provide cushion against a global energy supply shock by maintaining a reserve of petroleum to power the country for a maximum of 3 months.
VI. Electricity production: Coal-fired power plants and corresponding carbon emissions associated with such operations are monolithically dense issues for the American government, which looks to limit the effects of climate change. The EPA finalized the clean power plan in 2009, requiring a 32 percent reduction in CO2 emissions by 2030; most of that reduction will come from electricity generators, namely coal-fired power plants.
In subsequent sections, this section will be referenced periodically as goals I-VI to draw attention to the energy sector’s compliance with/ failure to meet up to the American federal government’s goals referenced above.
DATA AND PROCEDURE
Reference data used to conduct this analysis was retrieved from the international energy agency database. Collated energy, industry, residential, renewable, waste, and electricity data has been used. Energy production variables tracked for the analytical purpose include biodiesels, natural gas, solar, and wind energy amongst others. Additionally, CO2, CH4, N2O, HFCs, PFCs and SF6 emission data was also included, which reported raw statistics on emission data in 5-10 year periodicals. Data was evaluated from 2006 to 2012 as the response to the financial crash in combination with policies instituted are to be evaluated, except the emission data which was available from 1990 in roughly 5 year increments. It should be noted that 2012 was the last year of verifiable data.
ANALYSIS
This section will be broken down roughly into eco-friendly, non eco-friendly, and electricity sections. The non eco-friendly section will consist of analyses on natural gas and its derivatives (non renewables) data with the eco-friendly section analyzing biofuel, wind and solar energy data (renewables). In the electricity section, the electricity data associated with renewable and non-renewable energy sources will be extracted and analyzed thoroughly. In each section, performance will be analyzed and evaluated with respect to the target objectives and trends desired by the American government.
Non-renewables
Fortunately or unfortunately, the United States remains a major source of growth in oil and gas exploration and development in offshore production. American companies have developed advanced, efficient, and fiscally prudent techniques for extracting hydrocarbons from shale and hard to reach offshore oil and gas deposits, drastically altering the U.S. oil and gas sector and the domestic energy landscape. These techniques enable most American producers remain competitive with low international crude oil prices, making the United States the world’s largest and most critical non-OPEC member swing producer.
In analyzing the market for natural gas, diesel, naphtha and fuel oils, a relatively inelastic demand is observed. This trend is critical for understanding the associated data presented in figure I below:
Figure I: Natural gas and Derivatives Production Data
For the above figure, data for Natural Gas and Coal were lumped together as both are commonly regarded as non-renewable sources of energy with environmentally hazardous waste products. From the above figure, in the 7-year period examined, the U.S domestic supply including imports consistently exceeded its consumption rates by a yearly average of about 5-10%. In this regard, business interests consistently meet the target 5% exportation rate set by the American government in compliance with goal I. American consumption can be further broken down into its three major sectors: transportation, residential use, and industrial use.
Within this examined time period, the residential and industrial demand for natural gas generally paled in comparison to its transportation demands. This happens for two reasons. Firstly, technology efficiency in homes and industry is high because higher efficiencies are simply better for all parties involved: business interests spend less on expenses and get government backed bonuses for consuming less, and private residents spend less on electricity and heating. Secondly, there is a well-documented American cultural preference for petrol-demanding vehicles. This in conjunction with country’s immense landmass culminates in a culture that demands incredibly high amounts of natural gas and its derivatives in its transportation sector. This has led to mixed results with respect to the federal government goals. Figure II below highlights total pollutant emission data over a 20-year period.
Figure II: Pollutant Data
Fig II above suggests that policies introduced in 2009 clearly had a positive impact on curbing previously rising emission levels. Being the largest environmental concern, curbing CO2 emissions was a top priority for the government. As such, CO2 emission reduction was particularly effective, dropping 9% in 2010, a year from when anew set of policies were passed. The figure also illustrates a general decline in hazardous emissions for other key compounds.
Renewables
The environmentally friendly initiatives and policies have resulted in increased efforts in clean energy, reflected in a rising production of hydro, wind, solar, and nuclear power. Besides nuclear technology, renewable energy processes have been observed to have negligible or no harmful effects on the environment. As such, relevant data pertaining to performance was presented on its primary purpose to provide electricity efficiently. Figure III below presents this data.
Figure III: Renewable Energy Electric Output
From fig. III above, as hydro, wind, and solar energy technologies advanced and improved yearly, its efficacy improved immensely and as such contributed more to the American energy supply. As of 2012, all three contributed 7%, 4.5%, and 0.3% respectively to the American electrical demand. This is a marked improvement on 2005 values of 7%, 0.4%, and 0.1% respectively in a relatively static demand period. Although nuclear power has been proven reliable, renewable, inelastic, and dependable, it has been hotly debated as a viable source of energy due to toxic by-product production and as such is being reconsidered as a viable source of energy for the economy. Nevertheless over the time period studied, it consistently and annually accounted for 50% of the American electricity output.
Electricity
As of 2012, the U.S continues to have a very diverse energy sector, from Oil and gas production to nuclear and renewable energy exploration; all with significant investments and sizeable contributions to the electric generation sector. Fig IV highlights this sector in comparison to data from 2005 to accurately determine the effect of policies passed in 2009 on the power generation sector.
Figure IV: American Electric Generation Profile
From fig IV over the seven-year period, solar energy was not directed towards electricity generation, but hydro and wind energy were directed at larger rates. Additionally, non-renewables such as coal and natural gas largely retained their share of the market at the expense of nuclear energy with the most significant changes occurring between 2008 and 2009 as new policy changes kicked in.
Conclusion
Although the energy efficient and environmentally friendly policies and incentives initiated by the American government have driven a gradual change in the American energy sector, there is still much room for improvement. Reasons for relatively minute advances in some sectors could be linked to loose regulations characteristic of American industry, and the fact that America is one of the largest Natural gas and coal energy producers in the world. However, two major positives exist within such context. Firstly and most importantly, business interests have responded to and have been engaged on some level on the ideas and opportunities provided by clean energy exploration. Lastly, the American government has slowly but surely begun to hit desired clean energy trends.
Unfortunately, non much can currently be done to drastically improve the commitment to clean energy as America remains a dominant producer of Coal and Natural gas in the world.