[August 9, 2010 / No. 1453]

BP Oil Spill May Not Change Energy Policy, But Other Events Just Might

The disastrous oil spill in the Gulf of Mexico has been the focus of attention since spring, when BP's test well exploded, and on into these dog days of summer.

We now hold our collective breath in hope that the cement and mud injected into the well will plug the leak.

Many expected the incident in the Gulf would spur Congress to pass a comprehensive energy bill that would at long last provide our nation with a clear policy and process for moving to a renewable--or at least reasonable--energy future.

But even spilling 207 million gallons of oil that dirtied much of the Gulf Coast and left some states' economies in shambles apparently wasn't enough to undo the gridlock in D.C.

Meanwhile, there have been other developments in the energy world that warrant attention, and that should have some impact on our energy future, with or without a road map from D.C.

While Congress hasn't had the guts to put some kind of price on carbon emissions, others aren't letting that stop them.

As reported in last week's Clearing Up (No. 1452 [1/10]) by my colleague Steve Ernst, the Western Climate Initiative has released its updated design for a regional cap-and-trade program, along with a new economic analysis.

WCI's study indicates that reducing GHG emissions by 15 percent by 2020 could save the West about $100 billion between 2012 and 2020.

WCI calls those savings modest, given the overall size of the economy for WCI's 11 partner jurisdictions, but still significant.

I'll say. Just think of how many weatherization projects, renewable energy systems or school programs that could fund.

Meanwhile, China has announced it will start carbon trading in domestic businesses in its next five-year plan, starting in 2011. According to the Indo-Asian News Service, industry analysts say "putting a price on carbon is a crucial step for the country to employ the market to reduce its carbon emissions and genuinely shift to a low-carbon economy."

China--which the International Energy Agency said has now surpassed the U.S. as the top consumer of electricity, a ranking China disputes--also has a goal of reducing its energy intensity by 20 percent from 2006 levels by the end of 2010.

To help make that happen, the country's top 1,000 energy consumers have signed contracts with the central government to improve their energy efficiency, IANS said. In addition, the country has pledged to cut carbon emissions per unit of economic growth by 40 to 45 percent below 2005 levels by 2020.

Apparently, both the WCI and China are listening to the advice that the National Academy of Sciences delivered in May, when it called for a carbon tax on fossil fuels or a cap-and-trade system to curb GHG emissions. The Academy advised that the U.S. should cut the pollution that causes global warming by between 57 and 83 percent by 2050.

While some fans of nuclear power continue to see the need to cut GHG emissions as a sign of a nuclear-power renaissance, it might finally be solar power's time to shine.

A recent study by Duke University researchers says the cost of solar PV systems has declined to the extent that the systems are now less expensive than new nuclear plants.

The study, "Solar and Nuclear Costs--the Historic Crossover"--puts the crossover price at 16 cents/KWh--still considerably high by Pacific Northwest standards.

But co-author John Blackburn, a Duke University economics professor and former chair of the department, said that the cost of generating energy from solar has fallen by half in the last 12 years and is projected to fall by another 50 percent in the next 10 years.

This would put it right in the Pacific NW's sweet spot. At the same time, Blackburn said, the projected cost of generating electricity from new nuclear plants is rising.

Local solar power enthusiasts aren't waiting for any further cost reductions. Besides the increasing number of commercial solar PV projects, we have reported on the growing interest in community solar PV projects, in which local homeowners join together to buy solar PV systems in bulk from one or two suppliers, thereby lowering the cost.

This approach is especially popular in Oregon, where Energy Trust and state residential energy tax credits make the systems more affordable.

Certainly, both state and federal incentives and other programs make this solar expansion possible. But while it may seem as though solar PV and other similar renewable technologies are getting the lion's share of the subsidies, new research by Bloomberg New Energy Finance shows that's not the case.

According to a BNEF analysis released July 29, "governments of the world are spending substantially more on subsidizing dirty forms of energy than on renewables and biofuels. In fact, support for cleaner sources is dwarfed by the help the oil, coal, and other fossil fuel sectors receive."

Governments worldwide spent between $43 billion and $46 billion in 2009 to support renewable energy and biofuels technologies, projects, and companies, BNEF concluded in a preliminary analysis. That pales, however, in comparison to the $557 billion the International Energy Agency estimated was spent to subsidize fossil fuels in 2008.

"One of the reasons the clean energy sector is starved of funding is because mainstream investors worry that renewable energy only works with direct government support," Michael Liebreich, BNEF CEO, said. "Setting aside the fact that in many cases clean energy competes on its own merits. . .this analysis shows that the global direct subsidy for fossil fuels is around 10 times the subsidy for renewables. And that is without taking into account the enormous security and public health costs of fossil fuels, as well as the appalling pollution catastrophes on the Gulf Coast, the Niger Delta and elsewhere."

In other words, the playing field is nowhere near level. And it looks like we shouldn't expect a federal energy policy to help change that--certainly not in the near term.

In the meantime, I'm hoping that we'll see more local, state and regional initiatives aimed at reducing our reliance on fossil fuels. The Pacific Northwest is already on the right track in that regard. And in light of the developments cited above, the timing couldn't be better.

But don't tell that to Congress [Jude Noland].

Bearing Down is excerpted from Energy NewsData's Clearing Up publication. If you aren't a current subscriber, see for yourself how NewsData reporters put events in an accurate and meaningful context -- request a sample of Clearing Up.

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