At the recent North American Leaders’ Summit in Ottawa, Ontario, US President Barack Obama, Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto announced that the North American continent would produce 50% of its electricity from zero or low carbon sources, such as nuclear, hydroelectric, wind, solar, geothermal, biomass, etc.
Before we applaud too loudly, we need to analyze the numbers to understand what this really means. Canada already gets 63% of its electricity from renewable sources (mainly hydro) and 18% from nuclear, so Canada helps improve the continental average (although it only generates 15% as much electricity as the US). In order to fulfill its goals, the US will have to move from 13.7% to 23% renewable electricity between 2015 to 2025.
An 9.3% increase in renewable electricity over the next decade is a very unambitious goal, which is little better than current trends in new electricity generation. According to the US Energy Information Administration, US renewable electricity (excluding conventional hydroelectric) grew from 288,749 to 310,499 GWh between 2014 and 2015, which is a 7.5% annual growth rate. If we compound that same growth rate till 2025 and assume that conventional hydroelectric and total generation will be the same in 2025 as in 2015, then we will have 893,053 GWh of renewable electricity out of a total of 4,099,522 GWh in the year 2025, which means 21.8% will be renewable. In other words, Obama is promising to do 1.2% better than what we would have anyway, if we followed present trends. This is no way to address the climate crisis.
Taken as a whole, the Obama administration has been an environmental disaster. Obama’s “all of the above” energy strategy turned the US into the biggest oil and gas producer in the world. According to the US Energy Information Administration, US crude oil production increased 88.1% between 2008 and 2015, from 1,830,416 to 3,442,205 thousands of barrels. Between 2007 and 2009, US consumption of petroleum fell 9.2% during the economic crash, but it has since risen 3.3%.
Likewise, US natural gas production increased 28.3% between 2008 and 2015, rising from 25,636,257 to 32,894,683 million cubic feet.
This recent expansion in oil and gas extraction is due to the growth in new extraction techniques such as hydraulic fracturing (“fracking”) and horizontal drilling, which have allowed new reserves to be tapped which were previously inaccessible. Production of conventional oil fell gradually during Obama’s first term, continuing the steady decline first predicted by M. King Hubbert back in 1956 when he proposed the idea of “peak oil”. At the beginning of Obama’s second term, the high oil prices stimulated a small increase in conventional oil as more marginal fields were exploited, but the rapid fall in prices in recent years is now reducing that marginal output.
Fracking and other new extraction techniques, however, has caused an explosion of tight oil, whose US production grew 691% from 574,858 to 4,544,660 barrels per day between January 2009 and January 2016. During the same time period, tight oil’s share of total production rose from 11.2% to 49.5%.
This massive increase in oil has strained the existing refining facilities and a 40-year ban on exporting crude oil prevented it from being exported abroad for refining. Oil is generally a global commodity, so US crude prices have historically been kept in close line with the global prices. However, the oversupply of crude within the US caused it to become significantly cheaper than global prices. In 2011 and 2012, a barrel of US crude on the West Texas Intermediate was an average of $16.97 cheaper than in Europe’s Brent, which is the biggest trader of international oil.
Since crude oil was 18.0% cheaper in the US than in the rest of the world, US consumers had less economic incentive than in the rest of the world to be fuel efficient with their gasoline, heating oil and other petroleum products. The lower prices of petroleum products in the US is part of the reason why the average American consumed 22.3 barrels of oil in 2012, whereas the average German, British, French and Japanese consumed 11.2, 9.4, 10.3 and 12.8 barrels, respectively.
Fracking also led to an explosion of shale gas in the US. While the production of conventional gas dropped 38.2% between January 2009 and January 2016, production of shale gas rose 400.3%, from 8,789 to 43,973 million cubic feet per day. At the same time, the shale gas rose from 15.3% to 59.4% of total US natural gas production.
During the Bush administration, US natural gas cost more than gas in Europe. Fracking in the US, however, has produced such an oversupply of gas during the Obama administration, that US natural gas prices have plummeted far below international prices. In 2012 and 2013, the average price of gas at the Henry Hub in the US was $2.67 per million BTUs, compared to $11.63 at the European border. The price of Russian natural gas exported into Europe has since fallen, so now Europeans are only paying twice as much for their gas as Americans.
Because American natural gas was 2 to 4 times cheaper than in Europe, Americans could afford to be more profligate in its use. The average American consumes 2,163 cubic meters of natural gas per year, whereas the average German, Britain, French and Japanese consumes 928, 810, 724 and 886 cubic meters, respectively.
These increases in oil and natural gas production which led to lower prices and energy inefficiency inside the US have come at enormous environmental cost. The unconventional sources producing this extra oil and gas require extraction methods such as fracking and tar sands processing which consume more water, use more energy and release more greenhouse gases.
Natural gas is less of an international commodity than oil, because is harder to export abroad, which is why the increase in gas from fracking has driven prices so low in the US. Export of natural gas requires the construction of pipelines to neighboring countries or the gas has to be liquefied at -260°F and transported on special cryogenic ships. Despite the difficulties, the gas industry is eager to take advantage of the higher prices abroad. The Federal Energy Regulator Commission (FERC) has approved the construction of 10 liquefied natural gas export facilities.
Only in US coal production was there some improvement under the Obama administration, decreasing 23.5% between 2008 and 2015, from 1,171,808,669 to 895,937,000 short tons.
Most of the falling demand for coal, whose consumption reduced 22.5%, was matched by increasing demand for natural gas whose consumption rose 18.0% between 2008 and 2015. During Obama’s first term, the falling domestic demand for coal was matched by increasing exports of coal, so the US was not reducing its greenhouse gas emissions, but rather shifting them to places like India, Brazil, Netherlands, Japan, South Korea and Canada, where there was heavy demand for US metallurgical coal. Net exports of US coal rose 164.4% between 2008 and 2012.
At the time, it looked like global demand for coal would just keep going up and up. China’s demand for coal grew 10.4% annually between 2002 and 2012, and its demand for steel and cement which both consume massive amounts of coal grew 15.7% and 11.8% per year, respectively. To meet this rising demand, the average price of exported US metallurgical coal peaked at $201.59 per short ton in the third quarter of 2011. The next quarter, steam coal which is used to produce electricity peaked at $83.75 per short ton.
The major US coal companies anticipated that they could make a killing exporting coal abroad and they bought up other coal companies, especially the ones operating in central Appalachia and Australia which produced metallurgical coal for export. Walter Energy which specializes in metallurgical coal laid out $3.3 billion in 2010 to acquire Canada’s Western Coal, which also produces metallurgical coal. The following year, Peabody Energy bought Australia’s Macarthur Coal for $5.1 billion, Arch Coal bought International Coal Group for $3.4 billion, and Alpha Natural Resources bought Massey for $7.1 billion.
The high export prices that had these coal companies had banked on have since collapsed. From the peak in 2011, the export price has fallen 66.0% for metallurgical coal and 47,7% for steam coal. The recent economic downturn reduced global demand for coal, at the same time that low gas prices and concern over airborne pollution have induced many power companies to switch to cleaner-burning gas, causing a coal glut on the international markets. The increasing competitiveness of wind and solar energy, and government mandates for alternative energy have all worked to tamp down global demand for coal. In 2015, China’s demand for coal, steel, and cement dropped 4.6%, 2.1% and 5.9%, respectively.
The drop in prices combined with the industry’s over-investment in new coal fields and high debts from acquisitions has driven many of the largest companies into bankruptcy. Not only Peabody Energy, which is the largest coal company in the world, but Arch Coal, Patriot Coal, Alpha Natural Resources and Walter Energy have all filed for chapter 11. The four largest US coal companies, Peabody Energy, Arch Coal, Cloud Peak Energy, and Alpha Natural Resources, which together account for nearly half of US coal production, have fallen from a combined net worth of $34 billion in 2011 to $150 million today.
These companies which are helping to wreck the climate hardly deserve our sympathy, but their bankruptcies will leave great environmental destruction in their wake. Filing chapter 11 means that many will be able to escape their legal obligations to clean up their mining operations after extracting the coal. Operating at a loss also puts greater financial pressure on the industry to cut corners and not implement measures to reduce the environmental impact in their operations. The government will probably have to pick of the tab for cleaning up their abandoned mines, which means less funding might be available for alternative energy and green jobs.
The Obama adminstration is partly responsible for the destruction of the US coal industry, because it largely failed in its duty to regulate the industry. Much of the metallurgical coal, which inspired the coal companies to go deeply into debt in during Obama’s first term, comes from Central Appalachia where mountaintop removal is the common practice. The practice of blowing up the tops of mountains to get at coal seams and dumping the fill into the valleys is virtually impossible to do without violating the Clean Water Act. A study in 2009 estimated that mountain top removal in 1,160,000 acres of Kentucky, West Virgina, Virginia and Tennessee had destroyed or degraded 501 mountains. The EPA estimated in 2010 that mountaintop removal has buried 2000 miles of headwater streams. A 1999 court ruling found that covering a stream with fill from mountaintop removal violated the Clean Water Act.
The Obama administration clearly has enough evidence to stop mountaintop removal under the Clean Water Act if it were a priority. Studies by McAuley and Kozar (2006) and Palmer et al. (2010) found that surface water and ground water around mountaintop mining have elevated sulfates, iron, manganese, arsenic, selenium, hydrogen sulfide, lead, magnesium, calcium and aluminum. According to Pond et al. (2008), 9 out of 10 Appalachian streams downstream from mining operations are contaminated with runoff from surface mining sites.
The health consequences for people living near surface coal mining operations have been devastating. Kentucky and West Virginia have the highest per capita rates of cancer in the country. A survey found that 14.4% of people living in one West Virginia county with surface mining had non-melanoma cancer, compared to 9.4% in another West Virginia county without mining, and a national average of 3.9%. Ahern et al. (2011) found that there is a 42% greater chance of birth defects in communities living near mountaintop mining than similar Appalachian communities without mining.
In 2009, the US Army Corp of Engineers, the Interior Department and the Environmental Protection Agency signed an interagency agreement, which was “designed to significantly reduce the harmful environmental consequences of Appalachian surface
coal mining operations, while ensuring that future mining remains consistent with federal law.” As part of this agreement, the Army Corp of Engineers stopped issuing “nationwide permits” which authorize the discharge of debris into water bodies from surface-mining operations in Appalachia, and the EPA announced that it would conduct environmental analysis on 79 pending permits for mountaintop mining. However, a 2014 evaluation by the Alliance for Appalachia found that the implementation of this interagency agreement has been tepid with weak followup and enforcement. It noted that funding was cut for the U.S. Geological Survey’s study on the health impacts of mountaintop removal and the EPA only gave Fraser Creek Mining in Kentucky a slap on the wrist after 28,000 violations of the Clean Water Act. The Obama administration has issued fewer permits for mountaintop removal than the Clinton and Bush administration, but has refused to change the definition of “fill material” which allows mining companies to pollute streams with mining waste or implement the 4 policy changes called for by the Alliance for Appalachia.
After years of delays, the Interior Department finally proposed a new Stream Protection Rule in July 2015, that actually had some teeth to properly monitor mountaintop mining and try to clean up some of its damage afterwards. It proposes that environmental data has to be collected before and after the mining, the water quality has to be monitoring around the mining and that streams have to be restored to their prior use after the mining ends. After receiving 94,000 public comments and heavy industry lobbying, it is unclear how many of the proposed changes will be included in the final regulations.
Rather than taking these half steps and dithering for years on new regulations, the Obama administration could have used its power under the Clean Water Act to stop issuing new permits for mountaintop removal and crack down on water pollution from surface mining in general. If the Obama administration had done what the science demands, the profits and irrational expectations of the coal industry would have been reduced and the coal companies would not have made all the risky investments and acquisitions in 2010-2012, especially in Appalachian metallurgical coal, that have led to the recent spate of bankruptcies. If the coal industry had been confronted by effective regulation and growing costs during Obama’s first term, the coal companies would have prudently marshaled their resources and started looking for investment opportunities beyond coal, but instead Obama helped encourage the industry’s excesses.
A similar argument can be made about the recent boom in oil and gas production caused by fracking. If the Obama administration had been willing to properly enforce environmental regulations, it might have been able to reduce the increases in US oil and natural gas production and prevent the drop in US prices. The government’s hands, however, are more tied than with coal. The oil and gas industry has successfully lobbied congress to grant it exceptions for many environmental laws, including the Clean Air Act, Clean Water Act, Safe Drinking Water Act, National Environmental Policy Act, Resource Conservation and Recovery Act, Emergency Planning and Community Right-to-Know Act, and the Comprehensive Environmental Response, Compensation, and Liability Act, commonly known as Superfund. For example, fracking can’t be regulated under the Safe Drinking Water Act because congress passed the Energy Policy Act in 2005 to stipulate that fracking fluids except diesel fuel are not covered by the act. The same Act also stipulated that runoff from “oil and gas exploration, production, process, or treatment operations and transmission facilities” are not covered by the Clean Water Act.
The Obama administration, however, has shown very little willingness to use the regulatory and monitoring power which it has been given. Obama publicly praises the growth in oil and gas extraction, and promotes hydrocarbon extraction as means to generate new jobs and growth in a weak economy. In his 2012 State of the Union speech Obama enthused, “We have a supply of natural gas that can last America nearly 100 years, and my administration will take every possible action to safely develop this energy.” He speculated that oil and gas extraction would generate 600,000 new jobs.
Obama has a remarkable ability to hold two contradictory positions at the same time in an effort to please everyone. In his 2013 State of the Union address, Obama stated:
Today, no area holds more promise than our investments in American energy. After years of talking about it, we’re finally poised to control our own energy future. We produce more oil at home than we have in 15 years. (Applause.) We have doubled the distance our cars will go on a gallon of gas, and the amount of renewable energy we generate from sources like wind and solar — with tens of thousands of good American jobs to show for it. We produce more natural gas than ever before — and nearly everyone’s energy bill is lower because of it. And over the last four years, our emissions of the dangerous carbon pollution that threatens our planet have actually fallen.
Bragging about producing more hydrocarbons should make it difficult to also claim credit for lowing greenhouse gas emissions, but Obama makes this claims with polished aplomb.
Obama’s Interior Secretary Sally Jewell, a former ExxonMobil employee, supports fracking and announced the goal to “reform oil and gas permitting so that industry gets permission faster, while underwriting environmental impact evaluations and inspections Interior can’t afford.”
Maybe there wasn’t enough scientific evidence back in 2009 to restrict fracking, but by Obama’s second term, enough scientific evidence had accumulated to place serious restrictions on the use of fracking. What was lacking was the political will to enforce the laws.
It can be argued that the Obama administration has prevented US petroleum consumption from rising backing to levels during Bush’s second term, but most of his policies to reduce oil consumption have been the implementation of laws passed during Bush’s second term. The $2500+ tax credit for plugin hybrids and the $7500 tax credit on electric cars was a provision of the Energy Improvement and Extension Act of 2008, signed into law by George W. Bush as part of the $700 billion bailout of toxic assets. Give Obama credit for advocating that the tax credit be increased to $10,000 for electric car, wanting to convert the tax credit into an instant purchasing rebate so it helps poorer consumers, and calling for a million plugin vehicles by 2015, but none of these initiative ever became law under Obama. It was Bush’s Energy Independence and Security Act of 2007, that will increase the Corporate Average Fuel Efficiency (CAFE) standards to an average of 35 mpg by 2020. The Advanced Technology Vehicles Manufacturing Incentive Program which provided $7.5 billion to underwrite $25 billion in loans for US automakers to retool their factories to produce fuel-efficient and electric cars was signed into law by Bush in October 2008. Obama deserves some credit for taking the political heat for making risky loans to startup electric automakers Tesla and Fisker, but he was just carrying out the programs he was handed by Bush.
The Obama administration and the Democrats in congress arguably did make some difference in petroleum consumption by inserting funding for a green economy in the $731 billion stimulus which was passed in February 2009. The American Recovery and Reinvestment Act of 2009 was a bipartisan effort to fund favorite pet projects on both the right and the left, which included $27.2 billion of funding for energy efficiency and research and investment in renewable energy, $4.5 billion to increase energy efficiency in federal buildings, $13 billion to extend tax credits for renewable energy production till 2014, and $4.3 billion in tax credits for homeowners who invest in energy efficiency in 2009 and 2010.
Obama announced at the start of his presidency that the US would create 5 million “green jobs”, but this prediction was based on the assumption that carbon trading would create an economic incentive to move to lower-carbon alternatives. Unfortunately, the initial investment by the stimulus bill in energy efficiency, alternative energy and “green jobs” was not sustained by the Obama administration and the lack of a price on carbon gave companies little economic incentive to invest, so Obama’s initiatives to kickstart a green economy have largely withered on the vine. The workers trained by the stimulus bill to make homes energy efficient, install solar panels, etc. found little demand for their new job skills. The provisional nature of the stimulus bill gave investors little confidence that the funding for green projects by the US government would continue.
When the right-wing attack machine geared up to attack Van Jones in 2009, Obama failed to publicly defend his new “green jobs czar” and sent a signal that he was not willing to fight for his “green jobs” program, which further discouraged investors. The biggest failure, however, was not putting a rising price on carbon. Obama should not have left this vitally important task up to congress, where it could be vitiated by special interests and get loaded with exceptions and delays. The Waxman-Markey carbon trading bill which emerged from congress was so toothless and would have been so ineffective, that even some environmentalists rooted for its failure. In a scathing public letter, Dr. James Hansen, the head of NASA’s Goddard Institute of Space Studies, called the bill a “temple of doom,” which was complex, corrupt, and “a minor tweak to business-as-usual.” The EU’s Emissions Trading System (ETS) has proven to be a very poor mechanism for reducing greenhouse gas emissions. Most reductions in European emissions are the result of environmental policies, such as feed-in tariffs and green energy mandates, rather than carbon trading. Econometric analysis shows that emissions reductions are mostly explained by a combination of increases in renewable energy, the economic downturn post-2008, improved energy efficiency, and fuel switching (from coal to gas) in response to other policies and economic variables.
Obama and the Democrats made the typical triangulating play that they could appease the coal companies, power companies and heavy industry with extra emissions credits and loopholes, please the markets by giving them a new commodity to trade, and please the conservatives by using market mechanisms, but the complicated 1200 page Waxman-Markey bill ended up pleasing no one and alienated the progressive forces who would have lobbied hard for decent legislation. Greenpeace opposed the Waxman-Markey bill and Democracy for America decided to not lobby for the bill after polling its members who were overwhelmingly against it. Rockefeller Family Fund director Lee Wasserman and Micheal Levi of the Council of Foreign Relations both concluded that Obama’s strategy of trying to sell carbon trading as “green jobs” and energy independence rather than tackling climate change was a loosing strategy, because people who are worried about the economy are not going to be reassured by disruptive policies which could loose jobs in incumbent industries. Besides, it was simply bad politics to make the US consumer pay in higher prices rather than the polluting industries.
Irrespective of the politics, carbon trading is simply bad policy because a volatile market sends no clear, reliable signal that fosters long-term planning and investment in low-carbon alternatives. It also engenders cheating, lobbying for loopholes and extra carbon credits by the biggest polluters, and is socially unjust because the wealthy export their emissions reductions abroad to poorer nations. In contrast, a carbon fee-and-divide with a rising price on carbon is simpler to implement since it is applied at the mine, wellhead or port of entry, enables businesses to plan long-term, and makes it harder to lobby for loopholes and exceptions when everyone has the same price on carbon. It is socially just, because the wealthy who emit more carbon bear most of the costs. It is politically viable because 60% of the population receives more in their dividends than they pay out in higher prices. British Colombia
way to tackle climate change the green jobs argument mighobaWaxman-Markey passed the House, but Senate Majority Leader Harry Reid stripped carbon trading out of the anemic bill he finally introduced in April 2009. despite the fact that Even with a supermajority in the senate, the Waxman-Markey bill went down in defeat senate, Instead of pushing for a carbon tax or a carbon fee-and-dividend which would have been more politically acceptable since all the money collected would be returned to the citizenry in dividend checks. hich when he didn’t stand up and vigorously The biggest blow to green economy however, was the
The one area where Obama arguably does deserve credit was getting 27 but have been the implementation of the He did continue policies such as the $7500 federal tax rebate for electric vehicles and the new Corporate Average Fuel Efficiency (CAFE) standard for 1 have prevented petroleum consumption from returning during to the Obama administration may have helped pappears to have prevented a return being doing little better than After falling 9.2% export of petroleum out of the US increased andThe Obama administration could have prevented most of the fracking, which lead to the growth in oil and gas production by enforcing the Clean Air Act and Clean Water Act, but instead his State Department promoted fracking around the globe.
Petroleum consumption in the US has stayed flat during the Obama administration, while the decrease in coal was matched by an increase in natural gas. While gas is much better than coal in terms of mercury, sulfur, and black carbon emissions, recent research suggests that it probably emits as much greenhouse gases as coal once the leaking methane is factored into the equation. Given that most of the recent increase in gas and oil comes from fracking, which leaks more methane than conventional sources, it is highly questionable whether the greenhouse gas emissions from the US have reduced during the Obama administration.
While Obama’s Clean Power Plan is laudatory in shutting down some of the dirtiest coal plants, it will mostly clean up the power industry by moving these plants from coal to natural gas. It is some improvement to move from coal to gas, because according to the Intergovernmental Panel on Climate Change, coal emits a global average of 1040 grams of CO2-equivalent per kWh, compared to gas which emits a global average of 600 grams. However, the transition from one fossil fuel to another is hardly laudatory when wind emits 11 grams and residential photovoltaic solar emits 41 grams.
The Clean Power Plan promises to generate 30% renewable electricity by 2030. If we use the our current annual growth rate for renewables and compound it until 2030, we will get 922,903 GWh or 28.6% renewable electricity in 2030, so the Clean Power Plan is basically promising 1.4% more than what we are on track to accomplish anyway.
Sadly, Hillary Clinton also has a penchant for spouting numbers which sound impressive at first, but prove less ambitious after further analysis. Advocates of solar power are very excited by the current campaign promise that the “United States will have more than half a billion solar panels installed across the country by the end of Hillary Clinton’s first term.” What this means that the country will have 140 GW of solar capacity by the end of 2020, which means that solar capacity will move from 0.9% of total national capacity in 2014 to 11.9% in 2020, if there is not change in the total national generating capacity. Remember that solar typically generates 20% of its rated capacity over time, compared to gas which is closer to 80%, so 11.9% of national capacity means much less generated energy than it first appears.
Clinton’s goal of growing from 10.3 to 140 GW in solar capacity between 2014 and 2020 appears quite impressive, until we consider that US solar capacity grew by 55.9% between 2013 and 2014, according to the US EIA. If we use that same annual growth rate compounded till 2020, the US will have 148.1 GW of solar power in 2020. A 55.9% annual growth rate might seem improbable, but many analysts of the solar market are predicting even faster growth. With a 55.9% annual growth rate, we will have 8.9 GW of new solar capacity installed in 2016, but GTM Research is now forecasting a 119% growth rate in 2016 with 16 GW of new solar capacity in the US. These startling growth rates in solar energy are not surprising when we consider the fact that the installed cost per watt of PV solar systems in the US fell an average of 17% in the year 2015.
GTM Research is so optimistic about the 2016 solar market, because 74% of the new solar capacity is predicted to be in utility-scale solar, where costs have plummeted dramatically in recent years. In the fourth quarter of 2015, the average fixed-tilt, utility-scale solar system cost $1.33 per watt and tracking systems cost $1.54 per watt. As the installation of utility-scale solar has become more streamlined and standardized, its soft costs (onsite labor, engineering, permitting, etc.) have fallen dramatically, with a 37% reduction in the soft costs of fixed-title systems in 2015. This reduction in soft costs have made utility-scale solar competitive with natural gas, which is why GTM Research is predicting that 52% of utility-scale solar installed in 2016 will be above the amount mandated by state renewable portfolio standard (RPS) policies. Unlike natural gas which faces volatile prices, solar energy can be sold at fixed prices in power purchase agreements (PPAs) below $60 per megawatt-hour (MWh) and as low as $37 per MWh.
The real roadblocks to faster solar adoption lie in reducing the soft costs of solar installation on the rooftops of buildings and houses. In the fourth quarter of 2015, the average solar system cost $2.00 per watt on a commercial rooftop and $3.50 per watt in a residence. The main reason why commercial and residential solar energy costs so much more than in utilities is that soft costs form 50% of the total costs in commercial systems and 65% of total costs in residential systems and these costs are not falling. In fact soft costs grew 7% in 2015 for residential solar systems, but a 16% decline in hardware costs made residential solar cheaper overall.
While utility-scale solar will continue to grow, because its soft costs have been cut to the bone, residential solar which represents a fundamental shift in the energy system needs national direction and promotion to reduce its soft costs. In Germany, where there is strong national policy, the cost of residential solar is around $2.00 per watt. In contrast, US residential solar installers face a bewildering thicket of regulations and permitting hassles, plus very high sales costs, because installers have to send out sales people to knock on doors, which is why the soft costs for residential installers have been increasing.
If the Obama administration had started a national initiative to standardize the regulations and permits across states and municipalities, plus raise public awareness about the benefits of residential solar, the soft costs of solar panel installation could be lowered to levels similar to Germany. SolarCity, which installs 34% of residential solar energy in the US, only operates in 20 states, largely because the incentives, feed-in tariffs and other grid rules, regulations and permits make it difficult to operate in the other 30 states. A national initiative could make it cheaper to install residential solar across the country, by producing a set of standard guidelines that every locality is encouraged to adopt. In the same way that the federal government promotes a national speed limit, the federal government could pressure every state and power company to adopt standardized rates for feed-in tariffs and regulations for connections. A national initiative to advertise solar and direct people to licensed installers in their area could lower the marketing costs of solar. Of course, there would be a lot of political opposition, but the Obama administration could have gotten most of the blue states to collaborate in a national solar initiative if it had been established as a national priority and Clinton has the same opportunity in her administration.
The Obama administration and Democratic Party in general deserve credit for fighting to extend the incentives for renewable energy in the budget negotiations for the 2015 omnibus spending bill. One of the biggest problems in renewable energy is that the incentives in the past were renewed on a two-year basis, which has caused a roller coaster ride of booms and busts and made it very difficult to invest long-term. In return for lifting the 40 year ban on exporting crude oil, the Democrats got the Republicans to agree to:
The alternative energy incentives negotiated in the omnibus spending bill will give long-term stability to the US wind and solar industries, so they can attract investment. GTM Resarch estimates that the 5 year extension of the investment tax credit for solar will increase solar installations by 25 GW over the 46 GW that was projected for the 5 year period without the tax credit. Likewise, Bloomberg New Energy Finance estimates that the 5 year extension of the Production Tax Credit for wind will increase wind turbine installations by 19 over the 25 GW that would have been installed without them. Based on those numbers, a study at the Council on Foreign Relations estimates that the 5 year extension of the tax credits will decrease CO2 emissions by an average of 40 (range 25-46) megatons between 2016 and 2020, whereas the increase in oil exports will increase CO2 emissions 2 (range 0-5) megatons over the same period. There is little risk of increased oil exports in the short term at current global prices, but the IEA predicts that US exports of oil could increase to an average of 220,000 barrels per day between 2016 and 2025, which would mean 20 megatons of additional CO2 emissions per year, so there is some risk to dropping the ban on crude oil exports.
It is also worth noting that the incentives for biofuels in the omnibus spending bill are questionable in the US where they are generally made from corn. Although corn-based ethanol generally reduces GHG emissions compared to petroleum-based fuels, a literature review found in 6 out of 7 peer reviewed studies, that there are circumstances when corn-based ethanol can emit more GHG emissions. In addition, biofuels create a competition between the wealthy who own cars and the poor who eat grain, which can cause hunger and political unrest in developing countries. A study by the Federal Reserve estimates that the increase in biofuel production in 2006-8 caused corn, soybean and sugar prices to rise by 27%, 21% and 12%, respectively.
The Obama administration and the Democrats in congress should be applauded for fighting to extend the incentives for alternative energy, but these incentives will not do much to reduce US greenhouse gas emissions. A 2014 study in the American Economic Review estimates that the ITC and PTC will reduce annual CO2 emissions by 15 megatons, or 0.3% of total US CO2 emissions between 2012 and 2025. Even if the reductions are 40 megatons per year as the Council on Foreign Relations estimates, that is a pittance compared to the 5,460.64 megatons of CO2-equivalent which the World Resource Institute estimates were emitted by the US energy sector in 2012. Even the Clean Energy Plan, which calls for voluntary emissions reductions starting in 2020 and mandatory reductions starting in 2022, is only estimated to reduce annual CO2 emissions by 730 megatons in 2030. Likewise, the CAFE standards for vehicle fuel efficiency are estimated to reduce emissions by roughly 275 megatons per year (3000 Mt divided by an average car life of 11 years). The combined sum of Obama’s policies if fully implemented will eliminate roughly 1/6 of total US annual GHG emissions a decade and a half later.
The Democrat’s fight to protect the incentives for renewable energy and energy efficiency appears less heroic when we consider the fact that these industries have their own lobbies, who are capable of pushing politicians to protect them. According to Navigant Research, advanced energy building efficiency generated $63.6 billion in revenue in 2015 and its revenues have grown 50% over the last 5 years. Likewise, the revenue of the US PV solar industry grew 21% in 2015 to $22.1 billion and the revenue of the US wind industry grew 75% in 2015 to $14.4 billion. Solar and wind energy employed 297,000 people at the end of 2015 and the number of jobs has grown 20.3% over the last year. In contrast, oil and gas extraction and coal mining employed 226,200 people in May 2016, and the number of jobs has shrunk 12.6% over the last year.