The 112th Congress — Energy Roulette?

by Kristen Wright, associate editor

Without a comprehensive energy policy, U.S. utilities are playing roulette. Oddsmakers—in this case the energy punditocracy and investors—are placing their domestic bets on natural gas.

“This year we hear that shale gas changes everything,” said David Hobbs, IHS CERA chief energy strategist, during CERAWeek in Houston.

Hydraulic fracturing, or “fracking,” for shale gas can be done safely, but it must be done safely by everyone to gain widespread support, said Sue Tierney, an energy and economics expert at the Analysis Group in Boston. She also has worked as an assistant secretary for policy at the Department of Energy during the Clinton administration and as a Massachusetts state public utilities commissioner.

New gas-fired power plants can be built right now for less than coal, said Lewis Hay III, chairman and CEO of NextEra Energy Inc., North America’s largest renewable generator. In addition, natural gas emits roughly half the carbon as coal, he said.

“Natural gas solves a lot of those issues right now,” Hay said. “Once we get out to the 2040-2050 time frame, you’ll need something else.”

Don’t discount coal, the cheapest source, said Gregory H. Boyce, chairman and CEO of Peabody Energy, a private-sector coal company. If the U.S. rids itself of coal, it will encounter an unreliable electricity supply like Texas has encountered or increased electricity prices, he said. There is a direct correlation between gross domestic product and coal worldwide, he said.

“Expensive energy chokes off our economic recovery,” Boyce said. “Coal is here to stay.”

But the question remains: How much will carbon cost? Everyone involved in U.S. energy hopes a clear policy will emerge soon, said Katherine Hamilton, director of Quinn Gillespie & Associates, the Washington, D.C., public affairs firm started in 2000 by Democratic White House veteran Jack Quinn and Republican strategist Ed Gillespie. From 2008 to 2011, Hamilton served as the first full-time president of the GridWise Alliance.

“It’s unfortunate we don’t have a goal,” she said.

Experts agree that whatever energy bills pass the 112th Congress, likely they will be the diluted results of having no common goal. Is the federal government’s goal to reduce carbon emissions or to profit from them? Should carbon emissions be legislated by Congress or regulated by the Environmental Protection Agency (EPA), and should carbon policy be decided as an energy issue, health issue or both?

Blame part of the confusion on the Congressional power divide. On Nov. 2 Republicans won the House of Representatives following two years of Democrat control, and the Senate’s Democrat majority fell to 53 of 100 when Republicans picked up six seats. (Meet the Senate Committee on Energy & Natural Resources on Page 22, where senators are listed alongside their corresponding states’ energy interests, according to the Energy Information Administration.)

There’s a lot going on regarding energy but not a lot being accomplished, said Rick Nicholson, group vice president of IDC Energy Insights.

“Certainly as a result of those elections—the Republicans’ gaining a majority in the House—it effectively killed any policy surrounding carbon cap and trade,” Nicholson said.

While Democrats mourn its death, Republicans and the U.S. market still lack the certainty needed, Hamilton said.

“The thing that cap and trade did was that it put a cost on carbon,” she said. “It set a goal for the next 20 years. Right now we don’t have a goal. It’s always easier to plan.

“The investors will tell you that certainty is always easier to invest in. Whatever the goal would have been, it would have been nice to have a goal.”

The next option is a carbon tax, which is not necessarily as efficient as a cap and trade, Tierney said.

“They are actually going to be raising uncertainty if Congress delays acting another two years,” Tierney said. “It’s not doing a service to our electricity consumers and investors in power plants.”

As a result, many power companies must assume carbon controls are coming and act accordingly, she said. Apart from energy efficiency, almost everything else has some sort of environmental impact, she said.

Enter nuclear with its zero-carbon emissions, pundits pushed. But on March 11, the world focused on Fukushima Daiichi Nuclear Power Station in Japan after a 9.0 earthquake’s tsunami damaged at least three reactors. Elevated radiation levels near the plant continue to be detected.

“Boy, we saw what can happen when things go wrong,” Tierney said. “Often in a crisis, Congress has been known to apply the lowest common denominator.”

Nevertheless, Southern Co.’s Plant Vogtle in Burke County, Georgia, should not be in limbo, she said.

“Southern is absolutely dedicated to moving that one forward,” Tierney said.

“I suppose that if we continue to see one form of energy crisis after another, it becomes very difficult for Congress to resist showing that they’re trying to do something. It’s a really challenging playing field.

“After every year, I think, ‘After this issue passes, I’m sure it will be smooth sailing.'”

It’s been more than 30 years, she said.  Click here to see Senate Energy and Natural Resources Committee Members.

Editor’s Note: Two columns in this issue examine the 112th Congress and energy policy: Benefit of Counsel on Page 14, “Let’s Make a Deal: Energy Policy and the Art of the Possible in the 112th Congress”; and Taking It Into Account on Page 18, “What Will Drive Investment: Peer-reviewed Science or Ideology?”  

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Senate Energy and

Natural Resources Committee

Democrats (12)

Chairman Jeff Bingaman (N.M.): oil, gas, coal, uranium

Ron Wyden (Ore.): hydroelectric

Tim Johnson (S.D.): ethanol, geothermal, wind

Mary L. Landrieu (La.): crude oil, natural gas, liquefied natural gas

Maria Cantwell (Wash.): hydroelectric, jet fuel, wind, biofuels

Bernard Sanders (I) (Vt.): nuclear, wind, biomass

Debbie Stabenow (Mich.): natural gas, biomass, solar, large-scale batteries

Mark Udall (Colo.): natural gas, oil, coalbed methane, oil shale, biomass

Jeanne Shaheen (N.H.): nuclear, fuel oil

Al Franken (Minn.): ethanol, wind, natural gas, nuclear

Joe Manchin (W.V.): coal

Christopher A. Coons (Del.): petroleum products, offshore wind

Republicans (10)

Lisa Murkowski (Alaska): crude oil, diesel, nuclear

Richard Burr (N.C.): nuclear, propane, wind, hydroelectric

John Barrasso (Wyo.): coal, natural gas, wind

James E. Risch (Idaho): hydroelectric

Mike Lee (Utah): oil, natural gas, coalbed methane, geothermal, oil shale

Rand Paul (Ky.): coal

Daniel Coats (Ind.): coal, ethanol, wind

Rob Portman (Ohio): coal

John Hoeven (N.D.): coal, crude oil, wind

Bob Corker (Tenn.): ethanol, hydroelectric, nuclear

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