Commentary: Better times ahead for energy industry

Edward L. Monser

By Edward L. Monser

When the world’s energy industry leaders meet here next week at their annual CERAWeek confab, the price of oil will surely be front and center in most conversations. It usually is.

Just behind, however, will be the industry’s inexorable tectonic shifts – toward natural gas and renewables, and away from coal. Nowhere have these shifts been felt more acutely, of course, than in Houston, where tens of thousands of lives have been disrupted. But it is increasingly clear that the long-term ramifications will be positive – for the planet, for the country, and for Texas and this city.

The shift has taken place so quickly that many Americans are probably still not fully aware of it. Among the key facts are these:

• King Coal, the No. 1 source of fuel for electricity in the United States for more than a century, has lost its throne. Natural gas overtook coal at U.S. power plants in the first half of 2016, taking 36 percent of share compared to coal’s 31 percent. Coal’s share stood at 50 percent as recently as 2005. But inexpensive shale gas – much of it from Texas – has taken it down.

• Renewables have entered the mainstream. Renewables include hydropower, solar, wind, biomass, and geothermal. Although renewables accounted for less than 8 percent of U.S. electricity generation in 2001, they represented about 13 percent in 2015, and will grow faster than any other energy source between now and 2040, the U.S. Energy Information Administration forecasts. Solar and wind are the big stars here, and Texas, again, is a key player.

• Nonetheless, renewables will be limited until the problem of storage can be solved. Because sunshine and wind are never completely reliable, utility-scale batteries for the storage of their energy will be needed before society can depend on them. Until then, we’ll need to continue relying on conventional generation, typically natural gas-fired, to ensure consistent power.

• Distributed Energy Resources (DERs) along with micro grids, will change the way electricity is generated and delivered. DERS are small, decentralized sources of energy, usually using renewables and often located close to the load they serve. Micro-grids are small, decentralized grids that work independently from the “macro-grid.” These technologies will not only decentralize power production and distribution, but enable energy to flow two ways – to the consumer and back from the consumer when excess power is available. Current utility business models and our energy distribution infrastructure will be challenged.

As a result of these and other trends, we believe that in about a decade, natural gas will account for 50 percent of new U.S. electricity production; solar and wind for 30 to 35 percent; and other renewables, such as hydro, biomass and geothermal, along with DERs, for the balance. Virtually no nuclear capacity will be added; nor will any new coal plants likely be built. Coal’s share as a fuel for U.S. power production will decline, at a rate linked to the fate of President Obama’s Clean Power Plan.

The impacts of these trends has been and will continue to be painful for many Americans, of course. Coal miners are one obvious example.

In the long term, though, the shift from coal to natural gas represents a big gain for the planet, because of the corresponding 50 percent reduction in carbon dioxide output. And producing electricity from the sun, wind, or water, of course, entails almost no carbon footprint at all.

The boom in shale gas, meanwhile, has produced tens of thousands of jobs in that industry, a great many of them in Texas, and helped lower home heating prices across the country. Moreover, because they’re energy intensive, the increased availability of inexpensive shale gas has contributed to the growth of the U.S. plastics, fertilizers, chemicals, and steel industries, among others. Houston stands to be a significant beneficiary of this growth.

In wind and solar too, Texas and Houston have been staking out important roles. Texas already has the largest number of installed wind projects in the United States, and if it were a country, would be the sixth largest wind generator in the world. Dozens of Houston companies are involved in pursuing the answers.

Meanwhile, Texas’ installed solar capacity was expected to double in 2016, and, over the next five years, to grow faster than any other state except California. And although China wins attention for leading the world in solar installation, much of the brainpower and leadership for solar and other renewables continues to reside in America, many of them right here.

Hurricane Oil has clearly taken the world and Houston for a wild ride. Thankfully, the worst of that ride seems over. And the future seems bright.

Edward L. Monser is president of Emerson, a major oil and gas industry supplier with 1,200 employees in the Houston area. Emerson is foundational sponsor of CERAWeek 2017.