Last week a group of researchers published a report in the journal ‘Nature’, an international scientific and medical publication. The Report, entitled ‘Limited impact on decadal-scale climate change from increased use of natural gas’ clarifies that the most important energy development of the past decade has been the wide deployment of hydraulic fracturing technologies that enable the production of previously uneconomic shale gas resources in North America.
The Report makes two assumptions: Firstly, if shale gas drives energy prices down, more expensive energy sources such as renewables will be squeezed out of the market, leading to higher emissions in the long-term. Secondly, the Report claims that lower energy prices will stimulate the economy leading to an increase in energy demand, which will again lead to increased carbon emissions.
And while Europe does not have a commercial shale gas industry for the moment, the United States does and there is much we can learn from the positive impact it has had there and the lessons learnt in achieving them.
Impact of shale gas on renewables
As natural gas use has grown in the United States it has provided affordable energy for consumers; so too has the use of renewable energy. In fact, a recent report by the Energy Information Administration (EIA) found that natural gas, solar and wind are increasingly being used to generate new power:
“In the first six months of 2014, 4,350 megawatts (MW) of new utility-scale generating capacity came online, according to preliminary data from the U.S. Energy Information Administration’s Electric Power Monthly. Natural gas plants, almost all combined-cycle plants, made up more than half of the additions, while solar plants contributed more than a quarter and wind plants around one-sixth.”
In other words, at a time when the United States is achieving record natural gas production, which is driving down natural gas prices, natural gas has in no way “crowded out” renewables.
These trend-lines are clear, and can be seen in action, empirically, all throughout the country. Take Texas for instance: the state is not only leading the nation in oil and natural gas production, but according to EIA:
“Texas leads the nation in wind-powered generation, with over one-fifth of the U.S. total.”
In reality, natural gas is helping renewables grow because natural gas provides the clean-burning baseload power that these industries need to prevent outages when the wind doesn’t blow and the sun doesn’t shine. That’s why a report by the Texas Clean Energy Coalition found natural gas and renewables “are complementary, not competing, resources.”
Increased economic activity and carbon emissions
The Report also assumes that America’s current natural gas abundance won’t be going away anytime soon, which will likely lead to a protracted stretch of low natural gas prices. The researchers argue that sustained periods of low natural gas prices will invariably have the effect of “accelerating” economic activity, which results in a future expansion of the economy. From there, the researchers claim that if natural gas development is “deployed globally” this same effect would happen worldwide.
An expanded economy means more jobs for workers, more revenue for state, local and federal governments, and reduced prices for consumers and businesses. So far, so good – right? For these researchers, though, an expanded economy leads to a scenario in which more energy will need to be marshaled to keep it running and growing – and, according to their models, that energy is likely to come (predominantly) from low-cost natural gas, as opposed to higher-cost nuclear and renewable energy.
Let’s compare the United States with Europe. In recent years the shale gas revolution in the United States has directly and indirectly helped create 2.1 million jobs, while helping to reduce its carbon dioxide emissions by 13% to the lowest levels since 1994, reducing the country’s reliance on coal and other higher carbon intensive fossil fuels. In other words: a plenitude of natural gas leads to lower natural gas prices (agreed), which spurs significant economic growth (agreed), which creates a larger economy (agreed), which requires more energy to keep running (probably), which opens up new markets for natural gas (we hope!) potentially driving down CO2 emissions (even better!). And somehow, this is all supposed to be a bad thing?
Expanded natural gas development and use has significantly accelerated economic activity in the United States – and, to the extent that phenomenon continues to advance into the future, it’s difficult to understand how that can be considered anything but a great thing for the United States. But, to these researchers, more natural gas use invariably leads to greater GHG emissions – and that, apparently, is why they say it’s bad.
But once again, the researchers fail to recognize and take into account what’s currently happening all around them – namely, that as more natural gas is added to the system, GHG emissions (both from natural gas systems, and on an absolute basis in general) continue to decline in the US, save for a slight uptick in 2013 which was still significantly lower than emissions in previous years.
According to the Intergovernmental Panel on Climate Change (IPCC):
“A key development since AR4 is the rapid deployment of hydraulic fracturing and horizontal drilling technologies, which has increased and diversified the gas supply… this is an important reason for a reduction of GHG emissions in the United States.” (p. 18)
The Energy Information Administration (EIA) found recently that the “increase in natural gas-fired generation…substantially reduced the carbon intensity of electricity generation in 2012.”
The National Oceanic and Atmospheric Administration found the increased use of natural gas is the reason CO2 emissions from U.S. power plants “were 23 percent lower in 2012.”
The Paris-based International Energy Agency reported that the “decline in energy-related CO2 emissions in the United States in recent years has been one of the bright spots in the global picture. One of the key reasons has been the increased availability of natural gas, linked to the shale gas revolution.”
And the US Environmental Protection Agency (EPA) published its latest Greenhouse Gas Inventory, which not only found that oil and gas producers had dramatically reduced methane emissions, but thanks to natural gas, greenhouse gases have been significantly reduced.
Different countries have drastically different energy priorities, needs and generation and transmission systems. But by looking at what has happened in the United States we can see how Europe is missing a significant opportunity. While it continues to debate the size of any reserves, how much is viable and the potential environmental impact of shale gas, energy prices are, on average, three to four times higher than comparable prices in the United States and Russia and twelve times higher than in China, potentially driving business out of the region. While we have reduced our CO2 emissions by 19.2 % (between 1990 and 2012), increasing renewables to 14% share of our overall energy consumption, we have also lost 3.5 million manufacturing jobs since 2008. And a further 30 million people in Europe are still employed in energy intensive industries.
This week, the European Council met in Brussels to adopt a number of long-standing draft commitments on climate and energy including an agreement on its 2030 climate and energy policy framework. If Europe isn’t careful it could reach its own targets simply through a process of rapid de-industrialisation, rather than the careful management of its energy strategy.
But there are increasing signs that Europe is taking a more pragmatic approach to its shale gas opportunity. The European Union has deferred the decision to explore shale gas to each member state, which means national governments retain the right to decide if and where they want to explore for shale gas. While there are currently no commercial drilling operations the European Commission has stated that commercial drilling could commence in 2015. In the meantime, speculative drilling is essential in order to ascertain Europe’s potential reserves. Exploration is currently taking place in the UK, Poland, Germany, Romania, Denmark and Hungary.
An innovative solution to Europe’s energy needs
Europe will ultimately develop a commercial shale gas industry that works best for Europe. This will need to address its unique needs and requirements, delivering a secure, reliable and affordable supply within an appropriate environmentally sustainable framework. But economic growth is not bad. Following the Global Financial Crisis Europe needs to take advantage of an opportunity for growth which can support our climate change objectives, something Europe proudly leads the world on. An innovative and pragmatic approach could also create many jobs, stimulate growth and increase competitiveness. Economic growth does not have to be at the detriment of the environment. The United States has proven that this is the case.