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Energy: technology and free markets beat mandates

Bill Gates is the latest prominent thinker to suggest that it is wrong to achieve our clean energy goals with a carbon tax, or even greater government intervention in the energy marketplace.   Gates believes we would be better served by focusing on the energy supply side.  In other words, we need to encourage innovation to make clean energy cheaper and better so that it can win on its own without government support.  He’s absolutely right. 

Government meddling in the marketplace, be it punishing emissions regulations or state renewable portfolios, have cost consumers dearly but achieved little.  Even with tens of billions in taxpayer subsidies, wind and solar power still meet just 5 percent of our electricity demand.  Conversely, innovation in the energy sector has already produced significant results. Consider the shale gas revolution.   

{mosads}While Gates didn’t specifically point to the shale revolution as a model for his thinking, it fits perfectly. Natural gas has always been seen as a better and cleaner alternative to coal for electricity generation.  But for decades, gas was simply too expensive to wrestle away much of the power market. That has changed in a big way. 

The innovative combination of hydraulic fracturing with horizontal drilling has turned the U.S. into the world’s largest natural gas producer, slashed domestic natural gas prices and, in just a few years, reshaped the nation’s electricity generating mix. 

In 2005, coal generated more than 50 percent of the nation’s power.  Today, with utilities shuttering older coal plants or converting existing units to burn natural gas, coal generates about 30 percent of our power. This year, for the first time in U.S. history, natural gas is set to generate a larger share of our electricity than coal.

Tougher and ever-mounting regulation has certainly pushed utilities towards greater use of natural gas, but market fundamentals have played an equally important role.  Natural gas is simply cheaper than coal and expected to stay that way for the foreseeable future.  The shift towards greater reliance on gas in place of coal may only be in the early innings. 

Why is this shift from one fossil fuel to another an environmental or clean energy success story?  It’s simple – natural gas, when used in place of coal for electricity generation, produces just half the carbon emissions and a tiny fraction of the fine particulate emissions that cause smog.

Greater reliance on gas is the key reason the U.S. has been able to separate the growth of our economy from a growth in emissions, a major environmental milestone.  In fact, U.S. carbon emissions from the nation’s power sector are at a nearly 30-year low and falling.  This is remarkable in and of itself, but this reduction in emissions has come also with falling power rates in many states.  The shale revolution – a story about making cleaner energy abundant and cheaper – is also a model for emissions reductions

Bill Gates, much to his credit, has invested a considerable amount of his time and fortune in energy innovation. He’s expressed a quiet confidence about our ability to take on energy challenges with innovative technical breakthroughs. As the shale gas revolution has already demonstrated, that confidence is well founded. 


Dr. J. Winston Porter is a national energy and environmental consultant, based in Savannah, GA.    Earlier, he was an assistant administrator of the Environmental Protection Agency

 

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