Shale Gas and Carbon thoughts
Taking a break on the various issues of utilities from my previous blogs, I was inspired by this article to take on a macro issues of energy involving Shale gas and carbon issues – Is shale gas our future or should we look at other sources of energy? (Molten Consulting).
The title is opened ended… how far is future? And whose future? Shale gas does not and will not make up the majority of energy usage worldwide. It is a substantial portion for the US oil and gas balance. Before there were shale expectations, the theme to balance the energy market was to use all sources of energy including improvement in efficiencies. Supply and demand always meet, it is just a matter of convergence with price as the critical variable to impact supply and demand.
Before Shale:
- LNG imports were going to save the US from sustained $8+/mmbtu prices.
- Imports of crude with a large dependency from Canadian tar sands were going to fill in to maintain oil markets while we slowly convert the US auto fleet to alternative fuels.
- Advance coal would even play a part.
- Nuclear plants were going to easily be relicensed.
- Wind and solar cost would come down in cost and the cross intersection with gas prices at $8+/mmbtu would allow the elimination of subsidies in a few years.
However, shale has allowed this delay as it came with a bonus of liquids production. Middle East LNG and Canadian heavy oil are still there. Both coal and nuclear are actually being hampered because of the shale gas producing poor economics, therefore a significant decline is likely in the US. Renewables will likely continue to require subsidies, and the ability to transform quickly is hampered by the fact that there are physically known recoverable sources of energy to be used if shale gas drops off whether heavy oil, LNG, or even coal.
Technology breakthrough in energy is extremely tough given the capital intensity in the industry. New technology cannot plan or wish for peak oil to produce higher prices to enable their technology. Shale gas has pushed the peak curve much farther out than any of these peak oil theorists would ever imagined. Mr. Shaw brings up the carbon issue as a critical path. Once again, as much new technology cannot plan for peak oil, they probably should not plan on significant carbon prices to make their technology viable. Carbon is not going away, but when countries and individuals cannot even balance their check books, can we really plan beyond 10 years much less 100 years which many of the impacts of climate change will be felt? Debt is no different than carbon, it is kicking the can for the next generation. Therefore, to see any government put in a sustained economic penalty for benefits not seen in decades does not seem likely.
The stretch goal for all new technology in the energy space try to compete with prices now, not on a dependence on something in the future. Just as shale gas came into the picture, other sources of technology have the same opportunity.
Your Optimistic Energy Consultant,
614-356-0484
