Energy independence has been an increasingly popular goal in the United States.
However, “a goal without a plan is just a wish,” said Antoine de Saint-Exupery.
While there may be growing agreement that a plan is necessary, there is far
less agreement regarding its contents. Meanwhile, U.S. energy demand continues
to rise, driven almost exclusively by population growth. The problem of the
future of the U.S. energy industry will not solve itself; it is currently exacerbating
itself, with a little help from its friends.

U.S. energy consumption has grown at a rate of approximately 1 percent per
year over the past decade; approximately the same as the rate of population
growth. Electric consumption has grown at a rate of approximately 2 percent
per year over the period, or approximately twice the rate of population growth.
U.S. population is expected to reach 300 million during 2006. Continued growth
at the present rate would result in a population of approximately 450 million
by 2050. If current energy consumption trends continue through 2050, energy
consumption would be expected to increase by approximately 50 percent and electric
consumption would be expected to approximately double.

The substantial projected growth in U.S. energy consumption would occur against
the backdrop of:

  • a rapid global increase in energy consumption, driven primarily by the developing
    countries;
  • constrained refinery capacity, combined with more complex requirements for
    refinery output;
  • restrictions on exploration and production affecting approximately 40 percent
    of estimated U.S. domestic oil and gas resources;
  • constrained energy transmission facilities and increased resistance to the
    construction of new transmission facilities;
  • an aging electric-generating fleet, challenged by growing governmental pressure
    to increase efficiency and reduce emissions;
  • increasing governmental and environmentalist pressure to expand the use
    of renewable forms of energy; and
  • growing international pressure to reduce the emissions of greenhouse gases,
    primarily CO2.

The impacts of these factors have been reflected in rising world oil prices;
rising domestic natural gas and propane prices; hurricane-related supply, refinery
and pipeline capacity shortages and resulting price spikes; and the shifting
of some energyintensive production operations to overseas locations.

Generation X

Varying end uses compete for supplies of all types of energy in the U.S. economy.
Oil is used to produce transportation fuels, as a chemical feedstock and, to
a lesser degree, for residential, commercial and industrial heating. Natural
gas and propane are used for residential, commercial and industrial space and
water heating; process heating; as chemical feedstock; and increasingly (in
the case of natural gas) as a power-generation fuel. Coal is used primarily
as a power-generation fuel, although it is still used for some industrial process
heating. Nuclear energy is used exclusively for power generation. Of the renewable
energy sources, ethanol is used primarily as a gasoline additive; solar energy
is used for space and water heating and for power generation; and wind, geothermal
and hydro are used primarily for power generation. This competition for energy
has had the greatest impact recently on the natural gas market, where growing
demand for natural gas for electric power generation has increased prices, threatened
supply shortages and raised wellhead and retail prices.



The expanded use of coal as a power-generation fuel has met increasing resistance
because of concerns about the resulting pollutant emissions and because coal
has the highest carbon/hydrogen ratio of all fossil fuels, and thus makes the
greatest contribution to the production of greenhouse gases. The continued use
of coal as a generating fuel is being challenged in many older coal-fueled power
plants, because of its lower efficiency and the general absence of pollution-control
equipment to reduce the emissions of sulfur and nitrogen oxides. Over the past
10 years, the U.S. EPA has taken a far more aggressive posture regarding what
constitutes a major overhaul of these older coal plants which would trigger
New Source Performance Standards review of these plants. As a result, some power
plant owners have elected to convert older generators to burn natural gas to
reduce emissions, rather than installing expensive pollution control systems
on these older power plants – while others have continued to perform minimal
maintenance and repair, rather than battle with the EPA regarding whether more
extensive maintenance and repair should trigger New Source review. The development
of integrated-gasifier combined-cycle coal generation offers the potential to
dramatically reduce emissions from coal-fired power plants, but has relatively
limited impact in reducing CO2 emissions. Research is continuing on approaches
to capturing and permanently fixing the CO2 emitted by coal-fired and other
fossil-fueled power plants, but none of these approaches has been demonstrated
commercially.

Most new electric power-generating facilities constructed in the United States
in the past decade have been natural gas combinedcycle turbine generator plants.
Their combination of higher efficiency and the lower carbon/ hydrogen ratio
of the natural gas fuel results in a reduction of ~50 percent in CO2 emissions
per unit of electric power generated. These plants are operated primarily during
the summer months, when electric demand and consumption are highest. Therefore,
the gas consumption required for the operation of these plants competes with
the demand for natural gas to be pumped into storage to meet peak winter spaceheating
demand. This increased demand for natural gas, combined with restrictions on
natural gas exploration and production, has resulted in rapid and dramatic increases
in natural gas prices for all end uses.

Stalled Solutions

Nuclear power generation currently provides approximately 20 percent of U.S.
electricity. However, no new nuclear generation has been constructed in the
nation in 25 years. There remains widespread concern about the possibility of
a nuclear accident, as well as about the possibility of nuclear plant sabotage
by terrorists resulting in a release of radioactive material from the plants.
Several nuclear plants in the United States have reached their original design
lives. Some have been retired, while others have been subjected to extensive
life-extension projects to keep them in service. The U.S. Department of Energy’s
failure to meet schedules for long-term storage of spent nuclear fuel rods is
another issue facing many nuclear plant operators, which are reaching the limits
of their ability to store spent fuel rods on site.

Renewable sources including hydroelectric dams, geothermal steam plants, wind
turbines and solar photovoltaic systems comprise the remainder of the current
U.S. generating mix. The expansion of hydroelectric generation is limited by
the small number of potential large generation sites and environmental resistance
to the construction of new hydroelectric dams. There is also growing pressure
from the environmental community to eliminate some existing hydroelectric facilities
because of their impacts on fish migration and spawning, as well as other issues.
Geothermal generation, particularly from dry hot rock, represents perhaps the
largest and potentially most reliable source of renewable generation. However,
the technology required to drill the required injection and recovery wells to
the required depths is not currently in commercial use. Wind and solar generation
are growing rapidly, but from a very small installed capacity base. Both are
intermittent sources of power, which require conventional backup to avoid grid
interruptions. Both wind and solar generation could be combined with energy
storage technologies to deal with the intermittent nature of their output. However,
the required storage technologies are also not in commercial service at this
time.

The daunting challenge facing the U.S. energy industry is to meet growing demand
reliably and at reasonable prices in the face of diminishing supplies of fossil
fuels worldwide, restricted domestic resource access, aging infrastructure,
constrained transmission facilities, environmental pressure to reduce CO2 emissions,
immature renewable generation technologies and resistance to the construction
of new facilities. The challenges facing the transportation sector are even
more daunting than for the other sectors, in that there is no established alternative
to petroleum as a transportation fuel. Ethanol and bio-diesel cannot reasonably
expand to replace petroleum. Hydrogen is not an energy source, but rather an
energy carrier which must be separated from oxygen or other compounds using
some other form of energy. Electricity has limited value as a transportation
fuel in the absence of an order-of-magnitude improvement in battery storage
technology.

Potential Sources

One existing technology which has the potential to meet much of the growing
need for electric power is nuclear generation. Despite persistent safety concerns,
nuclear electric generation has an excellent safety record in the United States,
as well as in most of the rest of the world. Nuclear generation in the United
States has a history of very high capital costs, largely resulting from construction
delays and plant redesigns during the construction process. One U.S. nuclear
generator was constructed and fueled, but was not permitted to begin commercial
operation because of concerns regarding the evacuation plan in case of a nuclear
emergency. While these issues were difficult and expensive to tolerate in a
regulated utility rate-base environment, they would be absolutely intolerable
in nonutility installations funded by private capital. The potential of nuclear
energy to meet the growing energy needs of the nation will be severely limited
if issues regarding power plant siting, environmental review and approval, construction
permitting and operational licensing cannot be resolved in a timely, efficient
and effective manner. Some combination of advanced power plant designs, design
standardization, fast-track review and approval, and streamlined oversight will
be necessary to allow nuclear generation to reach its potential.

Another shorter-term approach to meeting growing U.S. energy and chemical feedstock
needs is the increased importation of liquefied natural gas (LNG). Again, despite
persistent safety concerns, the safety record of the LNG industry worldwide
is excellent. However, like nuclear power plants, LNG terminals are faced with
siting issues and environmental approvals. Also, increased reliance on LNG would
require the construction of new pipeline facilities from the LNG receiving terminals
to the markets to be served. These pipelines would be faced with the same siting
and environmental hurdles as new power plants, new or expanded electric transmission
facilities, the LNG terminals and other related energy facilities.

One important factor which could further complicate the expansion of U.S. energy
supplies is the imposition of carbon emissions limits which could result from
U.S. adoption of the Kyoto Accords, or legislative imposition of emissions limits
as proposed by Senators John McCain and Joe Lieberman. Both of these approaches
require absolute reductions in carbon emissions, rather than per capita reductions,
which impose far greater real reductions in emissions on a growing economy such
as that of the United States.

For example, let’s look at the Kyoto Accords, which would have required the
United States to reduce CO2 emissions 7 percent below 1990 emissions levels
by 2012. Since the U.S. population is increasing at a rate of ~1 percent per
year and is producing a corresponding increase in energy consumption, U.S. energy
consumption and associated CO2 emissions will have increased by ~25 percent
by 2012 compared to 1990, increasing the total required reduction in emissions
to ~32 percent below what they otherwise would have been. This is an impressive
reduction in itself. However, what is more important in understanding its significance
is that a reduction of this scale is not achievable with improvements in the
efficiency of existing coal-fired generation, or the adoption of the more efficient
IGCC coalfueled design. It would be barely achievable in the transportation
sector by replacing all existing gasoline-fueled vehicles with comparable hybrid
vehicles. Finally, it is totally unachievable, beginning in 2006, without retiring
billions of dollars in existing facilities and equipment before the end of their
economically useful lives.

The reduction targets set by the Kyoto Accords are only phase one of a multiphase
effort to stabilize CO2 concentrations in the atmosphere at a level of ~450-550
parts per million. Ultimately, achieving this goal would require an approximate
95 percent reduction in U.S. per capita carbon emissions. A reduction of this
scale is achievable, based on current commercially available technology, only
with a virtually full-scale conversion to nucleargenerated electricity, including
electrolytically generated hydrogen for all transportation requirements.

This discussion leads to one overarching recommendation: “Don’t begin vast
programs with half-vast ideas.”