IEA Chief: U.S. Energy Security “Golden Age” Is an Illusion

Optimism about U.S. energy security, which is rooted in the abundant supply of fossil fuels alone, is misplaced, Maria van der Hoeven, head of the International Energy Agency (IEA) told attendees at an energy conference in Washington, D.C., on Monday. 

The U.S. has seen a dramatic reversal in its energy fortunes over the past seven years that has sent imports falling, product exports surging, and a boom in natural gas production—”so much so that it is muscling out other sources of power,” the IEA’s executive director said in a keynote address at the 2014 Energy Information Administration’s (EIA) Energy Conference.

However, the traditional definition of energy security, entrenched in “security of supply of fossil fuels,” is “woefully outdated,” she argued. “Although things look bright, this is no time for complacency.”

An Incomplete Oil Future

When the IEA was founded during the oil crisis in the 1970s, “energy security was about responding to—and mitigating the pain of—oil supply disruptions.” Along with stockpiling emergency reserves, increasing output of U.S. light tight oil, Canadian oil sands, and potential deepwater conventional supplies from Brazil means oil security is sound—but only for the moment, van der Hoeven said.

U.S. light tight oil production will reach a plateau over the next decade, which means the U.S. will be forced to rely on the Middle East, she predicted. And the focus will particularly be on turmoil-stricken Iraq, which the IEA projected would provide up to 60% of the Organization of the Petroleum Exporting Countries’ capacity growth over the next five years.

One way to contribute to energy security is to slash fossil fuel subsidies, which “encourage wasteful consumption,” she said. According to the IEA, more than half a trillion dollars were spent on such subsidies in 2012 worldwide. While the U.S. does not subsidize “the consumption of fossil fuels,” the nation’s unleaded gasoline prices are the lowest among members of the Organisation for Economic Co-operation and Development. That’s because gasoline taxes are uncommonly low, she said.

An Overreliance on Natural Gas

However, “energy security is no longer just about oil,” she stressed.

Cheap gas as a result of the shale gas boom is “driving out older power generation” in some part of the U.S., she noted. “I have no problem with old plants being retired. But be careful about the degree to which you rely on gas. Energy security requires diversity; you do not want too many of your eggs in the same basket,” she warned.

The nation’s apparent overreliance on natural gas was tested during the polar vortex, she said. “Coal, nuclear, and wind were all essential for keeping the lights on. Diversity of your power mix guarantees your short‐term energy security.”

Van der Hoeven also dispelled claims that gas, which has displaced substantial amounts of coal, is beneficial to climate change mitigation. She said: “Let me be clear: Gas may be the cleanest of fossil fuels, but it is still a fossil fuel.”

She said the IEA would back policies that would promote “only the most modern and efficient gas plants being built with the anticipation of further carbon constraints.”

A Climate Change Threat to Reliability 

Van der Hoeven also called on the U.S. to step up efforts to limit the impacts and costs of climate change, saying, “System resilience also improves when markets are better‐connected and designed.” The Environmental Protection Agency’s (EPA’s) rules alone are not “compatible with minimizing the global temperature rise to 2C.” Renewables and energy efficiency “may well need to take center stage, but real action is required on [carbon capture and storage] and other low-carbon technologies to pave the way for oil, gas, and coal to play a full role in a secure global energy system for decades to come.”

Another way the U.S. could further secure its energy future is to spend more significantly on resilient infrastructure, including “smart transmission and distribution systems that are safe from cyber-threats.” About $2.1 trillion needs to be invested in power sector infrastructure in the U.S. through 2035, she noted, and around 60% will be required for new generation.

—Sonal Patel, associate editor (@POWERmagazine, @sonalcpatel)