The Trump administration, which is considering subsidizing baseload coal and nuclear power for resiliency and “national security,” is pursuing an “all-of-the-above” energy strategy that emphasizes natural gas exports, said Energy Secretary Rick Perry at the World Gas Conference this week in Washington D.C.
In a keynote speech on June 26, Perry described the shale gas revolution—which doubled the future supply of natural gas between 1990 and 2016—as an “astounding miracle” that has quickly transformed America’s standing in global energy markets. That transformation has allowed the U.S. to produce energy more “cleanly and efficiently, more abundantly and affordably, and from a wider range of energy sources … than anyone predicted,” he said.
A product of “innovation,” the transformation has helped drive the growth of renewables and is “propelling us to toward the next generation of nuclear energy.” It has also helped the U.S. reduce its carbon emissions by 14% between 2005 and 2017.
The Trump administration’s goal “is to continue to reduce emissions going forward,” Perry said.
‘All-of-the-Above’ with Clear Preferences
Perry said the Trump administration brought the all-of-the-above “policy” to Washington a year and a half ago, and that it works “for—not against—the many innovations that are helping produce more of every fuel, from renewables like wind and solar, hydro, and nuclear, to fossil fuels such as oil, coal, and of course, natural gas,” he said.
The strategy has actually been championed to varying degrees by every administration since the 1970s, starting with Richard Nixon. Barack Obama’s administration coined and pushed an “all-of-the-above” strategy starting in 2012, though it was heavily focused on jump-starting renewables and fostering natural gas. The Obama administration also promulgated a number of federal rules that deeply affected the economics of coal power, and it was mostly silent on nuclear power.
Perry on Tuesday noted that the Trump administration would pursue the “all-of-the-above” strategy and reduce emissions (presumably of carbon) through innovation—not regulation. “By advancing policies like tax and regulatory reform, the president is providing both the incentive and the freedom to innovate further,” he said.
In his speech, Perry did not mention a memo circulated by the Trump administration and leaked earlier this month that urges federal action to force grid operators to buy power from coal and nuclear plants that have been rendered uneconomic by the advent of cheap and abundant natural gas and the proliferation of renewables. Meanwhile, while lauded by some companies, tax reform has left regulated utilities laden with more debt. The Trump administration has also slapped hefty tariffs on imports of solar modules and solar cells, which the solar industry said in April has prompted at least 18 solar companies to shed jobs, cancel projects, and even embark on restructuring.
Aversion to the Trump administration’s possible push to prop up uneconomic coal plants was apparent at the World Gas Conference, where a number of speakers noted it could artificially temper growth of the gas generation sector. Orlando Alvarez, president and CEO of BP Energy Co., said specifically that the measure introduces regulatory uncertainty in a sector already afflicted by unknowns. “There seems a lot going on around the [Department of Energy’s] coal bailouts and getting infrastructure built in the U.S., including for gas pipelines and terminals, which is a complicated process,” he said.
Sen. Michael Bennet (D-Colo.) took a stronger stance on the tariffs and potential coal subsidies at a session examining a partnership between gas and renewables. “That is a battle that you want working with an emerging coalition of interest,” he told the audience of gas professionals. “The administration has also rolled back regulations that are going to hurt our economy in Colorado, some of which industry didn’t even ask for, causing needless uncertainty in the energy sector.” The bottom line, he said, is that “we need to stop flitting back and forth on our energy policy as a country. And to do that, we have to construct durable politics around these issues.”
A New Direction for Natural Gas
In his speech, Perry noted that the U.S. was hosting the World Gas Conference for the first time in three decades. The triennial event is hosted by the International Gas Union (IGU) to offer “timely updates on strategic, commercial, and technical issues facing the entire gas value chain.”
According to a comprehensive global gas overview released by the IGU on June 27, global gas consumption grew 3.7% in 2017 alone—more than double the 1.5% average annual growth rate from 2010 to 2016. Consumption growth especially soared in China (where consumption spurted 15% compared to last year, owing largely to coal-to-gas switching in the industry and buildings sector), and South Korea, which saw a 10% increase. Europe’s gas consumption grew more than 6% in 2017, driven by stronger economic growth and a broader shift away from coal power. Consumption also surged between 5% and 7% in the Middle East and Africa.
In the U.S., the country that kicked off the shale gas revolution and where gas demand has grown for seven consecutive years, gas consumption turned downward, decreasing 1.4% compared to 2016, “largely due to the power sector where higher prices, pipeline constraints, and greater renewables displaced gas,” the IGU said. That compares with a consumption surge of 7% in Canada and 3% in Mexico.
In 2017, meanwhile, U.S. gas production grew by only 1%, driven entirely by greater unconventional output from the oil-led Permian basin and sustained production growth from the gas-rich Marcellus and Utica basins in the Appalachian region.
The outlook for American gas trade, however, remains bright, according to the International Energy Agency (IEA), which presented findings from its Market Report Series: Gas 2018report, released during the World Gas Conference on June 26. In 2017, the U.S. became a net exporter of gas, owing largely to a surge in liquefied natural gas (LNG) exports and increasing pipeline exports to Mexico and Canada. Between 2016 and 2017, incremental U.S. gas exports soared from around 66 billion cubic meters (bcm) to 90 bcm—60% of which was LNG exports. The near quadrupling of LNG exports from 2016 to 2017 was enabled by a capacity increase from Sabine Pass, which began operations in 2016, and remains the only commercially operating liquefaction terminal in the U.S. In 2017, U.S. LNG veered away from the Americas and toward Asia and Europe, and to a lesser extent, the Middle East.
As IEA Executive Director Dr. Fatih Birol told reporters on Tuesday, the overall number of countries that imported U.S. LNG soared from 17 in 2016 to 25 in 2017. “Our numbers show that in the next five years, 75% of the growth in LNG will come from the U.S.,” he said. “Huge jump. And perhaps the most important implication today, the share of U.S. in global LNG markets, which is about 4%, will go to 20% in five years.”
On Tuesday, Perry said the U.S. is exporting LNG to 30 countries on five continents. “We are sharing our energy bounty with the world. And in so doing, we are empowering our friends, allies, and trading partners economically and energy-wise as well.”
Natural gas export opportunities will also enable the U.S. to share “technology and know-how.” That will help many nations develop energy diversity, and “free themselves of poverty and want,” Perry said.
But the world isn’t completely on board with the Trump administration’s vision, Perry noted. In the U.S. and abroad, “there is still stubborn opposition to natural gas and other fossil fuels,” he said.
“The opposition exists even as fossil fuels become cleaner and low-emissions natural gas increases its share of total fossil production and use,” Perry said. “These opponents flatly reject the ‘all-of-the-above’ strategy … the innovation-driven strategy that is helping us achieve energy security.”
According to Perry, the answer is not to “exclude” oil, gas, and coal from the world’s energy mix.
“For the sake of energy security, for the sake of economic security, for the sake of national security, for the sake of environmental progress, and for the sake of our fellow human beings, we must honor the right of every nation to responsibly use every fuel at its disposal,” he said.
—Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)