We can all relax now. Anyone who has a stake in US energy and climate policy no longer needs to follow the primaries, or even the final returns. The political debate is not connected to the material reality. So ignore it, like the brief waking memory of a bad dream.
Start with one of the pillars of the Trump administration’s re-election campaign, the assertion of US “energy dominance” of the world. Forget the baroque psychosexual undertones of the slogan. Just consider what is happening to the prospects for US LNG exports. None of those exports, by the way, are going through terminals that started construction under this administration.
Thanks in part to the economic impact of the coronavirus, Asian LNG prices have collapsed much faster than US prices. That means it no longer pays to chill American natural gas, load it on to LNG tankers, ship it across the Pacific, and re-gasify it. So US LNG exports are ex-growth.
Far from feeling “dominant”, American energy and power companies are feeling the spike heel of bondholders’ demands for capital spending discipline grind into the once-brave face they presented to Wall Street. They are tied up by contractual commitments to fill pipelines and processing plants and by their lenders’ austerity.
I think the Trump campaign and its allies can forget about bigger pledges from grateful E&P friends. They should be thankful not to be hit up for a refund on the cheques written in 2016 and 2018.
On the Democratic side, the promises (of varying intensity) to “ban fracking” will be turned into toxic waste water after the fall elections, that is, if they survive the Pennsylvania and Texas primaries. The US signed its fracked-gas-generation deal back in the Bush and Obama administrations.
Given the high rates of depletion of shale gas wells, any significant restrictions on hydraulic fracturing would lead to the current gas surplus turning in to a shortage in less than an election cycle. Power prices would rise sharply.
Put a cap on those, using executive magic, and you are back in the 2001 California blackouts. You could re-bankrupt PG&E, again, and do the same for many other utilities. Then who could use renewable energy contracts with the utilities to finance wind or solar projects? Oh, federal guarantees?
OK, so the guarantees would cover the engineering and planning costs for anyone proposing renewables projects. Does everyone get their own engineers? From where? And who would select the winners? Green New Deal enthusiasts who co-ordinated balloon releases at campaign rallies?
The enthusiasts are correct that the unit costs of power produced by wind turbines and solar panels have continued to decline. US coal plants will keep shutting down, whatever the Trump administration thinks or does.
The problem, though, is that renewables developers around the world are coming up against cost and planning barriers to connecting their generation to power grids. Those are more or less prohibitive depending on how well the energy transition has been planned and the quality of the grid’s connections with flexible neighbouring generation.
Denmark expects to have a completely green grid by 2026. But then it is connected to hydro and nuclear power in Sweden and Norway.
On flimsier grids, or grids in the developing world, connectivity becomes expensive or administratively difficult when renewables take as little as 20-25 per cent of market share. Transmission operators or national power authorities can insist that renewables projects pay not only for their direct connections, but to whatever upgrades are desired in the rest of the system. This can kill the economics.
In Argentina, low-cost wind resources in Patagonia lack the high voltage lines to bring power north. The country does not have the foreign exchange to build them.
In Mexico, Cenace, the national grid operator, has decided to interrupt solar energy from European-financed projects rather than reduce output from dirty fossil power from government-owned turbines. The president’s appointee prefers the controllability of the legacy power’s product. The Europeans can sue Mexico, in Mexico, under Mexican law.
In California, solar projects are having record amounts of power “curtailed”, because the grid cannot make use of their output in the middle of the day.
Wind turbine and solar manufacturers and cash-challenged advocates believe needed transmission system upgrades should be paid for by “black molecule” generation, or, alternatively, the tax system. Most politicians would rather not choose sides.
US voters will not hear that debate this year. Instead “energy dominance” and “Green New Deal 2030”. Pathetic performance. Tune out. Stop worrying.