The mix of fuels used to generate electricity in the United States is experiencing a seismic shift that is unlike anything that has happened in decades.  Looking across all sectors, U.S. coal-fired generation in 2011 fell to its lowest level since at least 1949, which is the earliest data available from EIA.  Moreover, according to EIA’s latest estimates, this trend will accelerate sharply in 2012, with coal-fired generation falling to just 36.2 percent of the U.S. total—far removed from its decades-long position as the source of more than half of U.S. power generation.

What’s driving this shift?  One look at the graph above tells the story pretty clearly.  The use of natural gas in power generation—which has steadily increased since about 2003—is set to soar in 2012.  While total U.S. power generation will increase by less than 1 percent between 2011 and 2013, gas-fired generation will increase by 23 percent.

In the past, natural gas was viewed as a risky option for baseload power generation, because fuel prices tended to be both high and volatile, making them unable to compete with coal. This fuel price volatility has historically outweighed the distinct advantage held by natural gas generators when it comes to capital cost. The revolution in domestic shale gas production, which has depressed natural gas prices to levels that are highly competitive with coal in numerous U.S. markets, has fundamentally changed the calculus for power generation economics.  Moreover, some recent analysis suggests that the capital cost equation has been moving even farther in favor of natural gas as air quality regulations and the complex construction requirements drive the cost of coal plants higher.

Changes in the fuels used to generate electricity could have important implications for everything from electricity prices to greenhouse gas emissions and air quality.  One area of particular interest to us is the impact a cleaner grid will have on the upstream CO2 emissions associated with plug-in electric vehicles (PEVs).  We sometimes point out that PEVs are the only vehicles that will get “cleaner” as they get older as the grid moves toward lower-carbon forms of electricity.  The experience of the past several years and expectations about the very near term demonstrate this quite well.

As the figure below shows, the amount of upstream CO2 emitted by a PEV in charge-depleting mode has been declining substantially in recent years—even when it is powered by the average U.S. grid mix.  A driver who purchased a PEV in 2005 would have seen his or her upstream emissions fall by 16 percent by 2012.  In other words, the driver’s vehicle would have continuously improved its advantage over the average light-duty vehicle for that year, which achieved an adjusted fuel-economy rating of 19.9 miles per gallon.  In fact, even when taking into account line losses, a PEV purchased in 2005 would just about be on par with the best hybrids on the road today, which tend to register fuel-economy ratings of about 50 miles per gallon. Going forward, as more U.S. electricity is generated by natural gas, nuclear power, and renewables, electric vehicles will only continue to get cleaner.

A final note: Of course, no EV is likely to be powered by the ‘average mix.’  Instead, it will be powered by the marginal power plant serving its load.  To the extent that this is a natural gas turbine, nuclear power plant, or renewable source, EVs are already the cleanest available transportation option.  Analyses like this one from Oak Ridge National Labs suggest that gas turbines are likely to play a key role in powering EVs.

Ever since wind energy came on the scene, questions have been raised about their impacts on local weather.  It stands to reason that diverting wind from its old pattern of whistling down the plain to make electricity would have SOME type of impact on weather patterns.  Now comes this study, that ”showed for the first time that wind farms of a certain scale, while producing clean, renewable energy, do have some long-term effect on the immediate environment.”

This is a first, at least for your writer.  And the methodology seems sound:

“Using sensors aboard a NASA satellite, researchers at the University at Albany-State University of New York, and the University of Illinois systematically tracked a cluster of wind farms in central Texas as the installations grew from a few dozen turbines in 2003 to more than 2,350 by 2011.

On average, the nighttime air around the wind farms became about 0.72 degree Celsius warmer over that time, compared with the surrounding area, the scientists reported Sunday in the peer-reviewed journal Nature Climate Change.”

Far from earth-shattering — and clearly offering no reason to shy away from wind energy — today’s report once again demonstrates two things:  1) The law of unintended consequences is real; and, 2) there is no impact-free technology we can use to harness energy.  The net effect of wind farms is of course still overwhelmingly positive, but let’s not pretend that it is uniformly so.

The Environmental Protection Agency has dropped its claim that an energy company contaminated drinking water in Texas, the third time in recent months that the agency has backtracked on high-profile local allegations linking natural-gas drilling and water pollution.

On Friday, the agency told a federal judge it withdrew an administrative order that alleged Range Resources Corp. had polluted water wells in a rural Texas county west of Fort Worth. Under an agreement filed in U.S. court in Dallas, the EPA will also drop the lawsuit it filed in January 2011 against Range, and Range will end its appeal of the administrative order.

WSJ readers may have gloated a bit on EPA “losing” here, but the real import is that a  “growing number of industry, academic and environmental experts say that while drilling can cause water contamination, that can be avoided by proper use of cement seals and other safety measures.”  And who is better positioned to ensure such local safety measures,  EPA or the various state regulators?  

EPA itself had a reasonable perspective on the withdrawal of its claim against Range:  (I)n a statement, the agency said that settling with Range “allows EPA to shift the agency’s focus in this particular case away from litigation and toward a joint effort on the science and safety of energy extraction.” The agency said it and Range would continue to monitor water wells and share data.

And the WSJ also found a reasonable-sounding enviromentalist to spin the outcome:  “This points out why it is so critically important to get a regulatory structure in place where companies are required to do thorough, publicly available baseline testing before they get in ground.”

A regulatory structure that provides for baseline water quality conditions to be established before production begins could actually be as protective of producers as it would be informative for citizens.  And an EPA role that focuses on sicence and safety that leaves permitting and regulation to the states could be the right answer as well.

Gold writes:  A couple of years ago, natural gas was touted as a bridge fuel to a renewable-energy future. But the bridge is looking longer and longer, spanning decades into the future. Is gas still a bridge, or a detour? Will it keep renewables from reaching viability that much longer?

Gold quotes venture capitalist Vinod Khosla, who has bet heavy on alternative energy sources and spent years lobbying for supportive state and federal policies, as calling shale gas “a black swan.”  Now, black swans can be good, but high-impact surprises usually aren’t.  In this case, if you are long on renewables, you are feeling pain with low natural gas prices.

If you are a consumer, or somebody who is elected by them however, you’re liking low energy bills:

California Gov. Jerry Brown said gas could help his state meet aggressive goals for generating a third of its power from renewables. The low cost of natural gas is helping offset the higher cost of wind and solar. It’s helping prevent “sticker shock,” he said.

That is close to a traditional role for natural gas in the electricity system — providing load-smoothing electrons that fill the gap when its cloudy and the wind isn’t blowing.  But what about abundant natural gas as baseload power?  What if it crowds out renewables altogether, rather than supplementing them?  Here’s Bill Gates on that prospect:

Having so much natural gas is “phenomenal,” he said, “if you put aside climate change.”

The idea that natural gas use is bad for the climate has been a recent, ahem, discovery.  Back when natural gas was thought of as a substitute for coal — and that being only the coal needed after aggressive efficiency and conservation measures were adopted — we always heard that burning natural gas for power emitted half the greenhouse gases that burning coal releases.  Which is true.

But now that natural gas production and usage is far more robust, enviros are concerned about two things:  1) displacing truly clean fuels like renewables — who emit negligible GHGs on a life-cycle basis (counting wind turbine or solar cell production activities) — and, in a more recently expressed worry, 2) how much methane “leaks” during the production and transport of the gas to the combustion facility.  Since methane is such a powerful GHG — 25 times more potent than CO2 — even a small leakage rate will have a big climate impact.

So, is focusing our electricity generation on natural gas a good thing?  Depends on your metric.

But that’s history, and the annual two-week negotiations over addressing global climate change did end on Sunday with what the WaPo called “a last-minute deal.”  The deal?  An agreement to potentially reach an agreement that would apply something called “an agreed outcome with legal force” to developing nations.  This is arguably an advance on the Kyoto Protocol, which did not require developing nations to commit to reduce their greenhouse gas emissions.   And that’s important because some “developing nations” — namely China and India — are leading the globe in aggregate emissions.  To be fair, their per capita emissions are far lower than developed nations, but that shouldn’t give them a free pass.  The key negotiating issue since the US pointed out the fundamental unworkability of the Kyoto Protocol has been  how to account for developing nations’ exploding emissions without unfairly impeding their economic growth — after all, the developed nations built their economies on cheap fossil fuels and only subsequently has the world (well, most of it) realized that there will be highly negative consequences because of it.

It remains to be seen whether this year’s climate confab really moved the ball on this point.  Host South African foreign Minister Maite Nkoana-Mashabane certainly thinks so, as the WaPo quotes him saying, “We have indeed saved tomorrow today.“  Veteran climate watcher Alden Meyer, of the Union of Concerned Scientists, had a different view, noting failure to achieve agreement on reducing the gap between expected emissions and those most scientists believe are the maximum that the climate can endure without expensive and life-threatening damage:  “There’s nothing [in the agreement] that’s going to get the world to lift its game and close that gap.”

Maybe more important news this weekend came from the Nuclear Regulatory Commission, where dysfunction apparently reigns.  Both the WaPo and the WSJ reported Saturday on four NRC Commissioners, two Democrats and two Republicans, writing to the White House accusing Chairman Greg Jaczko of  ”actions and behaviors [that] are causing serious damage to this institution.”  That quote is from the WSJ, which runs an unfortunate lead sentence (“Four of the five members . . .”) — if you didn’t already know that there are only four commissioners and a chairman, you don’t find that out until the end of the piece, so casual readers may have thought there was a hold-out.  The fact is that all four of these highly respected professionals, Democrat and Republican alike, took the trouble of airing their concerns about the NRC’s leadership to the White House.  House Oversight and Government Reform Committee Chairman Darrell Issa, not the fuming four, released the letter to the media.

The bipartisan nature of the criticism made Senator Harry Reid’s (D-NV) otherwise laudable defense of his former staffer ring a bit hollow.  As reported in the WaPo on Sunday, he called the complaints “a politically motivated witch hunt.”  We’re guessing Senator Reid meant that Chairman Issa was hunting witches, not labelling the letter such.  But since loyalty in Washington is often in short supply, we’ll give him a pass either way.  Not so the NRC as a whole, an organization too critical to our energy future to have it’s oversight confined to the weekend papers.  Oversight hearings, anyone?

WaPo’s dynamic duo of Juliet Eilperin and Steven Mufson reported on the “Keystone pipeline battle heating up” this past Sunday.  Useful graphic shows the existing Keystone pipeline as it drops down through the plains states and over to St. Louis and quotes Canadian ambassador Gary Doer about the pending US decision on the expansion:  ”If it’s made on the merit, we’re confident.  If it’s made on the noise, it’s unpredictable.”  This project gets essentially an anti-subsidy from the US, with costs nearing $2 billion on pipe and other stored equipment sitting idle during the three-year environmental review.  That’s almost 30% of the total $7 billion project cost.  Kind of a reverse investment tax credit.  WaPo cites a worry of activists opposing the pipeline:  ”the break in an Exxon Mobil pipeline in Montana over the summer” that spilled about 42,000 gallons of product and will cost an estimated $135 million to clean up.  But of course, that’s precisely the point:  it will be cleaned up.  Anti-energy activists need to recognize that producing energy carries risks and consequences, no matter how carefully it’s done.  More efficient cars and lightbulbs will help us all use less energy, not none.

Saturday’s WSJ also noted that forecasts of colder temperatures caused natural gas futures to jump 4.2% to $3.923 per million Btus.  ”Frosty Air Heating Up Gas Futures” quoted Matt Smith at Summit Energy:  ”It’s all about the weather.”    The same article reported that US EIA found underground gas inventory up 92 billion cubic feet, “much higher than the five-year average build for the current period.”  If futures can “jump” to only $3.92 per MBtu, the news is really how astoundingly low natural gas prices will probably stay. . . .

Front page in multiple papers Saturday on White House review of all loan guarantees made by DOE under the stimulus bill.  WaPo headline:  ”White House orders audit of Energy Dept. loans: Move comes amid GOP subpoena threat in Solyndra case.”  The story that won’t die, the “review is a tacit acknowledgment that the loan program, defended by President Obama and his senior advisers for weeks, has raised enough internal concern that an outside assessment is necessary to clear the air and determine its future.”  Good luck clearing the air.  Loan guarantee program future is bleak . . . .

Front page Sunday NYT:   “A New York Village’s Debate Over Drilling Turns Personal”:  ”The debate over horizontal hydraulic fracturing . . . has become increasingly contentious across the Eastern United States, with dozens of communities passing or considering bans.”  No real news here, including the allegation that fracking opponents are also generally “antigrowth fanatics, opposing a once-a-year music festival . . . wind turbines . . .even additional Little League fields. . . . .”

And the most important piece of the weekend, Dan Yergin in Sunday’s WaPo, Outlook section.  In “Oil’s new world order,” Yergin makes the point that the global geopolitical balance of power in the oil economy is shifting.  He finds that a “new world oil map is emerging” . . .”centered not on the Middle East but on the Western Hemisphere.”  But don’t breathe a sigh of relief yet, for since “there is only one world oil market” the U.S. “will still be vulnerable to disruptions . . . .”  Darn.

“The world is headed for a “dire future” where high energy prices drag on economic growth and global temperatures rise dangerously, unless significant innovations are made to lower the cost of clean energy and carbon-capture technology, the International Energy Agency said.

Senior officials from the agency painted the gloomy picture of the world’s current trajectory at a two-day meeting with international energy ministers and business leaders in Paris.

Participants concluded that growth in energy demand will be met largely by coal—and that the only hope of keeping global temperatures at safe levels would be in the creation of cheaper technologies to caputre carbon dioxide.”

Just a few inches later, we read “Tokyo Reconsiders Plans to Reduce Emissions”:

“Japan is reconsidering plans to cut carbon-dioxide emissions by 25% by 2020 due to a rethinking of its energy future, and the country is worried that it is spending too much on carbon-credit programs,a  senior government official said.

Japan’s doubts, prompted in part by its nuclear disaster in March, come at a time the European Union is questioning whether it should press ahead with plans to cut greenhouse-gas emissions if others don’t follow suit.”

So on the one hand, future costly calamity awaits, but on the other, current economic maladies reduce interest in spending money to prevent that future.

If only there was a way to make sound economic decisions today that held promise of reducing future high prices and dangerous global temperature rises.  Fortunately, there is.  Our dependence on oil in the transportation sector is both a current drag on the economy and a major contributor to future costly climate change.  Moving from dependence on mostly imported oil to completely homegrown advanced biofuels and domestically-powered electrified vehicles will reduce our balance of payments deficit, insulate us from oil-related economic shocks, lower the cost of clean technology, and help prevent dangerous global climate change.  It’s not a win-win, it’s a win-cubed.

New York’s charged debate over the natural gas extraction process known as hydrofracking will soon move to the face-to-face stage. At hearings set for November, pro- and anti-drilling forces will get a chance to address state regulators directly.

New York’s Department of Environmental Conservation, which is tasked with regulating the drilling, has announced that it will hold public hearings in four places — New York City, Dansville, Binghamton and Loch Sheldrake — on its draft environmental impact statement and proposed regulations for high-volume hydraulic fracturing. Each public hearing will include an afternoon and an evening session, the department said.

The hearings are part of an extended public comment period that ends Dec. 12 and is intended to ensure that the rules are tough enough to guarantee that drilling is conducted safely.

One hopes that’s not actually the goal.  No regulations are going to “guarantee” that any human activity will be conducted with 100% safety.  Humans are involved, so not matter how good the systems are, the potential for human error exists. 

The point of regulation is in this area, as in so many others, is three-fold:  ensure that best practices are followed by all participants; ensure that conditions are monitored so that failures or lapses can be detected; ensure that those engaged in the activity have the financial resources to make affected humans and ecosystems whole in the event of an incident. 

Nothing we do is risk-free, and energy production in particular has the potential for damage.  We live with that risk because energy production is so important to our way of life.  We seek to mitigate the risks through the application of regulations and the threat of civil litigation.  To pretend that the goal is guaranteed safety is a disservice to the public.

First, ANWR—an environmental preserve in the northeast corner of Alaska larger than the state of West Virginia—is again the subject of debate over if the territory should be opened to oil and gas exploration.  On Wednesday, Alaska Governor Sean Parnell (R), along with Alaska Senators Lisa Murkowski (R) and Mark Begich (D) as well as Rep. Don Young (R) testified in a House Natural Resources Committee Hearing.  Committee Chairman Doc Hastings (R-Wash.) is pushing to open the reserve as a way to generate revenue through lease and royalty sales.  Politicians have been battling over the ANWR for decades, and at the current time the territory remains closed.  But, with the country’s unacceptable levels of unemployment and the current focus on deficit reduction, it seems entirely plausible for a change in outcome.  Earlier this year, Senator Murkowski applauded SAFE for releasing analysis supporting directional drilling in ANWR, an approach which allows development of oil and gas resources without establishing a surface presence within the territory (full report available here).  It is also important to note that at a renewable energy conference this week, Sen. Murkowski expressed support for using revenues from oil to fund clean energy projects.

The focus of congressional attention this week has been on the House’s vote rejecting a short-term continuation of government funding.    After all but six Democrats aligned against the bill, House GOP members scrambled for support within their own ranks and ultimately came up short, with the vote failing 195-230.  Speaker of the House John Boehner urged members of his party to pass the bill, but many found it contained insufficient budget cuts for their liking.  “Boehner just broke it down pretty simple,” said freshman Rep. Bobby Schilling (R-Ill.). “He goes, ‘I know there are some of you out here who don’t want to vote for this thing, but if you don’t, you think this is a big number? Wait until you see what we get back, and we’re not in the driver’s seat then.’ ”

A major point of contention within the bill is funding for the Federal Emergency Management Agency (FEMA), which must be increased to manage recent natural disaster such as hurricanes in the East Coast, wildfires in Texas, and flooding in the Midwest.  The GOP’s goal is to offset increases in FEMA’s budget with reductions in other programs, one of which is Advanced Technology Vehicle Manufacturing (ATVM) proposal.  The ATVM’s budget is $1.5 billion, 1 billion of which Republicans are hoping to divert to FEMA, while rescinding the other .5 billion.   It is important to note that this is the only government loan opportunity for vehicle innovation, which creates technological solutions to transportation and energy challenges.  House Minority Leader Nancy Pelosi has sharply criticized the move, and argues that an offset for disaster management is unprecedented.

Both the House and Senate must pass a spending bill by September 30^th to avoid government shutdown.  It is essential that this important loan program remain in the final proposal—sacrificing it would only serve to delay essential innovations currently being made in electric and hybrid vehicle technology.