US energy policy review reveals US doesn’t have an energy policy

US oil and gas production have boomed, but the country still lacks a coherent energy strategy, according to an International Energy Agency review. The report credits the US for reducing greenhouse emissions, and encourages further investment in electricity infrastructure.

As oil prices plummet, some question whether the US – with its piecemeal, disjointed federal energy policy – is ready for a new era of fossil-fuel abundance and renewable-energy innovation.

The US oil-and-gas boom benefits the US, but lack of an overarching policy hamstrings US potential and poses environmental risks, according to a report released this week by the Paris-based International Energy Agency (IEA). Low oil prices could divert attention from renewables, the IEA said, and cheap natural gas could discourage electric providers from pursuing lower-carbon options like nuclear, solar, and wind.

Calls for clearer US energy policy aren’t exactly new – Congress has long lamented a lack of purpose and coordination throughout the nation’s varied and expansive energy sector. But the issue is gaining new importance as the US finds itself at the center of a North American energy boom. If the US is to emerge as a global energy superpower in the coming decade, shouldn’t it make sure it has its own house in order first?  

“Developments in the US energy sector have bolstered the country's energy security, sustainability, and economic competitiveness – but challenges remain,” IEA Executive Director Maria van der Hoeven said Thursday at an event with US Energy Secretary Ernest Moniz.

A chief obstacle in US energy policy a lack of clarity, the report says. This month’s temporary, one-year renewal of the wind production tax credit is an example of that uncertainty, van der Hoeven said; a one-year renewal of the tax break doesn’t provide wind power producers with the certainty they need to plan long-term investments. Uncertainty also hangs over crude oil exports. Earlier this year, the Commerce Department approved permits to export lightly-processed condensates, but many in the oil industry have struggled to interpret what exactly the department’s ruling means. Many have also questioned the logic of cutting coal use at home, only to export the carbon-heavy fuel overseas.

Sec. Moniz acknowledged the need for more coordination, cohesion, and deliberateness in US policy Thursday. He said IEA’s report will help inform the US Quadrennial Energy Review, which Obama directed Mr. Moniz to create last January as a “comprehensive and integrated energy strategy.” The review will come out next month.

 

“We’re optimistic it will be consequential as to how we pursue an integrated energy approach and how we pursue a coherent discussion between the administration and the congress,” Moniz said Thursday.

The sudden collapse in oil prices over the past few months must be addressed as well. Cheap oil is a challenge for US shale producers, but it might also provide an opening to make policy changes, like phasing out fossil fuel subsidies, van der Hoeven said. She credited the US for reducing greenhouse emissions, but said there's room for even more improvement.

“Why not use this opportunity to put a price on carbon?” Ms. van der Hoeven said at Thursday’s event, hosted by the Bipartisan Policy Center, a Washington-based think tank.

The US needs “predictable, effective national policies to encourage investment, greater coordination to encourage the integration of renewables, and a common understanding on the future of nuclear power," van der Hoeven said.

A patchwork quilt of cross-cutting federal and state policies govern oil, gas, coal, and renewables in the US. From the ban on oil exports, to New York’s ban on fracking, to the long-delayed Keystone XL pipeline, energy cuts across myriad departments and agencies within the government, often with little coordination.

“It’s seen as a very local, economic issue. The resources are in certain places, so that calls in a lot of local decision-making,” says Deborah Gordon, director of the energy and climate program at the Carnegie Endowment for International Peace. But collectively, Gordon says, it makes sense for the federal government to oversee issues at a higher level.

Governments elsewhere are more centralized and heavy-handed with their energy policies – think Saudi Arabia, Russia, and the rest of the Organization of the Petroleum Exporting Countries (OPEC). These countries own most of their local oil-and-gas companies, set national levels of production to influence prices, and, they claim, promote market stability.

But the excessive, state-controlled policies of oil mega-producers like Russia or Saudi Arabia are not exactly a preferable alternative to the more fragmented situation in the US.

“It’s not very helpful to be a state-owned oil enterprise in a global market,” Ms. Gordon says.  “When things are humming it might look okay, … but in a low market like this, it crashes.”

US energy, despite the challenges, is in a relatively good position to take advantage of the low-price market. That might make now the perfect time to take a fresh look at US energy policy – instead of in the wake of a catastrophe like the Arab oil embargo, the Fukushima nuclear meltdown, or the BP oil spill.

“Energy [policies] have tended to start with some sort of presidential proclamation, either around a crisis or because a president wants to tackle these things,” Gordon says. “This is the opposite of crisis. It’s opportunity.”