A version of this appears on the National Journal Energy Insiders blog.
Our energy infrastructure leaves consumers exposed to volatile, fossil-fuel linked prices under centralized utility and oil company control. We need an energy consumer “Bill of Rights” that gives households the tools they need to generate more of their energy from onsite renewables, afford energy efficiency retrofits, and have improved access to mass transit in their communities. Record US oil production can’t lower retail gasoline prices, and today’s inexpensive natural gas won’t last long. But entrenched industries are fighting so-called “disruptive” technologies like rooftop solar, and instead seek to maintain the status quo. But the status quo is no longer affordable, both from an economic and a climate perspective.
Let’s start with oil: it’s a globally priced commodity driven more by Chinese demand than domestic production. That’s why record US oil production has failed to deliver cheaper gasoline to motorists. Oil production efficiencies and fracking’s technology improvements aren’t translated into lower prices because consumers are charged for the price of the commodity, and Wall Street traders’ strategies price oil with irrelevance for efficiency. As a result, drilling and fracking technological efficiencies are pocketed by oil drillers, as gasoline and oil prices have actually increased for consumers during the oil boom. Contrast this phenomenon with the iPhone, microchips or solar panels, where technology efficiency gains are translated into ever-lower prices for consumers (and where renewable energy features zero fuel commodity costs). Solar PV costs are plummeting, from $3.80/watt in 2008 to $0.86/watt in mid-2012. And of course there’s all of the wasted water of fossil fuel production. The equity prices of fracking companies benefit from the fracking boom—consumers don’t.
Natural gas is problematic too. It’s imprudent policy to assume that gas will remain cheap, or even affordable for that matter. While we most likely have a few more years of moderately-priced natural gas, we will see a return to the Bad Old Days of natural gas price volatility as soon as emerging and proposed infrastructure changes accelerate. Natural gas’ emissions benefits are no match for zero-emission competitors, but today’s cheap gas prices are luring crucial support away from the long-term renewables solution.
In the power sector, decisions are being made based on today’s low prices that commit significant parts of our electricity infrastructure to gas for the next generation. This will come at the expense of renewables, which, unlike natural gas, will only have a plummeting future cost curve. It would be one thing if the oil & natural gas boom was producing affordable, clean and safe energy. It’s not and it can’t. The more money we spend to build oil and natural gas infrastructure is less money we have to invest in the true technological revolution that will actually deliver for consumers: renewables and efficiency.
Some utilities, with management styles enshrined with state utility commissions, lack the acumen to efficiently respond to changing market dynamics. They remain beholden to outdated supply chains that led them to believe that they must continue to stick with coal, economics be damned. Maximizing investment in a decentralized electricity structure has to be a significant part of policy going forward. Indeed, FERC Chairman Jon Wellinghoff promoted the idea of replacing centralized, baseload generation with small-scale, distributed renewable energy in an April 2009 interview.
A progressive price on carbon, with money directed to households, coupled with limits on greenhouse gas emissions are needed to transition to a sustainable energy economy that puts consumers first. The Obama Administration has begun the process at the EPA, and when the Administration calculated the social cost of carbon at $38 per metric ton for 2015 as part of a rulemaking on microwave oven efficiency standards.
An Energy Consumer Bill of Rights—complete with a progressive carbon price, limits on greenhouse gas emissions, billions of dollars in annual funding for a consumer-centric sustainable energy infrastructure and the establishment of an Office of Consumer Adovcate are all needed to move us away from centrally controlled fossil fuel system to the Solar Rooftop Revolution.
Tyson Slocum is Director of Public Citizen’s Energy Program. Follow him on Twitter @TysonSlocum