Recent news has highlighted the United States pulling out of the Paris Climate Agreement, however few articles have mentioned the US’s already impressive record of reducing carbon emissions without a government mandate. According to a new study by Morgan Stanley, the United States may meet the outlined minimums of the Paris Climate Agreement despite no longer being a party to the accord. In their recent analysis, the brokerage firm found that technology is steadily driving down the price of these energy sources to the point that market functions will eventually make renewable energy an equitable possibility for large-scale power.
“We project that by 2020, renewables will be the cheapest form of new-power generation across the globe,” Morgan Stanley analysts said in a report published last Thursday. According to the report, the US is to exceed the Paris commitment of a 26-28 percent reduction in its 2005-level carbon emissions in the next three years. The report points out that better understanding of wind conditions and redesigned wind-turbine blades have made wind power an increasingly viable power option.
Many in the environmentalist community will point to the cost reduction as an argument in favor of maintaining the United States position in the Paris Climate Agreement, and for continued subsidization of green projects. However, we believe that if true, these statistics render the continued government subsidization of green projects completely superfluous. The goal of green energy projects should be to achieve competitiveness based on the merits of the technology, not financial support as an “approved power source” from the government.
The United States’ exit from the climate treaty has been treated as an environmental calamity by supporters of renewable energy, pointing to German Chancellor Angela Merkel’s steadfast support for the treaty as a roadmap for the US to follow. Interestingly, the math doesn’t favor that argument. The U.S. actually reduced its overall greenhouse emissions at a faster rate than Germany over the last decade. American emissions fell by 9.9 percent between 2005 and 2015, as compared with Germany’s 8.8 percent, even though the U.S. was not a signatory to any carbon emissions treaty during that period.
FBAE believes that it is critical for the United States to be judicious in the extent to which it tethers itself to the climate goals of other nations. Climate treaties place an undue burden on the American economy, and in the case of reducing carbon emission is proving to be unnecessary.
President Trump has designated the last week of June as “Energy Week”. Policy weeks have become a trademark of the Trump presidency, and for family businesses, the consequences of this Energy Week could be welcomed by many who are plagued with volatile energy costs. The common thread of Energy Week will be a renewed reliance on traditional energy sources, and dominance of U.S.-based fuels in the export market. The reversal of Obama-era energy policy was a key tenant of the President’s campaign, and based on his Energy Week schedule, Trump aims to make good on that promise. Now, Trump is looking forward, forging actionable plans to shape America’s energy future. In his first 150 days, the president has used his executive power to lift regulatory barriers to domestic energy production and has empowered the Interior Department to begin revisions of Obama-era fracking regulations.
The President has been outspoken on reducing regulations, providing greater access for energy extraction purposes, and encouraging energy production to help lower the cost of our energy production needs. While specifics on the President’s Energy Week plans are scarce, it is known that he will discuss oil and natural gas exports with Indian Prime Minister Narendra Modi when he hosts here today at the White House. On Tuesday, EPA Administrator Scott Pruitt will appear before a Senate Appropriations subcommittee where he will deliberate on the President’s spending blueprint. Energy Secretary Rick Perry will likely offer a preview of some of the President’s priorities when he speaks Tuesday with analysts and executives at the U.S. Energy Information Administration conference in Washington – agenda here. On Wednesday, President Trump will meet with Governors and Native American tribal leaders along with Energy Secretary Rick Perry. This meeting will precede a Thursday panel in the House Natural Resources Committee that will explore energy industry access to federal lands – link here. Finally, the President Trump will host and event at the Energy Department on Thursday where he will focus on how the sale of U.S. natural gas, oil, and coal helps strengthen America’s influence globally.
While President Trump is expected to place his policy focus on traditional energy sources, he is expected to describe openings for other energy exports, including U.S. technology that harnesses power from the wind and sun, and a new generation of advanced and modular nuclear reactors. Many in the industry have argued that the licensing rules for new reactors are cumbersome and convoluted, discouraging investment in an inexpensive and environmentally friendly energy source. There are hopes that President Trump will eliminate these hurdles.
In addition to making it easier to produce traditional forms of energy, the Bureau of Land Management is currently finalizing environmental reviews to allow leasing of federal land for the purpose of installing solar energy collectors in Nevada. The Dry Lake region on Nevada could be the first federal land installation of solar power generation in the country.
Streamlining the energy permitting process and reducing regulations will drive down costs, which is welcomed news for many family-owned and operated businesses with tight margins. FBAE is hopeful that the changes highlighted during Energy Week will lift the burden that stifles job creation and holds back our economic recovery.
When your business is subject to the whims of boom-and-bust cycles the way the oil industry is, making money with less effort is very appealing. With that in mind, oil companies are using technology to cut costs while still turning a profit in the downturn.
“This is about reshaping the industry,” said Muqsit Ashraf, energy strategy consultant with the firm Accenture. He points out tech advances can keep workers safe.
But technology changes will also affect the workforce itself.
“The profile of the employees will change,” he said. “There would be a shift in terms of head count on the field to head count that might be sitting in remote operations centers making decisions.”
Technology is replacing energy workers. For example, oilfield services company Schlumberger has estimated one of its newer, more automated drilling rigs could cut the number of work hours needed to finish a well by more than 30 percent. But in the long term, the effect on jobs is hard to predict, according to Rice University’s Mark Agerton.
“It really depends on whether the technology is going to lower the cost of extraction and make us extract more oil and gas, and hire more people to do that, or if the technology is going to allow us to replace people with machines,” he said.
A more digitized industry also means companies will need more educated, higher-skilled workers to operate new technologies.
These advances are helping drillers in Texas make money even with low oil prices. But another boom could slow the innovation. If prices shoot back up, companies might decide to revert back to more time-tested ways of moving oil.
Family Businesses for Affordable Energy (FBAE) today called for the extension of the New Mexico Renewable Energy Production Tax Credit (REPTC), an extension that will lead to more new jobs and investments, while helping to lower the cost of energy for families and businesses.
With this simple incentive, New Mexico already created thousands of jobs with billions in new investments. According to a recent study commissioned by the NM Energy, Minerals & Natural Resources Department, the tax credit created over 9,000 jobs, $430 million of labor income, and reductions in electricity costs—numbers that significantly exceed the fiscal cost of the tax credit.
Conservative estimates are that there is $1.5-$2 billion worth of investments on the current solar waiting list alone. This could translate into 7,000-9,000 new jobs for New Mexico just waiting for the tax credit extension.
“New Mexico should continue to invest in its energy infrastructure,” said Alex Ayers, Executive Director of FBAE. “Taxpayers will get a huge return on new jobs, new companies, and projects that are already in the pipeline, just waiting to get started if this credit is continued. We cannot allow these potential jobs to just be thrown away or to leave New Mexico for other states with tax credits.”
“These tax credits are good for family businesses, good for taxpayers and good for the New Mexico economy,” he said.
In 2002, New Mexico expanded its renewable energy sector, bringing jobs, investments and sustainable energy into the state. To help spur private investments, the legislature implemented the REPTC—a tax credit available to energy companies who generate electricity from renewables, such as solar arrays and wind turbines.
This incentive program is set to expire January 1, 2018. A bipartisan bill (HB440 and SB432) changes and temporarily extends the program. The goal: to support continued investments in New Mexico while also adjusting the tax credit itself to better reflect the decreased costs of building renewable energy facilities.
In addition, the bill provides a more appropriate end date for the program, phasing out the production tax credit by 2023—as opposed to ripping the rug out from under companies already invested as well as the ones on the waiting list.