Electricity Policy

Wed04262017

Last updateThu, 16 Mar 2017 7pm

ISSN 2331-1223  Twitter

US companies should act to keep US from self-immolating over Paris agreement

Michael Liebreich, who founded what is now Bloomberg New Energy Finance and chairs its advisory board, posted a thoughtful op-ed piece in the Guardian newspaper after the US election about the perceived danger a Trump presidency could pose for the directions that have  been set for America’s electricity industry and for the country’s role under the Paris climate change agreement. We felt compelled to comment on Liebreich’s piece as our lead story, and do so here as well, because the issues it addresses threaten the direction of electricity industry planning that has been well established and is underway.

“The first thing to note,” Liebreich wrote, “is that Trump’s comments on energy during his campaign do not add up to a coherent policy. He promised that if he were elected, ‘the shale energy revolution will unleash massive wealth for America, and we will end the war on coal and the war on miners’– even though the two energy sources are in fact in competition.” Trump also dismissed wind and solar as being too expensive, “ignoring all evidence that this is no longer the case.” 

Trump’s suggestion that he might be able to restore coal to its former eminence is plainly wrong, as doing so would ignore the economics of the situation. Natural gas is cleaner than coal, is plentiful, and is cheap, having reduced power prices in every organized US wholesale market, sometimes at the expense of both coal and nuclear generation. Coal is not coming back, at least not in the East. Trump is also misinformed about the cost of solar and wind energy, which are becoming a major energy sources globally. 

Perhaps even worse for American prospects, Trump has claimed that “the concept of global warming was created by and for the Chinese in order to make US manufacturing non-competitive,” and pledged to cancel the Paris climate agreement. His notion about China’s role and intentions is contradicted by actions China is taking to reduce its uses of coal, and by its heavy—and sometimes even premature—investments in large-scale wind and solar capacity.

Indeed, not only China, but India and even oil-rich Middle Eastern countries are investing in solar energy because it is cheap, clean, and does not escalate in price. Nor does it carry hidden cleanup costs for waste fuel disposal as nuclear and coal-fired generation do. 

In discussing the possibility the US might abrogate its commitments under the Paris climate change agreement to which it and nearly 200 of the world’s nations have subscribed, Liebreich says the US would seriously damage its reputation and likely damage the American economy if it did so. There can be no question of that. 

If the US sought to withdraw from its commitments under the Paris agreement—which it and a remarkable consensus of nearly 200 nations subscribed to, partly at the urging of the US—it would create immense ill will and grievously damage America’s credibility for a very long time. 

Just as seriously, the long-held belief that American companies, many of which are leaders in energy efficiency and clean energy industries, would be major participants and investors in global infrastructure—with costs that will run to the trillions of dollars—would be very greatly compromised if the US were to walk away from its commitments.

Imagine Siemens preparing to bid on a 1,000-MW wind farm off the South China coast and weighing GE as a possible partner—and then reconsidering. It’s not hard to imagine. It’s a scenario that could be repeated again and again.

—Robert Marritz

 

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