Natural gas provides only a “short and narrow bridge” to a low-carbon future – John Reilly

MIT Sloan Sr. Lecturer John Reilly

From The Energy Collective

The oil industry is pinning its hopes on natural gas. To hear oil executives tell it, natural gas is a veritable “bridge between a fossil fuel past and a carbon-free future,” as Bloomberg News put it recently.

It’s a story that makes sense on its face: natural gas emits about one-half of the carbon dioxide of coal and about three-quarters that of gasoline. Power plants can get more electricity per BTU of natural gas than coal, giving it a further advantage. And in an electric vehicle world, the future of gas could look bright.

But natural gas is not our climate savior. The fuel—which consists primarily of methane—is cleaner than coal and oil, but it is by no means carbon-free. For regions of the world potentially new to gas, expensive investments in pipeline or ocean transport and distribution infrastructure are required.

At best, any “bridge” that the fuel provides to a future where zero-carbon-producing power generation technologies take over is short and narrow. True, gas generation may help firm up intermittent renewables, but the goal would be to operate these as little as possible, minimizing the use of gas. And yes, gas could come back with success of carbon capture and storage (CCS), but advances in this technology have so far not panned out.

Are big investments in new gas infrastructure worth it if fully utilized for only 20 years or so? The gas bridge is getting shorter and narrower as we delay serious action on fighting climate change.

Read More »

Maine can be a leader in solar energy, but rooftop by rooftop isn’t how it will happen – Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

From The Bangor Daily News

Renewable forms of energy, especially solar, have shown strong growth in recent years in the U.S., and that is certainly a positive development. As policymakers across the country continue to encourage this growth, it is important that they take a close look at the policies in place that provide favorable incentives to the solar industry. Currently, Maine has an opportunity to be among a select group of leaders on this front, as the state’s regulators work toward refining policies around solar energy.

Specifically, the proposal put forth by the Maine Public Utility Commission to reform net energy billing and ultimately transition to a more market-based approach for pricing solar energy production is a great example of how we should be thinking about these policies. Here’s what our key consideration should be: What is the most effective and efficient way to grow renewable energy production?

One of the main answers here is that while distributed solar energy can benefit homeowners and communities, it is not nearly the most technically or economically efficient way to achieve the goal of reducing greenhouse gas emissions. Ultimately, large scale solar is much more effective, and it will do more to help keep Maine’s electricity rates among the lowest in the region.

Read More »

Technology vs. location: Why U.S. shale oil & gas forecasts could be over-estimated – Francis O’Sullivan

MIT Sloan Sr. Lecturer Francis O’Sullivan

From The Energy Collective

Over the last five years, Americans have enjoyed consistently low oil and gas prices thanks to a massive uptick in the production of oil and gas produced from shale in the U.S. This industry growth has enabled the country to play an increasingly important role in global and domestic energy markets. But how long will these low prices and high productivity levels last? The answer is of great importance for matters like the economy and national security – not to mention the price you pay for gas.

If you look at our current production levels, you might think the good times will last for quite a while. The U.S. is now considered by some to be the world’s “swing producer” of shale oil and gas. In North Dakota’s Williston tight oil basin, crude oil production grew from 98,000 barrels a day in 2005 to 1,174,000 barrels a day in 2015. As a result, the U.S. power sector has drastically increased its reliance on domestically produced natural gas, especially from shale.

A lot of credit for this industry growth is going to technology. Many people say that the technology used to get the resources out of the rock – and the subsequent technology developments – are to thank for the gains we’ve seen in well productivity. But how much can we really link to technology versus the location of the wells?

Looking at this question in a recent study, we found that the oil and gas business is just like real estate. It’s all about location, location, location. Where you drill matters, but in the shale business it matters even more.

We looked at data from the Williston Basin during a 42-month period starting in 2012 to quantify the extent to which improvements in well productivity have been associated with technology as opposed to changes in development location. Using five different regression models, we found that the impact on technology on well productivity is greatly over-estimated. In fact, our study showed that the portion of improvement that came from technology is over-estimated by about 50%. This means that a great deal of the time, the operator was just drilling in the right spots.

Read More »

Solving the liquid fuel refining and distribution problems in Nigeria, and across Africa – Chinedu Onyeizu

Chinedu Onyeizu, MIT Sloan Fellow ’17

Producing two-million barrels of crude oil per day, Nigeria has approximately 38 billion barrels of crude oil and 188 trillion standard cubic feet of natural gas in reserve. Despite its abundance of natural and human resources — and its position as the largest crude oil producer in Africa — the country suffers from a persistent fuel shortage, with most Nigerians lacking adequate electricity. Clearly, the current industry model is not working in Nigeria. In the last 7 years, Nigeria has spent N4.7 trillion on petroleum products importation and subsidy payment.

I came to the MIT Sloan Fellows Program to find a solution. I am convinced that Nigeria has the capacity to become a leader in making liquid energy accessible and affordable to Africans. To enable such radical transformation, we need to make major policy, financial and operational changes.

The first step to finding a solution is identifying the cause of the current problems. Three main issues are prevalent in Nigeria: dysfunctional refineries, dependence on imported products and government regulation, and pipeline vandalism and distribution challenges.

Read More »

Pricing solar so it doesn’t raise everyone’s energy rates — Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

MIT Sloan Professor Richard Schmalensee

From The Boston Globe

Despite its recent growth, solar power remains an expensive energy alternative and accounts for only a small percentage of electricity generation in Massachusetts. If the state is going to make sharp reductions in carbon emissions as well as enjoy healthy economic growth, solar generation will have to be greatly expanded. But given the already high cost of electricity in Massachusetts, it is critical to obtain solar power as cost-effectively as possible to ensure that all consumers benefit.

In a recent study, an MIT team that I led presented a set of policy changes to make solar more affordable. The study shows that because of current policies, we are paying a good deal more for solar electricity than we need to. Residential solar systems are significantly more expensive per unit of capacity than utility-scale systems — about 70 percent more expensive on a levelized-cost basis. In addition, high levels of residential solar penetration often require substantial investments in distribution systems.

Residential solar continues to grow robustly, nonetheless, in large part because it is more heavily subsidized than utility-scale solar. The main federal subsidy, the investment tax credit, has just been extended for an additional five years. Since the amount of the tax credit is directly proportional to system cost, residential systems, which are more expensive on a per-unit of capacity basis, receive larger tax credits per unit of capacity than megawatt-scale, utility systems. This translates into a higher subsidy per kilowatt-hour of residential solar electricity, paid by taxpayers.

Read More »