At Proficient Sourcing we are always interested in the subject of energy. Cheap, reliable and abundant energy is vital to manufacturing in the US, and represents one of the primary competitive advantages we have to encourage reshoring. But current events are unusual enough to jeopardize US energy advantages.
Interestingly, 2021 will see the first increase in coal fired power generation in the US in several years, per the Energy Information Agency. The primary reason is the delivered cost of natural gas to power plants this year is about double that of 2020. Is it possible the administration’s issues with pipelines and discouraging drilling/fracking have something to do with gas availability?
Since the CO2 emissions from natural gas are something in the neighborhood of half that of coal, overall efforts to control climate change would also be handicapped.
If natural gas is throttled, what is the plan to replace that energy? Inquiring minds would like to know. Obviously, wind and solar cannot appear overnight, so is the plan to reduce overall energy, except for coal?
News stories abound concerning energy prices and natural gas shortages all over the globe. Many countries are increasing coal usage to keep the lights on. Of interest, according to a recent piece in The Week, China “is trying to make up for the loss in [their domestic loss of coal power] with imports, and has unofficially eased its ban on Australian coal. … Authorities are scrambling to boost coal production to keep the heat on this winter so angry citizens don’t turn on the government”.
Europe seems the hardest hit, as, again from The Week’s article highlighting problems in Germany: “…last year’s unusually cold winter drained our gas reserves, and Germany has been phasing out nuclear power. The renewables that are meant to replace those sources aren’t yet up to the task. Wind turbines, for example, didn’t produce as expected in a year without much wind”.
In the US, we have heard first, of increased oil imports from Russia! Apparently some our our refiners are designed for the sludgy Russian oil, so we import some. Who knew?
One would think if the US really does have gigantic natural gas reserves, this world wide energy situation would generate a tremendous business opportunity. Yet, the Biden administration seems hellbent on handicapping fossil fuels, what with pipeline cancellations and maybe more shutdowns, discouraging drilling/fracking and who knows what else in the regulatory category. But going to OPEC to ask for more oil? Who’s preferring Saudi oil to our own, and why?
What’s going on with our leaders? Emphasizing wind and solar growth means sending most of that money to China, which has the dominant position in manufacturing both. That doesn’t help the US as much as focusing on something more US based. Too much reliance on wind and/or solar also means more need for some backup when neither wind or solar is available. That’s usually natural gas!
Apparently Europe is really having a difficult time getting sufficient natural gas, which may be why the Russian pipeline became a news item some months ago. But wouldn’t that same problem represent an opportunity for the US?
So now we await the activity surrounding the Build Back Better bill, which supposedly contains a good deal of money for wind and solar growth, and presumably discouragement for coal, oil and natural gas. Does this make sense?
We have long believed nuclear represents the best long term answer to both increased energy needs plus environmental concerns. Recently we ran across an excellent Youtube TED talk by Michael Shellenberger, which we strongly recommend.
For all the reasons shown in that video, we are fans of more nuclear, but there doesn’t seem to be much going on in that area, which is disappointing.
So while supply chain problems make US manufacturing more competitive in many things, if we lose energy cost advantages, one of the great business opportunities in our lifetime may go by the wayside. What a shame.