The shale energy boom continues to drive improvements in America’s energy security risk, but federal policies attacking coal will lead to future declines, a new report finds.
The U.S. Chamber’s Institute for 21st Century Energy annually releases its Index of U.S. Energy Security Risk, a collection of 37 different energy metrics such as energy prices, price volatility, net energy imports, energy expenditures, and energy efficiency. America’s energy security risk dropped to 87.4 in 2013, its lowest level since 2004 and 5% below 2012.
The shale oil and natural gas boom get much of the credit. In 2013, the U.S. experienced the largest annual percentage increase in oil production since 1940, and there was a record-level of natural gas production.
“Given continued geopolitical uncertainty, rising U.S. oil and gas output couldn’t come at a better time, and has helped insulate our nation from instability,” Karen Harbert, president and CEO of the Energy Institute said in a statement.
However, not all the shale energy news is positive. Oil and gas production on federal lands is expected to continue to fall, the report notes:
Consider that all of that additional production is coming from, and will continue to come from, on federal onshore lands. In fact, the Energy Information Administration’s (EIA) 2014 forecast shows lower oil production from federal offshore areas and Alaska than its 2008 forecast. The trends are similar for natural gas. What this means is that while the rest of the country will enjoy an oil and gas boom, federal lands will continue to experience an oil and gas bust because of federal policy that locks out four-fifths of them from exploration and production. Under these kinds of restrictions, energy-rich public lands won’t contribute as much to U.S. energy security as they should.
As you can see in the first chart, the report warns that while energy security risk is falling, it’s expected to climb upwards in the next few years as the effects of EPA’s attacks on coal-fired power plants are felt:
Unprecedented levels of regulation covering fossil fuel-fired power plants and changing market dynamics are expected to increase electric power sector risks by decreasing generation diversity.
Federal environmental regulations targeting coal plants and to a lesser extent greater competition between natural gas and coal in the power sector are primarily responsible for the loss of generation diversity.
For instance, EPA’s mercury regulation is expected to shut down nearly 50 gigawatts of coal-fired electricity production, reducing energy diversity and making the power grid less resilient. Power grid reliability organizations have warned that EPA’s proposed greenhouse gas regulations will increase the risk of power outages.
This chart below on electricity generation diversity shows how reduced diversity affects energy security risk. Steve Eule, the Energy Institute’s vice president, said in a statement, “Our index found that risks related to electricity generation diversity will rise to an all-time high by 2040, due largely to planned federal regulations targeting coal plants."
The Energy Institute has an interactive tool to see how the Index of U.S. Energy Security Risk has changed over the years.
Index of U.S. Energy Security Risk