US Can Achieve Energy Self-Sufficiency by 2035, Says Report

Not too long ago, only dreamers believed in energy self-sufficiency in the United States. Now it is official. At least according to a report issued by the International Energy Agency in collaboration with the Organization for Economic Cooperation and Development.
US Can Achieve Energy Self-Sufficiency by 2035, Says Report
Valentin Schmid
11/14/2012
Updated:
11/15/2012

Not too long ago, only dreamers believed in energy self-sufficiency in the United States. Now it is official. At least according to a report issued by the International Energy Agency in collaboration with the Organization for Economic Cooperation and Development.

“North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency,” said IEA Executive Director Maria van der Hoeven.

New technologies will make it possible for the United States to become the largest oil producer in the world by mid-2020s, the report said. Increases in natural gas production, energy savings, and the continued development of renewables result in U.S. energy independence by 2035.

Controversial Fracking to Deliver Major Production Boost

Natural gas is predicted to overtake coal as the primary source of energy by 2035. Shale gas reserves are undisputed and the technology exists to get them out of the ground. Companies have been using fracking for several decades and during the last seven years it has been used widely.

Gas is extracted by breaking up shale layers with high hydraulic pressure. A mixture of water, sand, and chemicals is pumped into the surface at depths of 3,000–15,000 feet. The high pressure causes fissures in the shale and allows the gas to escape upward.

Environmentalists, however, are concerned that the dangerous mix of chemicals can reach into groundwater supplies in case of an accident. This has stopped the technology in its tracks in some places.

“There is regulatory uncertainty too, given the storm that has raged over fracking … and its environmental impact. Several governments, including those of France and Bulgaria, have placed moratoria on the use of fracking, and others could follow if environmental concerns are not alleviated by the industry,” says a Citigroup in a report.

The United States government has been largely supportive of fracking. President Obama tasked U.S. Energy Secretary Steven Chu with researching the technology. “The conclusion of this subcommittee is yes, it’s possible to do these things,” said Chu in an interview with New York Now.

Other unconventional production techniques that will reduce reliance on OPEC oil include oil sands in Canada and deepwater drilling in Brazil.

Focus on Renewables and Energy Efficiency

One part of the supply equation on the road to energy self-sufficiency is covered by unconventional extraction methods of fossil fuels. The other part is renewables.

The OECD estimates that renewables’ share of global output will rise from 20 percent in 2010 to 31 percent in 2035. While this increase is certainly encouraging, it will come at a price. The report says that globally, governments will have to spend $3.5 trillion in subsidies until 2035 to reach that goal. A large amount has already been committed.

Citigroup thinks that renewables can be price competitive as well: “Solar is already cheaper than domestic electricity tariffs in many parts of the world, with many other regions to follow in the next few years. While wind has a tougher task competing with lower wholesale prices, it is also competitive in a growing number of regions. … Rapidly falling cost curves imply parity even vs. cheap ’shale-electricity' in windy and sunny regions before 2020.”

The last element necessary in order to achieve energy self-sufficiency is less consumption. Countries such as the United States, the European Union, Japan, and China have committed to implement energy savings policies. They are expected to reduce energy demand per unit of GDP by 1.8 percent every year until 2035. This is almost three times the savings rate over the last decade (0.5 percent). Major areas of improvement include buildings and transportation.

Nonetheless, the OECD thinks that more energy can be saved: “A significant share of the economic potential of energy efficiency—four-fifths in the buildings sector and more than half in industry—remains untapped, mostly due to nontechnical barriers,” says the report.

In the report, the OECD and IEA outline policy measures that would cut growth in energy demand by half compared to the existing scenario agreed upon by world governments.

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Valentin Schmid is a former business editor for the Epoch Times. His areas of expertise include global macroeconomic trends and financial markets, China, and Bitcoin. Before joining the paper in 2012, he worked as a portfolio manager for BNP Paribas in Amsterdam, London, Paris, and Hong Kong.
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