2011 Think Corner

Eeekonomics: BEG/CEE-UT 2011 Annual Meeting & Forum
with The Oxford Institute for Energy Studies - Natural Gas Research Programme

“What Keeps Me Up at Night”

Views from the BEG/CEE 2011 Annual Meeting and Forum “Eeekonomics”, December 7-8, 2011, Houston, Texas
In collaboration with The Oxford Institute for Energy Studies-Natural Gas Research Programme

Michelle Michot Foss, Ph.D.
Chief Energy Economist and Head

Counting Sheep, and Other Bedtime Stories

Each year since 1995, the CEE research team has held our annual meeting in combination with a forum that provides critical input to and feedback on our research direction and outputs.  Over the years, our forums have captured the marked patterns and trends in U.S. and international energy fuel and technology developments.  Political shifts have driven policy and regulatory stances worldwide.  Energy markets are nothing if not dynamic, which makes research, analysis, and communication that much more demanding and important.  Since 1995, we’ve seen, and discussed:

  • Two U.S. natural gas supply bubbles (this for a resource that, in the 1970s, was thought to be close to extinction) and one very persistent, very stubborn oil price cycle (with no prognosis for a long term mean);
  • Sharp views and disagreements on commodity price volatility;
  • Ways in which governments can both open and close access to resources, sometimes simultaneously, and make or break markets, also sometimes simultaneously;
  • Harsh, unforgiving tests of investment strategies and both creation and destruction of energy business models across the value chains; and
  • Paradigms formed and demolished, some demolished paradigms resurrected, and ones that never die off (even though they should).

Within this frame of reference, we asked for and collected input from our annual meeting delegates in response to the simple, if parochial, question of “what keeps me up at night?”  Our goal was to elicit the collective wisdom of the crowd to guide our own research strategy going forward.  The information and discussion was so rich and frank that we decided to paraphrase results into this research note. Read the full article for the views of forum participants and our interpretations.

Forum Agenda

The [Energy] Webs We Weave
Michelle M. Foss - November 2011

Energy customers, consumers, end users have multiple choices of fuel or technology options.  Or do we?

We expect to move seamlessly from one form of energy to another for our daily and quality of life needs, to fuel our economies, provide our basic materials, and satisfy other values and priorities, like reducing greenhouse gases (GHG).  But can we?

In fact, comprehending the full range of considerations inherent in making energy choices is far from easy.  Each and every form of useful energy is delivered to end users through long and complex chains of supply-to-end-use activities.  Every useful energy fuel and technology bears inherent risks.  We may not, almost certainly do not, know what the inherent risks are for alternative fuels and technologies because these options have never constituted a large enough share of energy supply to attract significant scrutiny.  (When that does happen, controversies can erupt – witness large hydroelectric power and biofuels for example.)  When it comes to energy-environment “tradeoffs”, i.e., the balance we think we need to achieve between our energy necessities and environmental protection and preservation, perception and reality on tradeoffs is particularly complex.  Often the full supply-to-end-use chains are ignored.  We worry a great deal about environmental “externalities” – environmental costs associated with producing and using different forms of energy that may not be fully captured in market price.  We rarely, if ever, talk about “positive” externalities, benefits that are created and not measured.  When it comes to the socioeconomic dimension – how energy projects affect host communities, impact local economies, and so on – “perception” and “reality” can merge quite rapidly and in chaotic ways. [Energy Web slideshow] [Oil & Money slideshow]

Government support for energy technologies and green jobs
Gürcan Gülen - November 2011

Recent news on the bankruptcy of Solyndra, a solar manufacturer that received more than $500 million from the Department of Energy has attracted a lot of attention.  Most of the criticism, however, is misplaced.  The issue is not so much whether the federal government should be in the business of supporting technology research and development but it is rather whether the federal support should be picking winners based on the idea that “green jobs” can pull the U.S. out of the economic doldrums.  After all, federal support for R&D led to many of the widespread technologies we take for granted today, including the internet.  Also, one failed project out of 38 projects supported since 2009 and $535 million out of $35.9 billion is not a bad batting average for R&D support.

More relevant is the scalability and commercial sustainability of the projects that did not go bankrupt.  How large of an impact can they be expected to have?  Can they survive in globally competitive markets?  Only if these two questions are answered in the affirmative, significant positive economic impacts can be expected.

Promotion of clean energy options based on job creation prospects, albeit politically very appealing, takes away from the focus on potential benefits of these options: improving efficiency, reducing negative environmental impacts and contributing to energy security.  All of these are legitimate aspects of our energy options that require transparent, scientific and rigorous ‘cradle-to-grave’ evaluation against the fundamental decision criteria of Btus per dollar spent and reliability.

Think Day on Canadian Oil Sands and Keystone PipeLine with Andrew Stephens, former Executive Vice President, Suncor Energy
October 31, 2011

Held in cooperation with the Consulate General of Canada (Dallas) and Houston Consul, and the World Energy Council, the October 31 event focused on Canada’s crucial role as America’s lead trading partner for crude oil imports.  Mr. Stephens provided an update us on Suncor’s development activities.  Participants engaged in a lively discussion of the myriad issues surrounding the Keystone Pipeline, including input from public meetings held by the U.S. Department State presented by Ms. Evan Shoop Taranta, Consumer Energy Alliance.