Sunday, November 19, 2017

BWorld 163, US energy policies and implications in Asia and Philippines

* This is my article in BusinessWorld last October 31, 2017.

Energy means development. It is not possible to have fast growth in all sectors — agriculture, manufacturing and services — and sustain it without ample supply of affordable and stable energy and electricity.

The US remains the world’s biggest economy in terms of nominal or current values of gross domestic product (GDP). But in purchasing power parity (PPP) valuation of GDP, China has tied the US economic size in 2013, both with $16.7 trillion, and in 2014, China ($18.2T) overtook the US ($17.4T).

The energy policies of the previous administration can be summarized as follows: (1) drastic reduction of coal use, (2) steady use and consumption of nuclear and hydroelectricity, (3) relative encouragement of natural gas and oil, and (4) massive support and subsidies for variable renewable energies (VREs) especially wind-solar.

In contrast, other giant economies in the world have the following energy policies:

Germany: (1) mild reduction in coal, oil and nuclear, (2) relative encouragement of natural gas, and (3) massive support and subsidies for VREs.

Japan: (1) increased use of coal and natural gas, (2) decreased use of oil and nuclear, and (3) big support for solar.

China and India: uniform increase in coal, oil, natural gas and VRE. Which is the right thing to do, to improve energy capacity as big and as stable as possible to hasten their economic development (see table).

The US energy transition from coal to VREs like wind-solar has affected its long-term energy stability and competitiveness and punch some holes on the budget and ordinary consumers’ pockets.

Recognizing the long-term threat of this trend, President Donald Trump issued a series of policies reversing the Obama policy. Among them are the following:

(1) Appointed an Anthropogenic global warming (AGW) skeptic, Scott Pruitt as head of the Environmental Protection Agency (EPA). EPA in the previous administration has issued lots of regulations that explicitly or implicitly restrict new coal power plants while putting existing coal plants.

(2) Issued America Energy Independence policy in March 2017, targeting to reverse among others, the Clean Power Plan (CPP) projected to cost the US economy up to $39 billion a year and increase electricity prices in 41 States by at least 10%. A follow up Executive Order (EO) “Implementing an America-First Offshore Energy Strategy” was issued in April 2017.

(3) Exit from the Paris Agreement and the multi-trillion dollars possible liabilities in legal and environmental challenges.

These policies will reverberate to Asia and the rest of the world in terms of higher US production of coal, oil and gas. Higher supply means lower or stable prices for these energy sources.

On a related note, an America First Energy Conference ( will be held in Houston, Texas this coming Nov. 9, to be sponsored by the Heartland Institute. Being organized by an NGO, speakers and moderators (41 so far) are all from nongovernment entities except one, from the US Department of Interior.

Last week, the International Energy Agency (IEA) reported that about 100 GW of new coal-fired power generation capacity is expected to come online in SEA alone by 2040, increasing the region’s installed capacity to about 160 GW and more than doubling the region’s current coal power capacity. Global coal-fired generation capacity to grow by nearly 50% over today’s levels.

Coal as fuel is preferred because it is cheaper than natural gas and coal plants are in many cases less costly than the capex needs of gas plants, the IEA admits.

The Philippines will be among the big SEA nations that is investing big amount of resources in expanding its coal capacity. And rightly so. In 2016, coal constituted 34% of PH total installed power capacity but contributed 48% of actual electricity production.

Cheap, stable, and dispatchable electricity upon demand, that is the kind of power sources that people the developing world need. Governments must step back from climate and renewables alarmism and cronyism and go for least-cost, reliable energy.

See also:
BWorld 160, A high carbon tax is irrational, October 25, 2017 

No comments: