Special Report: Energy: The Year of Peril and Promise in Energy Production

The tsunami and earthquake that devastated northern Japan in March crippled the Fukushima nuclear reactor complex and shook faith in the safety of nuclear power worldwide. A tide of revolutionary fervor in North Africa and the Middle East temporarily cut oil production, pushed up prices and raised questions about political stability in the critical oil-producing region.

At the same time, new discoveries and increased production of natural gas in the United States and elsewhere drove prices down, foretelling a major shift to natural gas as both a transportation fuel and as a possible substitute for coal in electricity generation.

But offshore oil drilling in the United States is still feeling the political and regulatory effects of the April 2010 BP blowout and spill in the Gulf of Mexico.

One of the most eventful periods in energy news in recent memory has led to a shifting of the global landscape that is characterized by both promise and potential peril. Not only industry, but capitals around the world are trying to figure out how to plan for the new energy order.

A concerted international move in June to release oil stockpiles to stabilize world prices in response to the unrest in Libya sent a sharp signal to the Organization of the Petroleum Exporting States that its power to dictate oil prices was on the wane.

“The energy sector is undergoing a major transformation globally,” said Rajendra K. Pachauri, director general of The Energy and Resources Institute in New Delhi and chairman of the Intergovernmental Panel on Climate Change of India.

“There are new concerns arising out of the Fukushima nuclear disaster and the serious Deepwater Horizon oil spill that expansion in supply of energy would be associated with larger risks,” Dr. Pachauri said. “Therefore, many countries are rethinking energy supply strategies and the very drivers of energy demand.”

Germany, for example, aims by 2022 to eliminate nuclear power on its territory — today nuclear power provides 23 percent of the country’s electricity. The government is establishing plans to increase the share of electricity generated from renewable sources to 35 percent by 2020, up from about 18 percent now. Many doubt whether either is possible, but the country has undertaken an aggressive program of energy conservation and efficiency to reduce demand.

The future of nuclear power suffered another blow in September, when Siemens, the largest engineering company in Europe, announced that it would no longer build nuclear power plants anywhere in the world. The company’s chairman, Peter Löscher, said that Siemens was ending plans to cooperate with Rosatom, the Russian state-controlled nuclear power company, in the construction of dozens of nuclear plants throughout Russia over the coming two decades.

Mr. Löscher also said that his company planned to expand significantly its portfolio of renewable energy technologies.

Even before Fukushima, the future of nuclear energy in the United States was already shaky because of the high cost of building and insuring nuclear plants there, and because — unlike Germany and other European countries — the United States has not moved aggressively toward requiring renewable, noncarbon-emitting power generation.

“Two things have happened in the last year, both affecting nuclear power negatively,” said Jason Grumet, president of the Bipartisan Policy Center in Washington, a nonpartisan research organization. “First Fukushima, and then the rising supplies and falling prices of natural gas have fundamentally changed the economics of nuclear power.” Utilities find it far cheaper to turn to natural gas for supplemental power generation and see no value in investing in new nuclear generating plants, which can cost $10 billion or more, he said.

Natural gas now sells for $4 to $5 per thousand cubic feet, or 28.3 cubic meters, in the United States, far below its peak price. “If natural gas were still selling for $13,” Mr. Grumet said, “we’d be building several nuclear plants right now.”

Because the United States has not adopted a national climate change policy that would drive demand for nonpolluting energy sources, the prospects for alternative energy sources like wind, solar, geothermal and hydro are poorer in the United States than elsewhere else in the world. Renewable energy also suffered a sharp blow in the United States in September with the bankruptcy of Solyndra, a once-promising solar energy venture in California that received $535 million in federal loans. Republicans in Congress seized on the collapse of the company to question the Obama administration’s approach to supporting alternative energy ventures and the concept of so-called green jobs.

Article source: http://www.nytimes.com/2011/10/11/business/energy-environment/the-year-of-peril-and-promise-in-energy-production.html?partner=rss&emc=rss