Release date: 4 July 2017
“Even with a decline in production, the US remains the world’s top natural gas producer, accounting for 21% of global gas output in 2016. Gas made up 32% of total US energy consumption - second only behind oil, which was at 38%.
With natural gas and renewables displacing coal in power generation, the US had the world’s largest decline in carbon emissions from energy consumption for the second consecutive year. Total US emissions from energy use fell by 2% in 2016, which is almost double the historical average rate of decline.
And since they peaked in 2005, US emissions from energy consumption have fallen by a little over 12%.
There’s been a lot of focus on the policy and regulatory environments, but we think the biggest cause of this switch away from coal and toward natural gas has been cheap shale gas. The shale revolution is enabling gas to top coal.”
“The US oil industry, and tight oil in particular, has proven itself to be highly responsive to prices. When it comes to the resilience of shale, it’s not that lower oil prices don’t matter — it’s that US industry has responded to those lower prices by significantly improving its cost competitiveness and the productivity of its operations. Now that prices have begun to recover a bit compared to last year, the rig count for tight oil has more than doubled, and production is growing again. It has proven it can take a punch and still stay in the game.
At the global level, we can see how this has influenced OPEC’s behaviour.
By 2014, in the face of rapidly-growing US production, it was clear that shale was not a temporary phenomenon - it was permanent. This permanence makes US tight oil a major force on global oil prices. OPEC, being another force, retains significant influence particularly in terms of its ability to deal with temporary phenomena, such as moving production from one time period to another to help balance global oil inventory levels.”
“US coal consumption declined in 2016 by almost 9% and the drop in domestic coal production was even bigger, at 19%. Coal is getting pinched because electricity demand is flat, and cheap natural gas and renewables are pushing it out on the supply side. The weakness in the coal market isn’t just a function of domestic circumstances, but in fact a broader global story.
The demand for electricity hasn’t changed in the US and other industrialized economies around the world since the recession, even though the economy has been growing.
And, as in the US, coal is getting squeezed out of power generation globally by renewables and natural gas. In addition, coal consumption in China - the world’s largest consumer - fell for a third consecutive year. So, not only were US coal producers getting squeezed in the domestic market, they were also getting squeezed in the export market due to a weak global marketplace.”
“On the supply side, renewables are growing rapidly because they continue to have significant policy support and their costs are coming down dramatically. While most of that growth was in wind energy, the solar sector actually grew at a faster rate last year. US wind grew by 18% and solar grew by 44% — but solar is coming from a smaller base.
Although renewables in power generation grew at an above-average rate in the US, they grew even faster in China, by 33%. The Chinese government is pushing hard to expand the use of renewable energy and, more broadly, to diversify their energy mix.”
“The long-term transition of the world’s energy system is multi-faceted. One aspect is that energy use is likely to become more efficient relative to economic activity over time. We’ve certainly seen an indicator of that, as electricity demand has stalled in the world’s industrialized economies since the recession even as modest economic growth has resumed.
The other facet is how electricity is generated. There’s a lot more competition in the power sector compared to other sectors, such as transportation.
It’s an area where we see a dramatic reduction in the carbon content of the energy used in that sector, driven by renewables and natural gas pushing coal out in terms of market share.
The US is at the forefront of that movement. In both of these structural dimensions - a slowing need for electricity and greater energy efficiency, as well as the diversification toward lower-carbon sources of fuel in generating electricity - the US is right in the mix.”