This April, natural gas surpassed coal for the first time in U.S. electricity generation, 31% to coal’s 30%. The U.S. Energy Information Administration (EIA) and the Environmental Protection Agency (EPA) support this trend continuing.
The EPA’s Clean Power Plan is a hypothetical set of goals set for the U.S. to keep up, and even increase electricity production while lowering carbon emissions significantly.
The plan is based on the idea that electro-technologies, or devices that run on electricity rather than burning fuel are pervasive in our lives now and will become more so in the future.
The plan has four main “building blocks” to achieve its goals.
First is making fossil fuel plants, which will still be a necessary part of our energy portfolio for decades to come, more efficient by lowering heat rates in power plants and requiring less fuel for energy production.
Second is using low-emitting natural gas cycles in the spare capacity spaces of existing power plants. Natural gas is preferred to take up the extra capacity because it has a lower emissions rate and is cheaper than other fossil fuels such as coal.
Third is increasing the use of low and zero-emissions power sources such as wind, solar, and nuclear power. These power sources should increase, but they cannot take over the energy portfolio completely. Nuclear energy is lacking in experts, materials, and public support, and so will have to increase incrementally. Solar and wind have similar setbacks, with the added dysfunction of being intermittent.
Finally, the most obvious way to increase available energy in the U.S.: use the existing energy more efficiently. Devices of all kinds, from microwaves to phones have become more energy-efficient in recent years, despite the growing use of electricity in general.
By 2040 the EIA expects that wind will double its energy production from 2013 levels, and solar will rise from only 0.5% to 2%. Natural gas is also expected to almost double to reach 47% of our electricity production.
Natural gas will both replace dirtier coal power and become the dispatchable, or more reliable energy source when renewable energy sources aren’t available. The mix of these technologies will create a symbiotic relationship wherein renewable energy is primarily for immediate use, and natural gas is the backup source when weather is bad or the sun goes down.
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Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
