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A Current Look at the U.S. Energy Sector

A Current Look at the U.S. Energy Sector

It was less than a year ago that, for the first time in decades, the U.S. became a net exporter of oil thanks to innovations in fracking and improved extraction abilities of shale oil – a high-quality type of crude oil (1)(2). Now, the U.S. is expected to return to being a net importer of crude oil and petroleum products by the third quarter of 2020 (3). President Trump has mitigated this issue by replenishing the Strategic Petroleum Reserve with U.S. oil (4), but the unprecedented effects of COVID-19 have had wider energy implications than those the U.S. government can control by boosting demand. With a focus on environmentalism, this article explains the current state of U.S. energy production and consumption as well as discusses the implications of COVID-19 on related industries.

Over the past two decades, U.S. energy consumption has relatively plateaued compared with rising U.S. energy production (5). In descending order of British thermal units (Btu) consumed, that consumption can be attributed to the industrial, transportation, residential, and commercial sectors. Even then, the maximum difference between these consumption sectors is the industrial sector at 32,575 trillion Btu and the commercial sector at 18,189 trillion Btu in 2019, meaning each of the four consumption sources significantly contribute to overall energy consumption (6). A closer look at the commercial and residential sectors reveals that the primary source of energy consumption is by far natural gas and electricity retail sales, followed by petroleum and renewables (7)(8). This is not surprising given the growth in natural gas and crude oil production has heavily outpaced growth in renewable energies over the past decade (9). It is important to keep in mind, however, that electricity retail sales – which were almost equal to natural gas in their usage by the commercial and residential sectors – is largely (roughly 17.5%) fueled by renewable energies (10). Therefore, increasing the proportion of electricity that is fueled by renewable energy sources can significantly lower the commercial and residential sectors’ indirect carbon emissions.

The proportions of energy usage, however, are already being affected by COVID-19. In 2020, U.S. sales of electricity are expected to fall by 4.7% in the commercial sector due to the closure of businesses and by 0.8% in the residential sector due to the combined effects of stay-at-home orders and a milder winter and summer (3). However, given that renewables can be dispatched with low operating costs (11), renewable generation for the electric power sector is expected to grow by 11% this year whereas coal and natural gas power generation are expected to decrease 20% and increase 1%, respectively (3). Despite this, COVID-19 has still impacted renewables firms’ abilities to increase energy generation capacity; thus, 2020 wind and solar capacities are estimated to be 5% and 10% lower than previously estimated (3). For these reasons, renewable energy sources are predicted to account for 21% of U.S. electricity usage in 2020 – up from 17.5% last year (10)(11).

All energy industries, whether they produce energy directly or contribute to the grid, have been affected by COVID-19. Firms operating within renewable energy production are delaying the construction of many projects and, therefore, have turned to the federal government for assistance. While industry advocates originally wanted direct relief by being part of a stimulus bill, advocates are now asking the IRS to publicly declare that delays of renewable energy projects due to COVID-19 will be considered excusable for the wind industry Production Tax Credit and solar industry Investment Tax Credit (12). Doing so would ensure industry investors that project delays will not affect their returns, and it would not add to the trillions of federal government spending associated with stimulus packages (12). Whereas renewables powering our electricity are facing delays and uncertainty, alternative energy sources such as the solar industry are already laying off workers. By installing solar panels, a homeowner can reduce his or her electricity consumption by powering their home directly from a renewable source. Given the client-facing nature of installing solar panels, however, revenue has more or less ceased; the Solar Energy Industries Association expects roughly 125,000 workers in the industry could be temporarily unemployed, and industry growth is expected to be cut by a third (11).

It may come as a surprise that the majority of energy industry workers losing their jobs, however, are from the energy efficiency industry. Given the labor-intensity involved in increasing a building’s efficiency (energy auditors, weatherization crews, inspectors, office workers, tool/inventory suppliers), the energy efficiency industry’s employees make up the largest portion of U.S. energy jobs (13). Workers within this industry complete projects on people’s homes to make their energy usage more efficient. Such projects can include expensive home upgrades, though most are simple insulation projects with a few LED lightbulbs and smart power strips; these simple projects, however, can drastically improve a home’s energy efficiency. Even so, some states have completely halted federally-financed or discounted weatherization work, which makes up a large portion of energy efficiency work (13). Others have shut down all in-person construction, which makes up roughly half of the energy efficiency workforce (13). So far, the only aid received by these small energy efficiency firms has been the low-interest loans available to small businesses (13). Advocates of the energy efficiency industry are calling on Congress to include the energy efficiency industry in the next stimulus package (13). Proposed stimuli include the expansion of energy efficiency tax credits, increased Energy Department funding for weatherization programs, and a resurrection of 2009’s efficiency and conservation block grant program (13).

Damage to the energy efficiency industry is important, as the simplest and often government-funded initiative to lower a home’s carbon footprint is to increase its energy efficiency. As climate change raises global temperatures, residential electricity demand is expected to increase by 41% to 87% between 2020 and 2060 without policy intervention and 28% with policy intervention (14). The policies referred to in this study are those focused on upgrading heating/cooling systems. Heating, ventilation, and air conditioning (HVAC) currently make up 50% of building electricity consumption (15), and most electricity savings come from targeting space heating and cooling systems (13). Other studies demonstrate that energy efficiency can be increased through studying behavioral sciences which, so far, indicate energy consumption can be decreased by supplying residents with effectively-framed interfaces in which they can better understand their consumption (16). However, large scale installation of energy interfaces has not been a widely-implemented energy efficiency strategy. What these studies have in common is that they demonstrate improved energy efficiency’s ability to lower residential energy demand. Through countless and often low-cost weatherization projects, these currently idle small energy efficiency firms have been increasing residential energy efficiency on state and national scales. Whether the energy efficiency industry will receive direct aid has yet to be confirmed. It’s certainly possible considering energy efficiency is not inherently a partisan issue, as it does not benefit any energy industry in particular. As quarantine continues to drag on, it is difficult to imagine how well the energy efficiency industry will rebound after the virus subsides.

References

  1. Meyer, G. (Nov 9, 2019). US is net exporter of oil for first time in decades. Ft.com. Retrieved 8 April 2020, from https://www.ft.com/content/9cbba7b0-12dd-11ea-a7e6-62bf4f9e548a

  2. IPAA. (2020). Fracking | What is Fracking? | Shale Oil and Natural Gas. Independent Petroleum Association of America. Retrieved 8 April 2020, from https://www.ipaa.org/fracking/

  3. EIA. (Apr 7, 2020). Short-Term Energy Outlook - U.S. Energy Information Administration. Eia.gov. Retrieved 8 April 2020, from https://www.eia.gov/outlooks/steo/

  4. Cunningham, S., Dlouhy, J., Natter, A. (Mar 3, 2020). Trump Orders U.S. to Stock Up Oil Reserve After Price Crash. (2020). Bloomberg.com. Retrieved 8 April 2020, from https://www.bloomberg.com/news/articles/2020-03-13/trump-says-going-to-buy-large-quantities-of-oil-for-reserve-k7qlrbck

  5. EIA. (2020). Table 1.1 Primary Energy Overview. Eia.gov. Retrieved 8 April 2020, from https://www.eia.gov/totalenergy/data/browser/#/?f=A&start=1949&end=2019&charted=4-6-7-14

  6. EIA. (2020). Table 2.1 Energy Consumption by Sector. Eia.gov. Retrieved 8 April 2020, from https://www.eia.gov/totalenergy/data/browser/?tbl=T02.01#/?f=A&start=1980&end=2019&charted=3-6-9-12

  7. EIA. (2020). Table 2.2 Residential Sector Energy Consumption. Eia.gov. Retrieved 8 April 2020, from https://www.eia.gov/totalenergy/data/browser/?tbl=T02.02#/?f=A&start=1980&end=2019&charted=2-3-4-10-12

  8. EIA. (2020). Table 2.3 Commercial Sector Energy Consumption. Eia.gov. Retrieved 8 April 2020, from https://www.eia.gov/totalenergy/data/browser/?tbl=T02.03#/?f=A&start=1980&end=2019&charted=2-3-4-12-14

  9. EIA. (2020). Table 1.2 Primary Energy Production by Source. Eia.gov. Retrieved 8 April 2020, from https://www.eia.gov/totalenergy/data/browser/?tbl=T01.02#/?f=A

  10. EIA. (2020). Table 2.6 Electric Power Sector Energy Consumption. Eia.gov. Retrieved 9 April 2020, from https://www.eia.gov/totalenergy/data/browser/?tbl=T02.06#/?f=A

  11. Penn, I. (Apr 7, 2020). Oil Companies Are Collapsing, but Wind and Solar Energy Keep Growing. Nytimes.com. Retrieved 8 April 2020, from https://www.nytimes.com/2020/04/07/business/energy-environment/coronavirus-oil-wind-solar-energy.html

  12. John, J. (Mar 24, 2020). How to Give Certainty to US Renewables Regardless of a Stimulus Package. Greentechmedia.com. Retrieved 8 April 2020, from https://www.greentechmedia.com/articles/read/as-coronavirus-stimulus-bill-stalls-a-proposal-to-ask-irs-for-solar-wind-tax-status-certainty

  13. Iaconangelo, D. (Apr 7, 2020). ‘Horrible.’ Coronavirus unravelsenergy efficiency industry. EnergyWire. Retrieved 8 April 2020, from https://www-eenews-net.ezp.bentley.edu/energywire/2020/04/07/stories/1062807477

  14. Reyna, J., & Chester, M. (2017). Energy efficiency to reduce residential electricity and natural gas use under climate change. Nature Communications, 8(1). doi:10.1038/ncomms14916

  15. Pérez-Lombard, L., Ortiz, J., & Pout, C. (2008). A review on buildings energy consumption information. Energy and buildings, 40(3), 394-398.

  16. Crowley, M., Heitz, A., Matta, A., Mori, K., & Banerjee, B. (2011). Behavioral science-informed technology interventions for change in residential energy consumption. In CHI'11 Extended Abstracts on Human Factors in Computing Systems (pp. 2209-2214).

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