Tuesday, August 2, 2016

Sustainability & Sustainable Business: Natural Gas Does Not Kill Renewables

I am traveling to the SEALS Annual Meeting today, which means my summer is over.  We start orientation next week at WVU College of Law, and I have absolutely no idea where the time went. 

I will be keeping myself busy at the conference, where I am participating in a number of events, including a discussion group on Sustainability & Sustainable Business and one on White Collar Crime.  Today, I thought I'd write a little bit about the first subject, and engage in a bit of shameless self-promotion, as well. 

The intersection of sustainability and business is a significant part of my work.  My areas of focus are business law and energy law, and I have spent much of my research time looking at how companies respond to regulation, including the effects of environmental regulations.  (I also teach courses in Energy Law and Business Organizations, as well as a course called Energy Business: Law and Strategy, which merges the two subjects.)  

I was recently asked to submit a response to Prof. Felix Mormann's paper, Clean Energy Federalism, which appeared in the Florida Law Review.  His paper, which I think is well done, offers "two case studies, a novel model for policy integration, and theoretical insights to elucidate the relationship between environmental federalism and clean energy federalism." His article argues that renewable portfolio standards (mandates that require a certain percentage of electricity generated come from renewable energy sources) and feed-in tariffs (guaranteed payments for renewable energy that are independent of the market price) can be used together to find a "better, more efficient allocation of investor and regulatory risk."  

The recent influx of cheap natural gas from shale formations (using hydraulic fracturing and horizontal drilling) has lead some to believe that renewable energy goals like the ones Prof. Mormann proposes will be ineffective, or at least much weaker. Although cheap natural gas does change way the electricity market was expected to evolve, my response argues that the change does not necessarily make renewable energy goals unattainable or even less attainable.  My response, Natural Gas is Changing the Clean Energy Game, But the Game is Not Over, appears in the Florida Law Review Forum. Here's the abstract (and the paper is available here):      

In his article, Clean Energy Federalism, Professor Felix Mormann analyzes the keys facets of how energy law and environmental law intersect, as he considers how to implement a program to “decarbonize America’s energy economy.” In this forward-thinking piece, Professor Mormann considers the potential role of renewable portfolio (RPSs) and feed-in tariffs (FITs) and how concurrent implementation at the federal and state level could support a lower-carbon energy future. His conclusion—“that one clean energy policy (RPS) be implemented at the federal and another (FIT) at the state level”—is likely correct from a policy-optimization perspective. Still, as Professor Mormann acknowledges, such policies can face enormous political hurdles.

This Response acknowledges the enormous role fossil fuels still play in our electricity generation sector and notes that renewables still account for less than 15% of the overall U.S. generation market. The energy sector, though, can be expected to continue its diversification, in part because diversification is valuable for utility reliability and resilience, as well as for financial management purposes. With lower natural gas prices, fuel switching has continued at pace, with the bulk of the new natural gas generation replacing coal-fired generation. This is a positive development for those looking to displace coal, but the change to natural gas also delays at least some of the shifting to renewables.

This response argues that all is not lost because of that delay. The coal-fired generation that is displaced by natural gas could create at least some opportunity for a parallel increase in renewable electricity generation. Although some may believe that low natural gas prices undercut the option of bringing new renewable energy online, that does not need to be the case. Professor Mormann’s option is still a reality, and the likelihood of success is more a question of priority than opportunity.

 

http://lawprofessors.typepad.com/business_law/2016/08/sustainability-sustainable-business-natural-gas-does-not-kill-renewables.html

Conferences, Joshua P. Fershee, Law and Economics, Technology | Permalink

Comments

As a general comment, it has been publicized this summer that in certain areas "green energy" (solar and wind) is being greatly hindered by llack of sufficient storage technology. In fact, power grids have - in some locales - turned away this electricity because of a lack of storage medium.

Posted by: Tom N. | Aug 3, 2016 6:12:12 AM

Tom - thanks for the comment. That's absolutely true. It tends to be in areas supported by coal and nuclear power that cannot be cycled off easily. This is where natural gas (with he right system) can prove helpful.

Posted by: Joshua Fershee | Aug 3, 2016 6:56:46 AM

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