As Norway And The US Move To Decarbonize Transport, Legacy Energy Sources Are A Key Differentiator
Originally published on Forbes.com on June 22, 2021
When considering the US transition from fossil fuels to renewable energy sources, it is helpful to look at a country further along than our own. Norway has some significant commonalities with the US–most importantly, both countries are oil and gas rich. Yet Norway exports most of its fossil fuels, while the US consumes most of theirs.
These two countries, both rich in oil and gas, face a giant challenge of divesting from fossil fuel production to lower greenhouse gas (GHG) emissions.
Norway has been particularly successful in changing their transport to electric vehicles (EVs), but the US has lagged. The data on energy sources best exposes the differences between Norway and the USA (Table 1.)
Fossil and renewables in Norway versus USA.
Oil production is big in Norway, about an eighth of that in the US. It also provides about 14% of Norway’s budget revenue and so is a huge asset.
Now let’s look at renewables because these are key for decarbonizing transport.
The big picture is that renewables production in Norway is only 14% of the total energy produced. This is similar to 21% in the US (Table 1). The simple reason is because both countries are big producers of oil and gas.
Table 1. Primary energy sources in 2018 for Norway and USA in quadrillion Btu. Source: EIA
But here’s where the picture changes. Renewables in Norway count for 67% of energy consumption, while in the US renewables count for just 18%. So the carbon footprint within Norway is low while it’s high in the US (actually double that in Norway.)
In Norway the transition to renewables is an in-country success — but not an export success because the net exports of oil and gas are high in GHG.
In the US, the transition to renewables is not yet an internal success, while the net exports of oil and gas GHG are a relatively minor quantity compared to what is consumed in-country.
If serious about reducing GHG further, Norway must focus on oil and gas quantities they export. The US must spotlight reducing in-country consumption of oil and gas.
Norway is doing this. They plan to boost their renewables capacity for offshore wind up to 4-6 GW by 2026 and 12-16 GW by 2035. The company is looking to expand capacity in core areas: the North Sea, the Baltic Sea, and offshore USA.
The energy legacy in Norway is oil and gas and hydro. Hydroelectric power has been around for over 100 years, has large capacity, is cheap, and is carbon-free. This clean green electricity supplies the EVs.
The energy legacy in the USA is oil and gas and coal. These sources have been around for over 100 years, have large capacity, are cheap, but are carbon-intensive. Their electricity can supply EVs, but is not clean or green.
In the US, wind or solar or nuclear electricity needs to be upgraded rapidly to provide clean green electricity for auto-makers such as GM who has promised 30 different EV models by 2025.
In Norway the price of gasoline is a little over $6/gallon compared with about $3/gallon in the USA. The low price in the US – a result of the shale revolution – is a disincentive to buyers of EVs in the US.
The USA is facing headwinds in its transition from fossil to renewable energies:
First, government policy for EVs has been volatile and unreliable as the US moved from President Obama to President Trump to President Biden.
Second, it’s harder for the people of a country to give up on buying and running internal combustion engine (ICE) cars that can be filled up with such cheap gasoline ($3/gallon).
Third, it’s hard for US oil and gas companies, so successful in the shale revolution of the last 20 years, to think of investing in renewables when they are more concerned about the recovery of oil and gas prices, and recovery of their production portfolios to pre-pandemic levels.
Meanwhile: The GHG emissions per capita from fossil fuels and cement plants in the US are close to double those from Norway, according to OurWorldInData.
Is it possible that Norway’s high EV uptake is due to oil and gas riches that have led to the country having the highest GDP per capita in the world? A general plot of EV uptake predicted for 2030 versus GDP per capita reveals no correlation between the two variables – for 21 countries examined.
In the plot, Norway is certainly an outlier, which suggests such an effect. But there are other outliers that do not support the case. Finland produces no oil, but its EV uptake in 2030 will be almost as high as Norway’s suggesting oil success is not critical. The US is a heavy oil and gas energy industry like Norway, but its EV uptake is slow – also suggesting oil success is no guarantee of rapid EV uptake.
Rystad Energy, a world-wide analyst company based in Norway and Houston, recently attributed Norway’s EV success to legacy hydro power and to government incentive policy.
In Norway, the EV market was only 3% in 2012. Over the years, infrastructure has been provided, but charging stations are still an issue. The workaround is that 90% of EV charging is done at home. Charging stations will undoubtedly be a big issue in the USA, although the Biden administration have promised 400,00 new stations (compare with 150,000 regular gas stations currently in the USA).
The main point is that Norway’s transport sector went from 3% renewable to 60% in just 8 years. Transitions don’t have to take several decades.
But there is a legitimate question of scale-up. Norway is only a small country, about 5 million people, so scaling up to 328 million population in the USA may be a challenge. One answer to the challenge is the carmaker GM who has embraced this scale-up by pledging 30 different EV models by 2025 — that’s just four years away.
While Norway and the USA are both rich in oil and gas, they are facing the challenge of divesting from fossil fuel production to lower their associated greenhouse gas (GHG) emissions.
One analysis1 says the oil and gas industry should address the demand for fossil energies, not just their supply. There are three pathways to do this, and one is buy into green energy businesses (e.g. solar or wind farms, or electrical charging stations). A second is to iInvest R&D in clean technologies (e.g. green or blue hydrogen). A third is to push for climate policies that will reduce GHG emissions (e.g. carbon-pricing).
Ref. 1: Bloomberg Green Newsletter, “Oil Companies Cutting Demand,” 16 June 2021.