The Transition From Fossil Fuels To Renewables Under Biden and Yergin

Originally published on Forbes.com on February 12, 2021

President Joe Biden has been quite aggressive in some of his actions that pertain to the oil and gas industry, such as banning drilling leases on federal lands and waters, stopping progress on the Keystone X-L pipeline, and elevating climate change to a national office in his government.  Biden’s goal is net-zero greenhouse gas (GHG) emissions by 2050. This is one perspective.

Daniel Yergin of IHS-Markit spoke recently at Baker Hughes’ Energy Forward conference and addressed some of these things. Yergin, a Pulitzer Prize winner, has released a new book called The New Map. As a recognized expert in oil and gas, Yergin in his own gentle way elaborates on some of the key prospects of the oil and gas industry.

Yergin has said the oil and gas economy across the world is an $87 trillion economy, implying that such a giant structure cannot be changed quickly and that oil and gas will be around for decades. This is another perspective.

Are these two perspectives actually at odds?

Bp’s Energy Outlook 2020 projects an aggressive changeover that will lead to 45% renewables, and 36% oil-and-gas by 2050. Less aggressive BP forecasts imply less than 45% renewables and more than 36% oil and gas. An independent company, DNV-GL, predicts 46% for oil-and-gas energies in 2050. Both predictions leave hefty amounts of oil and gas energy (36-46%) still being used by the year 2050.

Bp seems to support Yergin’s case that oil and gas production will be substantial in 2050. But this means greenhouse gas (GHG) emissions, when these products are burned, will be substantial too.    

The only way Biden and Yergin can be consistent is if a process is found that can remove excess GHG generated by burning of the remaining (36-46%) oil and gas products. One process is carbon capture and storage underground (CCS). This process is an escape-hatch or counterweight that brings the GHG emissions back to net-zero.

The governments of both USA and UK have made funding available to research and field-test CCS/CCUS.

Economic advantages of shale production.

It was reported that Yergin said at the conference, “There are a lot of economic advantages from shale production, and some foreign policy advantages, and Joe Biden is a foreign policy person.” The economic advantages can be illustrated by Figure 1.  The US has become self-sufficient in oil (and gas) in just the last couple of years – for the first time since 1947.

Imports of crude oil peaked in 2006. From there, US shale oil caused imports to fall sharply to zero in 2020. One estimate is that this saved the US $2.3 trillion between 2006 and 2020. This is equivalent to $164 billion per year, for 14 years, that US companies were not paying to import oil.

US net imports of crude oil and refined products (gasoline and diesel).

SOURCE: EIA

Figure 1. US net imports of crude oil and refined products (gasoline and diesel).

Curious note: It took 14 years and roughly $2.3 trillion for the US economy to become self-sufficient in crude oil in Figure 1. How long would it take the world to change an $87 trillion economy from oil and gas to renewables? The answer is 530 years. Although this calculation is simplistic, it does convey that changing the world to renewables will be difficult and will take a lot longer than 30 years until the year 2050.

Transition progress in US versus EU and UK.

As reported, Yergin told the conference that the Biden administration “will continue to swiftly implement its climate-conscious policy, but it is not going to be as green as the European Union.”

The table compares consumption of fossil fuels versus renewables (including hydropower) and nuclear power for different countries, as well as world totals. In 2019, the US has only half the renewables fraction that Europe and some of its countries have, which supports Yergin’s statement.

Primary energy consumption by country in 2019.

SOURCE: Our World In Data

Primary energy consumption by country in 2019

In every case in the table, the share of energy from renewables is increasing. This is good news. But unfortunately the progress is slow: if the curves are extrapolated out, none of them are even close to reaching zero fossil consumption by 2050. This implies two things: First, the pace of winding down fossil production will have to increase. Second, carbon capture and storage will have to scale up greatly to be a net-zero counterweight to get rid of the “leftover” fossil GHG emissions.

From the table, 83% of the energy the US consumes is fossil energy, compare with Europe 73%. This is a significant difference, in absolute terms, because the total energy consumed by both US and Europe is enormous.

The difference may reflect the shale success in US and the absence of it in Europe. Under the Paris accords, the politics of climate change has entered European consciousness, and they have moved more quickly toward renewables. Not so in the US consciousness. Instead, the success of shale has enabled cheap natural gas, and power plants gladly switched from coal to cheaper gas because it was good business. The power of political lobbyists in the US may also tend to resist changes to a hugely successful shale enterprise.

GHG emissions from US versus EU.

The question can now be answered: Is the US going to be as green as the EU? Climate Action Tracker provides the data. Figure 2 shows GHG emissions for the US, while Figure 3 shows the same for the EU. Note: Note 6,000 Megatons is the same as 6 Gigatons. Here are the main points:

  • They both start out at about the same emissions: 6,000 Mt/year. But for 17 years, US emissions increased while EU emissions fell.
  • The falling emissions for US after 2007 were slower than the falling emissions for EU.
  • By 2020, the US was at 6,000 Mt/year while EU was at 4,000 Mt/year approximately.
  • So after 2020 the US is starting behind EU and has a lot to catch up by 2050.
Trend and forecasts for GHG in USA (updated July 2020).

SOURCE: Climate Action Tracker (edited by Ian Dexter Palmer)

Figure 2. Trend and forecasts for GHG in USA (updated July 2020).

The graphs of Figure 2 and 3 support Yergin’s statement and it seems unlikely that the US could catch up to the EU, despite Biden’s aggressive moves.

If the US in Figure 2 were able to follow the blue line, they would reach actual zero GHG emissions by 2050. This seems very unlikely.

A more likely scenario is the US follows the red line and are left with 300 Mt/year emissions mostly from burning products of the remaining oil and gas industry.  To reach net-zero by 2050, processes such as CCS or CCUS would have to remove 300 Mt/year.

This is doable, but will require rapid scale-up of CCS starting now. The USA has plenty of storage capacity in old oil and gas fields: 6,000 Mt/yr for 23 years or 3,000 Mt/yr for 46 years. Saline aquifers could hold a lot more. It would take big money to pull it off though.

Trend and forecasts for GHG in EU (updated July 2020).

SOURCE: Climate Action Tracker (edited by Ian Dexter Palmer).

Figure 3. Trend and forecasts for GHG in EU (updated July 2020).

Perhaps thoughts like this are motivating ExxonMobil to commercialize technology like CCS, as reported recently. The company plans to invest $3 billion in technologies that focus on lowering GHG emissions, including 20 new CCS facilities, for itself and for other industries. The new business unit will be called ExxonMobil Low Carbon Solutions.

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