Revealed: The Next Energy 'Revolution'

While the last decade was about the energy buried in the earth and how to get it out, the next decade will be about how energy already removed from the earth is moved across it.

Świnoujście, Poland, on the frigid Baltic Sea where that country meets Germany seems to have little in common with the swampy heel of Louisiana where that state meets Texas. However, the sites are connected—and connected with many others around the world—in their importance to the next revolution in energy.

Over the last decade, the biggest change in energy was how and where hydrocarbons were removed from the earth. The United States led this change. Take hydraulic fracturing, or “fracking,” which allows natural gas to be collected from shale rock formations. As the use of this method has taken off, shale gas has gone from 4 percent of the total natural gas produced in the United States in 2005 to a projected 40 percent this year, according to the U.S. Energy Information Agency (EIA). Or take oil—in the last decade U.S crude oil production has increased from five million barrels a day to its current pace of more than nine million barrels a day. However, a different kind of energy revolution will take place between now and 2025. While the last decade was about the energy buried in the earth and how to get it out, the next decade will be about how the energy already removed from the earth is moved across it.

Natural Gas:

Powering Central and Eastern Europe has long been a story of importing energy from the east, and not just from Russia. Before plans were scaled back, the EU- and U.S.-supported Nabucco pipeline was scheduled to pull natural gas from the Caspian across Turkey and up into Austria. Now, however, Europe is looking to the west and to importing liquefied natural gas (LNG) by tanker to sites such as the new terminal in Świnoujście. The terminal, a first in Poland, is expected to come online in 2016 and import up to five billion cubic meters of gas a year. Its sister site, an LNG exporting terminal, is now being developed by Cheniere Energy in Cameron Parish, Louisiana, on the border with Texas. Once completed, the tanks at this site will hold eighty-one thousand tons of exportable LNG at -260 degrees Fahrenheit, Bloomberg reported this week. And more LNG exporting terminals are in the works. With annual U.S. natural-gas production having already increased by over 40 percent in the last decade, the EIA expects that the United States will become a net exporter of natural gas by 2017.

Japan shows why LNG is poised to go global. After the Fukushima tragedy, LNG imports to Japan increased by a quarter as natural gas replaced nuclear power in generating electricity. Japan is now the largest LNG-importing country in the world, and indications are that it will remain at or near the top of this list. Reuters reported this week that due to legal and technical challenges, only seven (of a total forty-two) nuclear reactors will be powered up in the next few years, half the number predicted last year. If most of Japan’s nuclear energy program stays closed, or if more reactors fail to reopen, imported LNG becomes an even more essential energy replacement for this U.S. ally. Across the world, the specialized transport infrastructure needed to ship natural gas is being built. LNG now looks to become a revolution in the movement of energy comparable to what fracking has been for the collection of energy.

Oil and Coal:

What about oil? Will low gas prices persist? In twelve of the last twenty years, the annual change in the benchmark price of a barrel of oil has moved by more than 15 percent. Oil’s current low price does have important geopolitical implications as exporting countries adjust their budgets to account for less revenue. But overall, there is no reason to expect any less year-to-year volatility in price going forward. Banking on oil staying below $50 a barrel now is as ill advised as last year believing it was permanently fixed above $100 a barrel.

Instead, the more long-lasting change will be the decision Congress likely takes up this month about removing restrictions on the export of crude oil from the United States. These restrictions have been in place since the oil shocks of the 1970s, and momentum for their removal is building. The case for allowing such exports was strengthened this week as a new report by the EIA concluded U.S. gas prices “would be either unchanged or slightly reduced by the removal of current restrictions on crude oil exports.”

Coal is also on the move. Between 2005 and 2014, U.S. coal production fell by about 11 percent as natural gas took over a larger share of electricity generation. But the coal that is still being mined is finding a home abroad. Over the same period, the U.S. nearly doubled the amount of coal it exports.

Solar and Wind:

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