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  • Oil Is Just the Beginning

    Pay close attention to the debate over the price of gas. Because in the coming years, you’re going to see the exact same debate play out over electricity prices. Just as in the debate over gas prices, conservatives will argue we need to increase supply by harvesting domestic resources and by building more power plants –whether coal, nuclear, or natural gas.

    The left, on the other hand, will demand that no new resources be harvested to provide electricity, that U.S. lands remain “pristine,” that no new coal or nuclear power plants be built, and that alternative power sources such as wind and solar can save the day. If the left gets its way, the U.S. is going to have a brown future. Fortune reports:

    By as early as next year our demand for electricity will exceed reliable supply in New England, Texas and the West and, by 2011, in New York and the mid-Atlantic region.

    While oil gets the attention, America uses just 15% more of it today than when the first modern energy crisis hit in October 1973. But electricity use is up 115% since then, thanks to all those plasma screens, iPhones, computers and data centers. And all economic forecasts see substantial growth in demand for electricity–think just of the coming electric cars–yet lots of problems in meeting it.

    Ninety percent of electric power is fueled by nonrenewable coal, natural gas or nuclear power. Renewable sources will not cover the growth in demand. While wind is gaining ground (and now supplies 1% of power), hydro’s share (7%) is shrinking as dams are dismantled. Solar, at 0.01%, is an inconsequential contributor.

    Coal is cheap, but it has no friends. Anticoal activists brag that 59 coal-fired plants were canceled in 2007.

    Next, the favored hydrocarbon: natural gas, used for 20% of U.S. electricity. Natural gas prices seem on track to meet, and perhaps substantially exceed, previous peaks. The same problem here: Demand is up, but supply is not. Natural gas is largely a domestic fuel (as oil was decades ago). But U.S. production is falling because of environmental restrictions on exploration and tapped-out existing gas fields.

    Nukes produce 20% of U.S. electricity. But there hasn’t been a new nuclear plant started in three decades, and licenses are expiring on existing nukes. Opponents are fighting renewal of those licenses.

    Recall the summers of electric discontent for California in 2000 and 2001? Wholesale electricity prices skyrocketed, reflecting tight supply conditions (conditions that were exploited, but not created, by traders at Enron). The consequences were a bankruptcy filing by the state’s biggest utility, Pacific Gas & Electric Co., and the early departure of a governor.

    Multiply by dozens of states. Add in brownouts. Buy candles.

    Posted in Energy [slideshow_deploy]

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