A boom in cheap gas in the United States is igniting American dreams of energy independence. At the same time, it is stalling growth in nuclear plants and even forcing Opec to study its long-term strategy. Now the bounty in shale gas – blasted from the rock using high-pressure jets of water and chemicals – is set to slow the growth of “green” energy.
The arrival of vast quantities of previously inaccessible hydrocarbons has driven down the price of natural gas in the US from its 2003 peak of US$20 per million British thermal units to today’s $2.
Continued low prices pose a threat to the pace of growth for wind and solar energy, at least until 2030, according to the International Renewable Energy Agency (Irena), a United Nations agency with headquarters in Bonn, Germany, and Abu Dhabi.
“In the next two decades, I would say probably there will be less of a gas-price increase than projected five years ago,” says Dolf Gielen, the director of Irena’s Innovation and Technology Centre in Bonn. “And the net effect, of course, of less increase in gas prices is less rapid growth of renewables.”
The boom and bust cycle for hydrocarbons and renewables mirrors another that took place several decades ago in the US.
The price of oil shot up in the 1970s with the Arab oil embargo, creating high fuel prices for consumers across the world and sparking in the US a search for energy independence through government incentives for renewables and the establishment of many solar companies. Americans were so taken with the promise of renewable energy that Jimmy Carter, the US president at the time, installed solar panels on the White House roof.
“A generation from now, this solar heater can either be a curiosity, a museum piece, an example of a road not taken, or it can be a small part of one of the greatest and most exciting adventures ever undertaken by the American people – harnessing the power of the sun to enrich our lives as we move away from our crippling dependence on foreign oil,” Mr Carter said at the time. But the embargo ended, prices eased and several renewable energy companies went bankrupt in the years that followed. Ronald Reagan, who succeeded Mr Carter as the president, had the White House solar panels removed in 1986.
The question today is whether the arrival of cheaper hydrocarbons, in the form of shale gas, could also spell the end of renewable energy as a major player.