The Opportunity

Unconventional oil and gas production has transformed future energy supply options for the world. Over the last decade major advances in directional drilling and hydraulic fracturing have led to an increasing supply of oil and gas. Continuing innovation in the market has led to decrease in the cost of recovery, making oil competitive at $50/barrel and below.

The recent report “America’s Unconventional Energy Opportunity” gives a good summary of the economic opportunity available for the US based on low cost energy supply from unconventional oil and gas production.   This and many other reports cover the major economic opportunity that is possible with new low cost production of oil and gas from unconventional resources.  Beyond just the low cost of energy there is economic benefit to reinvestment in major industries based on a low cost domestic energy supply.

There is a need for improved environmental performance.  Net carbon emissions reductions are required to offset any adverse effects contributing to climate change.  The role of fossil energy sources short-term and longer term is subject of on-going debate.   Typical questions that are debated are: is natural gas a bridge fuel, a transition fuel and what is the path forward for future energy supply.

Over the past century the US has invested in major infrastructure that supports energy across multiple sectors – power, transportation, residential, industrial and agriculture.  The net greenhouse gas emissions by sector is shown in the figure for the past 25 years.  It is important to note that the system level performance needs to be reduced and as such looking at overall sector performance from supply, distribution and end-use is important.  Local reductions of emissions may not contribute to net emissions.

It is also important to note that energy is “big”.  The total installed energy infrastructure of the US would represent tens of trillions of dollars.  As an example replacing the total US annual energy use of 97 Quads with 100% solar energy at $1/watt and 25% capacity factor would require a $13 Trillion dollar investment.  While this scenario isn’t realistic it highlights the potentially high costs of both investment and operating cost.  New innovation is required to reduce cost, investment and operating, and system operability while delivering improved environmental performance.

For each energy sector the there should be a strategic plan developed looking at options plotted on an environment vs. economics grid as shown in the figure.  As shown in the figure the circle “today” highlights current state.  The best case would be to move to “A” where there is economic benefit derived from low cost energy as well as environmental benefit delivered.  Given the size of the investments, the time-scale of major infrastructure projects having an integrated plan by market sector would be the most efficient.  Absent some form of plan there is great risk that significant money will be spent potentially increasing energy cost and suboptimizing environmental benefits.   While  many renewable energy sources have grown it is the overall system performance that needs to be evaluated.  For example if solar is added to a legacy power generation infrastructure there is still need for storage and reliable power generation.  The overall system cost in terms of initial installed cost needs to be estimated in addition to any changes in net operating costs.

 

Designing a Path Forward

For each economic sector it is desirable to develop an overall plan and path forward for balancing economic and environmental goals.  An example for electric power generation is shown below.   Power generation relies on a series of energy sources from fossil to renewable.  With time the mix of energy supply will change as well as the underlying infrastructure and grid technology.

Any new innovation that is developed ultimately needs to find a path to market delivering some advantage in terms of total system goals – economic and environmental.  For the university working with key stakeholders and partner companies such an assessment would lead to new developments both immediate and long-term.  The design of the institute for natural gas research includes organization by key economic sectors and sponsor engagement for purposes of designing and implementing a series of projects align with long-term market need.  Covering both immediate applied efforts as well as longer-term strategic developments.