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Gas 'Key Enabler' of Renewables, Says Chu

The United States has the opportunity to lead the world in a new industrial energy revolution, but it has to begin today, Secretary of Energy Steven Chu said last week.

Speaking to an overflow audience at IHS Cambridge Energy Research Associates' (CERA) CERAWeek 2010 in Houston, Chu emphasized efficiency gains and renewable energy, mentioning that natural gas would play a major role in helping transition to more renewables.

"Today the United States is dependent on foreign oil as a transportation fuel," Chu said. Petroleum has a 95% share of the transportation fuels market in the United States, with natural gas capturing 2% and biofuels taking 3%.

Meanwhile, a "huge growth" in oil demand is projected from the developing world, led by China, India and the Middle East. To help decrease the U.S. dependence on oil, the Department of Energy (DOE) has invested nearly $13 billion to promote competition and convergence in the transportation sector using approaches that include using more natural gas, as well as hydrogen and natural gas fuel cells.

Last September Chu requested two new studies from the National Petroleum Council. One study is to focus on the "prudent" development of North American natural gas and oil resources to "reassess the resources supply chain and infrastructure potential, and the role of gas in a transition to a lower carbon fuel mix." The second study is to focus on future transportation fuels and would analyze U.S. fuels prospects through 2030 for auto, truck, air, rail and water transport.

"Groundwork is under way to initiate these studies this spring," Chu told the CERAWeek audience.

Natural gas produces emissions, "but they are fewer than other fossil fuels," Chu noted. "Natural gas is a key enabler of renewable energy. The response time of natural gas electricity generation is much faster than coal or nuclear power." In addition, gas can be used in compressed air energy storage, noted the DOE secretary. "Natural gas, in a certain sense, is the first responder for changes in energy."

To ensure that new technologies will be used to fuel U.S. independence from foreign oil supplies, DOE investments "have led to massive increases in recoverable coalbed methane [CBM] and shale gas," said Chu. "Could methane hydrates be next? DOE is investing $64 million in early-stage research."

Once pilot projects are up and running, the government will step back and let private enterprise take over, Chu noted. For instance, he reminded the audience that the federal government initiated a CBM research program in the 1970s, spending almost $30 million in total funding before private enterprise took over in 1982.

The federal research program on natural gas shale, which ended in 1992, received $137 million from DOE for pilot projects.

"DOE has a long history in supporting unconventional natural gas," said Chu. "Investments led to massive increases in recoverable CBM and shale gas," and he noted how quickly the industry has taken off since the pilot studies were first conducted.

"The cost of oil and other forms of energy will rise in the coming decades," said the DOE secretary. "The risks of climate change are becoming increasingly apparent. We will live in a carbon-constrained world. China, EU [European Union] countries and others see the economic opportunity and are moving aggressively."

For the United States, "the most important policy" to stimulate innovation "is a declining cap on carbon emissions," which in turn would provide a "long-term signal that there will be a price on carbon." The signals need to be in place "before the business community will make substantial investments...Right now a lot of money is sitting on the sidelines because we are in limbo."

Long-term policies also need to be in place to ensure there are tax credits for the energy industry to spend money to innovate, Chu said. The United States "still has the opportunity to lead the world in a new industrial revolution and secure our future prosperity, but time is running out and the train is leaving the station."

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