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To export or not to export natural gas, that is the question

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In a well reported column on Friday, The Wall Street Journal’s John Bussey ventured into the looming question of whether the U.S. should go full force into natural gas exporting. I write looming because as we over here in the cleantech vertical worry about stabilizing solar panel prices and the growth of renewable energy deployment, the price of renewable energy’s biggest 21st century competitor—natural gas—will be highly impacted by whether the government permits large scale natural gas exporting. Which will in turn impact the success and growth rates of renewable energy deployment.

The political situation

The Obama administration has already come under fire for what Republicans say have been delay tactics in terms of waiting until after the election to release a key natural-gas export study, which will examine many issues including the impact of natural gas exporting on the domestic economy. (For a comprehensive look at the impact of Obama’s victory on renewable energy interests, see “The government’s impact on the renewable-energy industry, post-2012 election.”)

Some natural gas exportation is currently allowed, but Republicans want an accelerated approval process for licenses to export and likely a large scale permitting process that will expedite the construction of export terminals. They want exporters to be able to easily send natural gas to countries the U.S. doesn’t have trade agreements with.

Natural gas prices hit a 10 year low earlier this year, ducking briefly under $2 per thousand cubic feet.  The cause of this newfound cheap gas has been innovations in horizontal well drilling, hydraulic fracking, and the discovery of shale gas not just in Pennsylvania, but in North Dakota and Texas.

And with natural gas drilling exploding, the companies behind all that exploration want demand to catch up with supply. The quickest way to do that is to start exporting natural gas, particularly liquefied natural gas (LNG), to energy hungry countries like Japan, which saw its imports surge post-Fukushima. Allowing all that gas to trade on the global market, will, no doubt, send natural gas prices north.

Strange friends

Climate change advocates are largely opposed to natural gas exporting because they worry it will encourage global natural gas consumption, which could worsen warming not to mention the fact that fracking has local environmental consequences. The Sierra Club is actively trying to block a permit to Cheniere Energy to export LNG at a terminal in Sabine Pass in Lousiana.  It’s currently an import terminal, but in a sign of which way the wind is blowing, Cheniere plans to convert it to an export terminal in 2015.

But those on the green side of the equation find themselves with an unfamiliar ally. The U.S. manufacturing sector is also deeply opposed to natural gas exporting because cheap natural gas is fueling what companies like Dow Chemical view as a manufacturing renaissance in America. And they fear exporting natural gas will be the end of a dirt cheap feedstock needed by manufacturing plants here in the U.S.

And in an even stranger twist, renewable energy companies like First Solar and Vestas should want exactly what the natural gas industry wants, which is to export as much gas as possible so that prices head upwards and wind, solar, geothermal and biomass remain more cost competitive.

Coal power plants are on the way out as in just the last four years, coal generation as a share of the nation’s electricity generation fell from 50 percent to 38 percent, while natural gas rose from 20 percent to 29 percent. The Energy Information Administration (EIA) has reported that increased exports of natural gas would raise electricity bills between 1 and 3 percent annually from 2015 to 2035.

Rising utility bills under a natural gas export plan would actually be the best thing for renewable energy developers, if perhaps not the best thing for die hard climate change advocates that want to limit the burning of any and all hydrocarbons. But the sequestration of natural gas domestically is effectively market manipulation and creates the perverse incentive of keeping the price of a fossil fuel artificially low so that we can burn more of it here at home.

None of this is a replacement for strong federal investment in renewable energy research and deployment. But in the grand scheme of things letting the price of natural gas reach its natural price in a global market is the most honest approach to accurately assessing our cost of burning fossil fuels and the best thing for renewable energy developers who must compete against those fuels.