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The“Yes, and” Solution to Our Energy Crisis

 

Summer is here, and it’s bringing historically volatile gas prices with it. The cost of travel is hitting millions of Americans directly in the pocketbook at a time when they’re already facing sky-rocketing bills. Unfortunately, with inflation at a 40-year high and ongoing Washington gridlock preventing bipartisan energy solutions, the country is facing a bitter realization – no short-term fix is coming.

When you add the war in Ukraine, escalating global demand, and world-wide supply chain shortages to the mix, it becomes even clearer no magic bullet exists to alleviate this crisis and push gas prices back down, no matter what the countless talking heads on television say. In other words, Americans need to buckle in for a summer of financial pain over the next several months.

Thankfully, all hope is not lost. As bleak as it might seem, we have the tools and insights to turn the situation around. It’s just a matter of taking advantage of all our resources and recognizing our domestic energy policy must revolve around a smarter long-term strategy. Such policies, what we call a “Yes, And” approach, must embrace both renewables and fossil fuels, not one or the other.

The “Yes” component focuses on embracing the promise of renewables. Our country must be forward-looking with investments in sustainable energy – solar, wind, hydro, and nuclear. However, while growth in renewables is inevitable, our collective commitment to them still consistently wavers.

A recent International Energy Agency report said global clean energy spending is expected to increase by 12 percent this year, reaching $1.4 trillion. Domestic private investment in clean energy topped $100 billion last year, a record for the U.S. Yet we need to do more just to keep pace with other countries racing ahead, with both China and Europe investing over $100 billion more than America in renewable energy technologies and infrastructure in 2021. 

In fact, China is tripling its solar-energy footprint by spending billions to accelerate its renewable push even further. Likewise, the United Arab Emirates just announced a $400 million energy transition strategy to develop solar-energy projects across the world. 

But as a global community, renewables cannot be our only track forward. The European Parliament implicitly acknowledged this just last week after its decision to support labeling some nuclear and gas energy projects as “green.” Despite fierce debate on the impact this would have on climate goals, it is a recognition that multiple approaches will be needed to solve the current energy crisis. This brings us to the “And” part of the equation. A strong energy policy must also include a commitment to producing fossil fuels like natural gas in the short-to-mid-term to meet demand.

The United States has the largest methane reserves in the world, potentially making it the Saudi Arabia of natural gas. Therefore, a critical starting point to solving the energy crisis is to make exploration and production easier for domestic producers, removing excessive regulatory handcuffs, and letting them help resolve this massive misalignment between supply and demand.

Regulations have capped domestic production growth through a variety of measures, particularly with limitations on federal permits and pipeline development. The fastest way to address our energy issues is to relax some of these regulations and incentivize production. This would allow energy companies to increase output, while production-friendly policies would also signal a safe landing for investment capital returning to the sector.

At this point, such policies would not be swimming against the strong, ESG-oriented currents they might have encountered just a year or two ago. The market is now experiencing growing pushback against ESG investing, much of it propelled by investment mainstays like Blackrock and Warren Buffett, amongst others. This expanding faction is beginning to paint activist investors in a negative light, recognizing their expectations of renewable energy generation over the next two decades is likely unrealistic.

Ultimately, we need to depoliticize the discourse and embrace all forms of energy to lead the country out of this crisis. Let’s develop an effective long-term strategy that embraces multiple tracks, not a splintered, segmented approach that fails to see the bigger picture. Otherwise, by the time we glue a piecemeal approach together, it might be too late.

 

 

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