The Oil and the Glory

The latest victim of shale gas — clean energy technology

The latest victim of shale gas — clean energy technology

In the new issue of Wired, Julie Eilperin writes that clean-technology investment is in the throes of going bust, at least in the United States. That includes solar, wind and biofuels. A U.S. presidential election year and the continuing Solyndra bankruptcy scandal are combining to seriously undercut federal subsidies, she reports. As usual, China is providing stiff competition (the New York Times’ Charles Duhigg and Keith Bradsher produce a long, must-read dive into why China and not the U.S. is likely to continue to dominate manufacturing). But the main culprit is cheap natural gas, Eilperin asserts. The shale gas boom, allowing for electricity prices of 10 cents a kilowatt-hour, has eroded the chances of solar and wind to compete.

As discussed over the weekend, Citi Group analyst Edward Morse concludes that shale gas (pictured above, part of a hydraulic fracturing operation in South Montrose, Pa.) could fuel a U.S. industrial renaissance, specifically in energy-intensive products such as chemicals, plastics and housewares. But to the degree that Morse is right, it is coming at a cost, which is a "clean tech meltdown," according to Eilperin:

Because natural gas has gotten so cheap, there is no longer a financial incentive to go with renewables.

Already, shale gas has seriously undermined Russia’s petro-fueled influence in Europe. Now Eilperin suggests some of the most highly promoted technology of recent years is under challenge.

The confluence of reports of turbulence in the energy space is striking. Eilperin’s account of a bursting clean-tech bubble coincides with a parade of reports of a fresh surge in South and North American oil production, and animated forecasts of regional fossil fuel self-sufficiency in the coming decade or so.

How consequential is this tradeoff — a clean-tech economy for a fossil fuel-based boom? First, the calculus may be false: If you read the Duhigg-Bradsher piece from yesterday’s NYT, you are likely to deduce that almost no one except China and a few other Asian states are capable of manufacturing competitively at scale.

Yet, for those who are not as pessimistic about U.S. and western economic prowess (this Associated Press piece suggests that manufacturing is picking up), there is a raw philosophical divide on U.S. industrial policy. We hear full-throated voices arguing both that the U.S. ought to abandon fossil fuels in favor of clean energy technology, and that it is exceedingly premature to rely on renewable energy, so that oil and gas must be encouraged. That debate is likely to remain robust.

Still, it is useful to keep in mind that neither Eilperin’s nor Morse’s scenario is set in concrete — fracking is subject to a set of serious problems that could yet curtail its use, Peter Farley writes at MIT Technology Review. In addition, U.S. government investment in clean technology may dry up — and solar and wind have yet to prove able to stand on their own legs without subsidies — but venture capital appears to continue strong, writes Felicity Carus at AOL Energy.

Ultimately, a skeptical eye is warranted. The reports of oil independence have the ring of "if only," that is what could happen if only this or that were true. For example, much of the oil under discussion — oil shale and oil sands among the resources — is economical to produce only under sustained high oil-price scenarios. But what if oil prices don’t stay high? In this vein, the forecasts bear an eerie resemblance to the .dotcom-type predictions of fortune we heard a few years ago about the clean technologies.