November/ December 2012 How We Could Blow the Energy Boom

America’s vast new surplus of natural gas could lead to great prosperity and a cleaner environment. But if we don’t fix our decrepit, blackout -prone electric grid, we could wind up sitting in the dark.

By Jeffrey Leonard

The United States is at the cusp of what very well could be the biggest political and economic windfall in a generation. But to realize this windfall, we must ensure that natural gas is maximized as a source of electricity generation, and we must commit to a modern regulatory structure that mobilizes major investments in a reliable, secure—and, yes, “smart”—grid. While relatively straightforward, this is not an easy path. It will require presidential leadership to explain to the public what’s at stake and to provide a broad vision of a national energy strategy. The president will also have to face down an army of entrenched special interests to avoid squandering America’s energy dividend. If too many priorities and hare-brained schemes divert our political resolve, we may find that we have blown the energy boom.

Jeffrey Leonard is the CEO of the Global Environment Fund, a growth capital-oriented investment firm, and the chairman of the Washington Monthly board of directors. He is the author of five books and numerous articles on issues relating to energy, the environment, and economics.


  • A.Oscar Antonio Oscar on November 12, 2012 10:56 AM:

    The way we have the world with the Earth real sick; donít going to the first, not even the last one. And worse ones will be around again soon; Iím not to the point be negative, just the reality in the account to my studdingís. A.Oscar

  • Eric on November 12, 2012 1:18 PM:

    When burning gas at a plant to generate electricity, a large amount of energy from the gas is emitted as heat and wasted. When burning gas in my furnace to heat my home, the heat given off is actually used. I'm skeptical that electricity generation is the "optimal use" for natural gas (despite some justifications given in the article).

  • Dave on November 12, 2012 1:56 PM:

    Eric, heat is one of the lowest forms of energy, so although the efficiency of a gas furnace can be very high, the use of natural gas in a modern gas combined cycle generator produces high quality energy in the form of electricity, a much more flexible and powerful tool than the low level heat you get from burning gas. An additional factor is that modern heat pumps powered by electricity can be more efficient than gas furnaces while also providing air conditioning. The bigger picture here is that any long term thinking about national energy use will have to pay attention to issues like the one you raised while also thinking about the impact of a major effort to retrofit buildings to be more efficient overall. Energy not-used is just as valuable as finding more.

  • Ed on November 13, 2012 6:29 PM:

    We could blow the energy boom by paying any attention at all to editorials from manipulative con artists from crooked hedge funds.

  • M. Report on November 13, 2012 6:57 PM:

    Backup generators are popular in areas hit by Frankenstorm.
    Standby generators, their big brothers, are also being
    ordered at a good clip.

    Downsize, standardize, modularize, modernize;
    Build a bullet-proof Grid !

  • Corky Boyd on November 13, 2012 8:58 PM:

    The availabilty of inexpensive gas will have profound effects, well beyond its substition for coal in electric power generation.

    The largest item in our balance of payments defecit is energy. The world gas price outside of the US is $10 to 12 compared to under $4 in the US. The fact shale formation gas is generally profitable at around $2 gives the US a tremendous advantage in the world market. Russia, which has a near monopoly in Europe, has proven to be an unreliable source. And it pegs its price to the btu content of oil. This supply and priceing monoply can be broken, but only if the US can build a liquifaction and port facilities to market it. And do it quickly. Regulatory hurdles could make us miss this golden moment.

  • Fred Z on November 13, 2012 11:22 PM:

    Obama's gonna prevent it from being produced and what is produced he's gonna steal to pay for Sandra Fluke's condoms and Obama-phones for pond-scum.

    You Americans are so screwed.

  • Sam Hall on November 14, 2012 6:38 AM:

    Ed, you got it.

    I have never heard that transformers had a lifetime. With proper maintenance and protection, they should last hundreds of years.

    A "smart Grid" is all about control of your energy use - no thanks.

    More government is the last thing we need. Look at what is happening on Long Island with a government run power system.

  • Michael on November 15, 2012 7:41 PM:

    If the administration hadn't squandered the bulk of that $90B stimulus fund marked for energy efficiency on failed solar companies linked to his campaign contributors, we could have some of that smart grid technology.

    But that would have been marked for other campaign contributors and probably squandered as well.

    Why don't we create real competition, unfreeze electrical rates and reduce regulation in the utility industry? If the smart grid has all the advantages claimed, smart utilities will tap capital markets and build it. Nah...government and all you "experts" know best.

  • Andrew on November 16, 2012 7:33 PM:

    If we are going to stick with the problematic concept of heavily regulated utilities, said utilities won't have much interest in investing in smart grids and infrastructure (read: capital) if prices can't be manipulated to produce the returns necessary to justify the upfront expense. We'd be better off with unregulated utilities that actually have to compete with each other for customers. Broadband and cable customers suffer the same problem of a highly regulated industry leaving multiple providers, but conveniently usually just one to choose from where they live.

  • N.Wells on November 18, 2012 6:06 PM:

    Not only has humanity has never failed to screw up an energy boom, but it has also never avoided screwing up the environment at the same time, whether we are talking about firewood, charcoal, whale oil, coal, nuclear, or petroleum, so the chance of getting this one right is infinitesimally small. What will happen is that we will collectively rush to produce, therefore ensuring overproduction combined with deleterious environmental effects, a temporary glut with cheap prices that leads to a crunch with high prices later, rapid depletion of an invaluable but finite resource, and abandonment of research into sustainable alternatives. The Republicans controlling my state (Ohio) are pushing to produce as much as possible as soon as possible lest we miss out on the boom, and with minimal regulation of and payments from energy companies (lest they pursue their part of the boom somewhere else), all without thinking that whatever we don't produce in the next decade is no less usable and valuable in subsequent decades. We really aren't thinking long-term. There's no reason we couldn't exploit the resource slowly, expanding drilling areas over the next 100 years to ensure a slow and steady boost to the economy, but our capitalist system doesn't readily allow that degree of planning and control. Hydrocarbons actually have many more valuable uses than cheap fuel (fertilizer, plastics), so humanity will be much worse off once it starts getting scarce. Quite clearly, our view toward far-distant generations is, screw 'em.

    There used to be a story about a prayer in Texas: Dear God, just give us one more boom, and we promise not to piss it away like all the others.