Comparing the shale revolution to wind and solar energy

Real Clear Energy:
... wind and solar together still supply less than 1.5% of America’s energy. Fast growth from a small number is like winning $100 in Vegas on a $10 bet. Nice, but not life-changing.

To find a “radical and pervasive” change in energy markets we have to look elsewhere. Over the same decade noted above, the amount of energy added to America from shale hydrocarbons was 2,000% greater than the additional supply from solar and wind combined. That actual revolution also happened because of the maturation of new technologies. But, notably, in this case it took place without the stimulus of special subsidies.

The scale and velocity of the shale revolution is underappreciated. It is the fastest and biggest addition to world energy supply -- not just hydrocarbons, but all forms of energy -- that has occurred in history. The only time something close to as dramatic has occurred was in the decade following the 1968 opening of Saudi Arabia’s giant Ghawar oil field.

This American transformation has far-reaching implications, not least of which is that the U.S. now exports crude – savor the word “exports” – at a rate north of 1 million barrels a day. That’s the highest rate of U.S. crude exports since 1958, by a factor of two, and outstrips the crude exports of five of OPEC’s members. Four decades of handwringing about import dependencies and serially misguided federal energy policies were upended overnight.

Looking to the future, the Energy Information Administration (EIA) “optimistic” forecast (which assumes subsidies continue) see solar and wind output growing three-fold by 2035. EIA’s optimistic forecast for shale hydrocarbons for the next two decades (still no subsidies of course) has that industry replicating it’s growth of the past single decade. We’ll suggest, shortly, why that’s actually a pessimistic forecast. So by 2035, the American energy revolution will still be driven by oil & gas.

But the revolution with respect to shale goes far beyond ‘mere’ quantity. In many quarters, the enthusiasm for solar and wind has been animated largely by the notion that these sources democratize energy production. But in fact, wind and solar growth in the past decade is utterly dominated by utility-scale projects, and a Darwinian consolidation of the companies that produce the hardware. There are currently only a few major wind turbine vendors (only one in the U.S.); while a comparably small number (most in China now) of solar panel producers utterly dominate the market. In short, we’ve seen the emergence of “big solar” and “big wind.”

The shale story has been precisely the opposite. None of the “big oil” companies, the super-majors, were responsible for creating the new shale industry. The pioneers were all upstarts with names like Continental, Pioneer and Brigham. There are hundreds of shale drillers; more than four dozen relatively unknown companies comprise the top ranks. The majors, of course, have noticed and have started to get into the game, but they will still constitute a small share of that industry for the foreseeable future. The rapid emergence of a new, diverse and broad community of companies in the U.S. shale industry is a classic, American entrepreneurial bootstrap story culminating in a new industry that has truly democratized a huge swath of the energy landscape.
There is much more.

The majors are coming to the table late, but they are finnally engaged in the process.

The shale revolution is much more durable than competitors realized and the OPEC attempt to drive them out of business with predatory pricing turned into a suicide pact for the oil cartel. Shale producers in some areas now have a price advantage over many OPEC countries whose commitment to a form of socialism is now causing them to burn through their currency reserves.

I recall reading back in the 70's when OPEC was driving up the price of oil, that the US had enough shale oil in the ground to put the cartel out of business if it found the means for getting it out of the ground.  That day has come.  The Democrats who claimed that the US could not drill its way t lower prices were dead wrong.  It would be a mistake to listen to the same people now who are pushing alternative energy.


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