Wednesday, May 28, 2008

Some Basics About Energy

The following article summarizes some basic information about the energy the United States uses, where it comes from, and how it is used. These simple realities are often overlooked, misunderstood, or misinterpreted among people participating in the ongoing debate over energy prices, renewable and alternative energy and global warming. Perhaps most significant, is how little energy comes from so-called alternative energy sources, particularly solar, wind, and geothermal. We can not just suddenly do away with oil, gas, and coal . These numbers are well worth understanding and remembering.


The Basics on Energy
May 23, 2008
Energy & Entrepreneurs #57

The Basics on Energy
by Raymond J. Keating

When energy costs are skyrocketing, it's often hard to stay clear on the basics regarding the economics and workings of energy markets.
The U.S. Energy Information Administration launched a series early this month titled "Energy in Brief - what everyone should know about energy." The EIA explains: "Energy in Briefs explain important energy topics in plain language. Each Brief answers a question relevant to the public and recommends resources for further reading."
For the most part, these are handy guides that walk through some energy fundamentals. They can be read at the "Energy in Brief" website.

A few points from the current reports on the site are worth noting here.
On electricity:

• In 2007, 48.7 percent of electricity generation came from coal, followed by 21.5 percent from natural gas, nuclear at 19.4 percent, hydroelectric at 6.0 percent, other renewables at 2.5 percent, and petroleum at 1.6 percent.

• Regarding electricity prices: "In 2007, Hawaii residential consumers paid the highest rate (24.13 cents per kilowatt hour) because the primary fuel used to generate their electricity is oil, which is expensive. Idaho residential consumers paid the lowest rate (6.35 cents per kilowatt hour) because of the availability of economical hydroelectric power."

On foreign oil:
• In terms of meeting U.S. oil demand, 60 percent are net imports and 40 percent is domestic oil.

• "Some may be surprised to learn that almost 50% of U.S. crude oil and petroleum products imports came from the Western Hemisphere (North, South, and Central America and the Caribbean including U.S. territories) during 2006. We imported only 16% of our crude oil and petroleum products from the Persian Gulf countries of Bahrain, Iraq, Kuwait, Qatar, Saudi Arabia, and United Arab Emirates. During 2006, our five biggest suppliers of crude oil and petroleum products were: Canada (17.2%), Mexico (12.4%), Saudi Arabia (10.7%), Venezuela (10.4%), Nigeria (8.1%)."

On liquefied natural gas:
• "The United States imports about 16% of the natural gas we consume. Most of these imports are delivered by pipeline (from Canada). But a growing volume of natural gas is coming to the United States in liquid form from overseas. With the demand for natural gas expected to increase, it's likely that U.S. imports of LNG also will need to increase."

• "Liquefied natural gas (LNG) is natural gas that has been cooled to about minus 260 degrees Fahrenheit for shipment and/or storage as a liquid. The volume of the liquid is about 600 times smaller than the gaseous form. In this compact form, natural gas can be shipped in special tankers to receiving terminals in the United States and other importing countries. At these terminals, the LNG is returned to a gaseous form and transported by pipeline to distribution companies, industrial consumers, and power plants. Liquefying natural gas provides a means of moving it long distances where pipeline transport is not feasible, allowing access to natural gas from regions with vast production potential that are too distant from end-use markets to be connected by pipeline."

On renewable energy:
• In 2006, renewable energy accounted for 7 percent of U.S. energy demand and 9.5 percent of electricity generation.

• Based on data from the EIA brief, of the total U.S. energy supply in 2006, wind accounted for 0.28 percent and solar 0.07 percent.
"The largest share of the renewable-generated electricity comes from hydroelectric energy (75%), followed by biomass (14%), wind (7%), geothermal (4%), and solar (0.1%)."
This is all information worth keeping in mind as the energy policy debate continues.
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.


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