Picture from http://www.windpowerengineering.com/featured/business-news-projects/vestas-supply-turbines-midamericans-2000-mw-wind-xi-iowa-project/
Now that the The Donald & Co. has successfully seized control of the US government, two of the 3 branches of the US government are now completely in Republican control (Presidential, Senate/House in congress). And it looks like Trevor Noah’s observation of The Donald as a toddler mind will get magnified something fierce (http://time.com/4585970/trevor-noah-donald-trump-toddler/). As part of this toddler mindset, there is the matter of revenge (if they screw you, you screw them back 10 times as bad). The renewable energy and environmental advocacy community has been very down on The Donald, figuring that he is totally in the tank for pollution based energy companies - notably fracking sourced oil, fracking sourced methane and (supposedly) coal. So payback will get ugly, as evidenced by his cabinet appointees. Science is irrelevant to The Donald and even less so for his proposed head of EPA, eventual Energy Secretary, Commerce Secretary, Attorney General, Health and Human Services, etc. We as a country will soon become a pariah in the civilized world and even the uncivilized world…. but no matter, the evil deed has been done, the die is cast, now it’s time to pay for this combination of nasty, greed and hatred coupled to a petulant frenzy induced by the finest advertising and propaganda campaign via Twitter and Facebook, EVER.......
Odds are, we can forget about coal as much of a factor in anything - annual sales of U.S. coal are less than $25 billion/yr (in contrast, sales of ethanol and biodiesel are > $30 billion/yr on a bulk basis). And if you don’t have a lot of coin to bring to the table, there’s just no sense bothering to show up for this hand of really crooked poker - it’s hardly even entertaining to the likes of The Donald. And since new nukes are abysmally expensive and a long term investment (The Donald is strictly short-term oriented), we can forget about those as being a factor in future US electricity production. So electricity generation in the US will be made by existing presently operating coal burners, nukes and gas burners as well as renewables. In The Donald’s view (assuming this even exists with respect to energy), any further new generation will be provided by fracking sourced methane - it’s cheap to install, plants can be rapidly put up and methane producers/marketers are desperate for new customers. As for the money to install these, we in the USA are awash in money (estimated as $2 trillion of private money looking for something - anything - to invest in that will provide ANY kind of profits), so banks, hedge funds and rich investors will be more than willing to do this, especially if they get “back-stopped” by the Federal Government and also can score some ginormous tax avoidance possibilities with such investments.
Those who seem to be in the dumps the most about these developments (it’s a long list) include the small percentage of Americans actively concerned and informed about Global Warming/Climate Change/Climate Weirding. Obviously there will be NO Federal Government policies implemented in the next few years to even modestly try and make this bad situation slightly less worse as was done in the Obama Administration. The Donald’s reign will be characterized by attempts to actually make things worse - to INCREASE the rate at which the atmosphere gets polluted with fossil sourced CO2 and CH4. They will take it as religious dogma that greater rates of atmospheric greenhouse gas pollution per annum equates with greater economic activity in the US, or at least greater profits for the Ngas extraction industries/Ngas consuming entities. Of course, to claim that The Donald’s administration will pursue smart policies is a really stupid thing to do. Odds are, they will rapidly induce a recession which will actually CUT DEMAND for methane and thus collapse methane pricing even more than already exists ….. After all, just a slight decrease in the demand for methane at constant production will take the record inventories (http://ir.eia.gov/ngs/ngs.html), increase them more and trash prices that are already too low to make the profits investors were promised. And since so many methane producers are unable to throttle back production (that is forbidden via the financing deals that were signed), the oversupply will crash prices…..
More than half of US methane produced in the US these days is fracking sourced (43 bcfd) with the Marcellus/Utica zone as the biggest producer (combined these provide 21 billion cubic feet per day of the fracking sourced CH4 now consumed). Essentially none of this is being provided by new wells drilled in the Marcellus (16.8 bcfd), as production is drifting down from the peak of 17.0 bcfd (March 2016). Nationwide, methane consumption is close to 75 bcfd, so fracking now supplies 57% of US methane. Of the major fracking zones for methane zones (Antrium, Bakken, Woodford, Barnett, Fayetteville, Eagle Ford, Paynesville, Marcellus, Utica), several are in decline. Only the Bakken (no longer flaring it), Marcellus and Utica seem to be holding their own (Woodford = - 14%, Barnett = -40%, Eagle-Ford = -16%, Haynesville = -50%). For example, here is this updated chart of US methane production (presently rising to supply exports!): http://www.eia.gov/dnav/ng/hist/n9070us2m.htm
There are now only 119 drilling rigs prospecting for methane (down from 1600 in 2008/900 in 2010 to 2012) in the US; this is less than 8% of the peak drilling effort in 2008. The reason for this drastically lower drilling rate is low methane prices - especially for one of the major consumption sectors for methane - electricity (now 29% of methane consumption in the US). Those have been in place for roughly the last 7 years, and as a result at least $200 BILLION in losses have occurred - mostly from investors who, as it turned out, were foolish to invest in these drilling ventures. Here is the trend nicely encapsulated into a graph:
and prices for electricity raw material methane (NY Citygate):
According to this source (http://www.artberman.com/world-oil-production-in-balance-u-s-natural-gas-production-way-down/), the best fracked wells need $4/MBtu to justify the investment and average wells need $6/MBtu. At $3/MBtu, that’s the wrong price. And “city gate” pricing in NY City is now both unpredictable AND often too low: http://www.artberman.com/world-oil-production-in-balance-u-s-natural-gas-production-way-down/. So while lots of impressive production rates have come from all this fracking based gas drilling, an absolute dearth of money making has taken place and huge debts are all that there is to show for this effort. That does not sound much like financial genius type activity, more like “genius” at losing Other People’s Money. However, both bankers/financial services entities and those supplying the tools of the trade have done well for themselves until recently. But even that segment is finally “reaping what they have sowed” - with lots of bankruptcies so far and a lot more to come… (http://oilprice.com/Energy/Energy-General/North-American-Oil-Gas-Bankruptcies-Climb-Beyond-100.html). And for now, with record methane inventories, more drilling, fracking and methane production will just lead to WORSE business conditions. So anyone counting on that part of the US economy to be a major stimulus is either ignorant or lying or both - such as The Donald…..
So why is it likely that The Donald will induce a recession in the US? It’s all about economic demand and uncertainty related to things like the Affordable Care Act (“Obamacare”). For example, this means that close to 30 million people will have to pay more - in many cases a LOT more - for what passes for health insurance in this country, and so they will start cutting back spending on other things to try and sock away some stash to deal with the future potential costs. This also will cause failures to a number of hospitals - especially in rural or semi-rural regions when they experience significant rises in emergency room visits with no extra added income to compensate them. In addition, insurance companies will lose up to 30 million customers (a lot of it a transfer of money from wealthy people to the Federal Government to Insurance Companies, with about 80% of the money paid to insurance companies going to doctors/nurses/hospitals/drug companies/other health care related entities. All that will have a snowballing result as the economic multiplier from the spending vanishes with that spending. Our economy is already on a fairly delicate balance - much of it financed by debt (cars, housing, student loans). And when debt-holders cannot make their payments and do so at an increasing rate, that spells trouble for banks, which will cause interest rates to rise/credit to be contracted. And credit is money creation….. Another source of worry concerns rent payments, which have skyrocketed in many areas and are still boosted by the fact that when 7 million people lost their houses in The Great Recession, they had to start renting. More renters, same number of rental spaces —> more demand for rental housing = higher rents, especially when few affordable rental housing units have been built.
The gas and oil economic FUBAR for the last several years (oil and gas prices often lower than the cost of production) also has resulted in close to $80 billion in bankruptcies just this year (and several billion last year). A lot of those who made a killing on The Great Recession or the bail-out used to deal with it bought up billions worth of vacant housing at bargain pricing, which they converted into rental housing. But evidently those investments have not panned out that well, and so those investments are also an economic drag. But rents are already obscenely high, so there is no relief in that area…. Of late, auto and truck sales have started to decline for lack of customers with actual money of good enough credit to buy them, Heck, there is even a thing called “sub-prime auto loans” not to mention bonds that have been sold to amortize the car loans/student loans/rental home loans. Cute.......
As for the effects of massive tax cuts to the super-rich - that will have little effect on overall consumption, as they pretty much have all the stuff they have time to buy/use/abuse. As for investment opportunities in this country…. well, those are also pretty sparse. Adding more investable money to this pool (tax cuts for the rich/tax holidays for corporate “offshore” money) will not lower interest rates (already effectively at or near 0%) and it will not cause business investment/real estate investment to rise, because that is predicated on an actual DEMAND for stuff. But what is lacking is DEMAND. Investment usually follows demand and does not lead it…. As for the vaunted “The Donald Infrastructure” plan, that appears to be just another scam based on tax avoidance. Besides, these investments by private entities would need a money stream over time to pay a profit on this investment. But there is no profit to be had on sewer plants or mass transit systems or non-toll roads....
An area of the American economy that has been doing good of late (and with huge upside of growth potential) has been renewable energy - in particular, biofuels, wind turbines and PVs. But now there is worry that the petroleum interests who now dominate (i.e. purchased their share of The Donald, Inc.) the new administration will be targeting biofuels (sales = $30 billion/yr) because these take away market share from actual petroleum and thus crude oil production/extraction. But that will collapse prices for certain major crops when the demand for these drops even slightly (we had bumper crops of corn and soybeans last year). There is also a well founded fear that The Donald, Inc will attempt to trash the wind turbine biz as much as is possible. This too will be a bad thing for the U.S. “Ag” economy - after all, where else is it legal to net $5,000 to $15,000 from a 1/16 acre parcel of land. But The Donald got dissed big time on a wind turbine matter in Scotland, so obviously American farmers are going to have to pay for that one to a YUGE degree. Yeah, The Donald is quite a piece of work - psychologists and abnormal behavior analysts will have a field day writing papers and debating the results of their research for many generations…..
In the meantime, there are still something like a $30+ billion “pipeline” of wind projects being developed in the US in the next couple of years with the understanding that one of the subsidies that has so far made the wind biz possible in the US - The Production Tax Credit - is going away, starting in 2018 and phasing out completely by 2022. But thanks to the development of Low Wind Speed Turbines such as seen in the picture at the top (presently one of the more popular varieties being installed in the US this year), the electricity production cost from these is often less than can be obtained from a methane burning plant. Texas now has 117 large wind farms and ~ 18 GW of installed capacity, while Iowa now has over 35% of its electricity provided by wind turbines. In Iowa, that could well become 50% wind sourced electricity by 2018 (http://www.govtech.com/fs/Iowa-Passes-Plan-to-Convert-to-100-Percent-Renewable-Energy.html). The Warren Buffet owned utility MidAmerican Energy (Iowa’s major electricity monopoly) now has a goal of 100% wind sourced electricity. So much for increase Ngas or coal consumption, at least in the US midwest…. And to think that’s where The Donald pretty much “swept the tables” in the 2016 US election…
Anyway, The Donald’s ascent to power will mean roughly 4 years of inaction on renewable energy efforts by the US government as he attempts crony capitalism on a truly “bigly” scale. This will include payoffs (mostly legal) to those that helped bring him over the Electoral College finish line - notably fossil fuel producers and marketeers and scammers and promoters. But it is unlikely that he can stop the wind rush in the west and midwest and other parts of the U.S. That wind resource is so huge and the LWST coupled to that are just too enticing. So that means less demand for fossil sourced methane than his backers are hoping for, and even more delayed profitability for the Ngas biz, despite record production. That has to make them pretty angry - all that production and nothing but money losses. And the spots that have been tapped to date are those with the best sites - cheapest to drill, greatest production rates. But those have been squandered during the last 8 years of really cheap methane prices. Oh well, as the saying goes, “Cry me a river”. Given the evil that their actions will do for our planet via global warming and climate weirding, it’s hard to feel sorry for them - easier to do that for the investors conned by gas industry and Republican promises, but then they ARE supposed to be careful with that money. Unlike the wind, a lot of that money can’t be replenished….
Of course, in a sane world, we would be installing wind farms all across the US like there is no tomorrow - reasonable cost electricity, rapid energy payback of ~ 9 months for each turbine installed, and lots of economic stimulus/real wealth creation, especially since almost all of the turbine components are “made in USA” these days. But for a while, we are not in a sane world, and especially a sane country, as evidenced by the election of November 2016. But who knows, maybe we can rejoin a realm of sanity in the near future… Anyway, it’s certainly more pleasant to believe that we might, even if presently there are few facts to back up that assumption/wish….