A U.S./European Secure Energy Future

(Taken from a lecture delivered at Estonian Energy’s Forum:  “Where Will Tomorrow’s Energy Come From?” in Tallinn September 20, 2011.)

President Obama accentuated the state of the U.S. energy situation when in March this year he said “we cannot keep going from shock to trance on the issue of energy security.”

Unfortunately this has been the case for far too long in America. Our interest in energy security rides a cycle from almost manic activity when gasoline prices are high, to indifference when prices drop back down again. It is clear that continuing this cycle is no longer an option. Global demand for energy is expected to rise 50% over the next 25 years. Driven by growth in China, India and the rest of the developing world, the rising price of oil and other forms of energy is an issue we must confront head-on with resolve and ingenuity.

We in the United States and our European friends and allies owe it to ourselves and our citizens to provide for a more secure energy future by harnessing all of our available resources, embracing a diverse energy portfolio, and investing in the most promising new sources of renewable power.  U.S. – European, U.S. -Estonian, and regional cooperation, along with free markets, are key elements to reaching an abundant, clean, and secure energy future.

When President Obama took office, America imported 11 million barrels of oil a day. This past March, the President pledged that by a little more than a decade from now, we will have cut that by one-third. He put forward a plan to secure America’s energy future by producing more oil at home and reducing our dependence on oil by leveraging cleaner alternative fuels and greater efficiency.

First, we will develop and secure America’s own abundant energy supplies: We need to deploy American assets, innovation, and technology so that we can safely and responsibly develop more energy at home and be a leader in the global energy economy. Developing our existing energy supplies means improved drilling for oil and natural gas. And it also means exploring exciting opportunities for U.S.-Estonian cooperation by putting together Estonia’s oil shale expertise with America’s vast oil shale resources. I very much look forward to seeing Enefit’s investment in Utah develop swiftly, and will continue to do all I can to ensure this project is a full success.

Second, there is also an important ongoing role to play for nuclear energy. Some countries in Europe decided to write-off nuclear power in the aftermath of the natural disaster in Japan this year. That is not the course the United States will take. Abandoning such an important stream of rather clean energy will only lead to higher electricity bills, increasing dependence on fossil fuels – which are often imported, and further complicate our uphill challenge in reaching climate change goals. Instead of abandoning nuclear energy, we intend to continue to make nuclear power function safely, and we have high hopes for new generation reactors being developed.  The United States will provide consumers with choices to reduce costs and save energy: Volatile gasoline prices reinforce the need for innovation that will make it easier and more affordable for consumers to buy more advanced and fuel-efficient vehicles, use alternative means of transportation, weatherize their homes and workplaces, and in doing so, save money and protect the environment. Increasing energy efficiency is something we can do now, with existing technology, and have a major impact on our energy and climate security.

Third, we will innovate our way to a clean energy future: Leading the world in clean energy is critical to strengthening the American economy. Our Government has invested over $90 billion in clean energy research and development over the past 2 years. This unprecedented investment demonstrates our commitment to one day creating limitless clean energy supplies. This process will take many years and until then we must use all we have responsibly: our oil, gas, oil shale and nuclear power along with nascent renewables.

Along with our domestic energy program, we will also pursue three main, interconnected components of our Eurasian energy strategy. We want to assist Europe in its quest for energy security. I recently wrote a blog re-stating the obvious: having strong European allies is essential for the health of the American economy and for our national security. The EU and the U.S. account for the largest bilateral trade and investment relationship in the world. Europe is also our partner on any number of global issues from Afghanistan to Libya to the Middle East, from human rights to free trade and to peace and security for the citizens of those regions. Promoting energy security in Europe is good for America and good for Europe.

In Europe, energy security is a more pressing issue to some than to others. Some countries in Europe do not have a diverse energy mix and depend largely on a single supplier and transport route. When that route is disrupted, as we witnessed in January 2009 with the Russo-Ukrainian gas dispute, the consequences for countries downstream can be severe in the immediate term and profoundly unsettling for the future. Also, for the European side of the Atlantic, we want to encourage the development of new oil and gas resources and also promote efficiency and conservation in the use of all types of energy.

Because there is a fungible world market for oil, new production contributes to meeting growing demand anywhere in the world, including in the United States. Such a global supply chain does not exist for gas, but security of supply is equally important. We often speak about new natural gas production in the Caspian region, shale gas in Poland, and other potential gas resources in and near Europe. It is unlikely that any of that gas will reach the U.S., but these sources will improve the energy security of our European allies and add to international gas supply. Additional supply in one place naturally frees up supply in another. Also, as the market for liquefied natural gas continues to grow, we can start to plan for gas to move around markets in much the same way that oil does.

Finally, we want to help Caspian and Central Asian countries find new routes to a free market. To turn an old phrase, “happiness is multiple pipelines.” We want to help foster economic growth and prosperity in these countries. By expanding export routes, they can increase competition for their resources, demand a fair price, and create strong links to the global economy. These countries must also be able to make their own independent choices regarding how their energy resources reach the market.

So, how can we achieve our common energy security goals together with and in Europe? We know that energy markets work best when free market forces drive decisions on how oil and gas are produced, transported, and purchased. This is normally the case for private firms and can even be the case for state-owned oil and gas companies. Governments can and should play a facilitating role. They should put in place the right business climate to attract free investment and work with neighboring states to expand market access and increase interconnections. As with all other goods in a global trading system, the value added by the public sector is the creation of the political framework in which businesses and commercial projects can thrive.

At the heart of U.S. policy is our conviction that energy security is best achieved through diversity – diversity of suppliers, diversity of transportation routes and diversity of consumers. This of course applies to existing as well as future technologies, including renewable and other clean energy technologies, and products and methodologies for increased energy efficiency.

We strongly support the establishment of a new pathway, the so-called Southern Corridor, to bring natural gas to Europe, via Turkey, from the Caspian Region and potentially other sources beyond Europe’s south-eastern frontiers. Gas from Azerbaijan’s offshore fields will be the first significant volumes available to supply the Southern Corridor. Development of a major field in Azerbaijan is well underway and three separate pipeline consortia are laying the financial, technical and organizational groundwork to compete for the right to ship this gas to Europe. The best outcome of all these efforts is the one that brings the most gas, soonest and most reliably, to those parts of Europe that need it most. But at the end of the day, any solution for bringing Azeri or other gas to European customers must make commercial sense. In light of the momentum achieved over the past 18 months, we are confident that a commercially viable Southern Corridor will be realized. The investment decisions to make that possible should occur by the end of this year.

Some people have portrayed our energy policy and Russia’s as the next round in the “Great Game” in Central Asia. I could not disagree more. Energy security is no game. And we are not playing. Energy security and energy investment are topics for serious two-way discussions with Russia. The importance of these issues is reflected by the inclusion of a Working Group on Energy, chaired by U.S. Energy Secretary Chu and Russian Energy Minister Shmatko, under our U.S.-Russia Bilateral Presidential Commission. Russia is an important supplier of oil and gas, and we welcome market-driven expansion of its production capacity.

In Central and Eastern Europe, we support efforts to more effectively diversify energy sources. We encourage states throughout the region to coordinate work toward a common energy market and to increase gas and electricity connections with each other and with the larger, better-supplied economies of the rest of Europe. To this end, the U.S. is actively cooperating with Estonia and its neighbors in implementing the Baltic Energy Market Interconnection Plan (BEMIP), which strives for full integration of the states in the Baltic/Nordic region into the European energy market. We have already seen important successes on this front, for instance with the Estlink project between Estonia and Finland. I applaud Estonia for the hard work, leadership and patience it has demonstrated on regional energy cooperation.

New pipelines alone will not fully assure Europe’s energy security. The U.S. supports the other initiatives that Europe is undertaking to increase its own energy security. This includes building a single market for energy, unbundling the distribution and supply functions of energy firms, building interconnectivity of European gas and electricity networks, environmentally sound development of shale gas reserves, enhancing LNG import capabilities, increasing gas storage, improving energy efficiency, and exploring alternative and renewable sources. All of these are pieces of the puzzle to ensure European energy security.

In November 2009 our governments launched the U.S.-EU Energy Council to formalize our ongoing engagement. Through this body we have developed coordinated approaches to Ukraine, Russia, the Southern Corridor and Iraq. The Energy Council is also making important practical strides toward harmonizing battery and plug-in charging standards for Electric-drive Vehicles (EVs) and software for Smart Grids. We are also working to facilitate an unprecedented level of researcher exchanges in key areas of clean and renewable technologies research.

U.S.-Estonian energy cooperation fits seamlessly into the broader U.S. – European energy framework. Of course the most prominent area of cooperation between our countries is on oil shale. Putting together Estonia’s 90 years of experience utilizing oil shale with America’s immense oil shale resources could unlock 1.8 trillion barrels of shale oil. This year we have seen two significant steps further intensifying our cooperation: Eesti Energia’s/Enefit’s investment in Utah with plans to build a sizeable shale oil production facility, and the oil shale research cooperation agreement Minister Parts and I signed in February. My Embassy has strongly supported Enefit’s investment in the United States and I will firmly continue that support. Estonian oil shale investment is just beginning in the U.S., but the potential benefits to both of our countries are enormous. As to further research cooperation, I am happy to report that experts at the Department of Energy are already in contact with their counterparts in Estonia. Among the many things we can do together are enhancing the efficiency of oil production from oil shale, identifying new and commercially feasible processes to produce high quality oil from shale, and minimizing the environmental impact associated with shale oil production.

Naturally, our mutual interests go beyond oil shale. We have also encouraged development of renewable energy through initiatives such as the Clean and Green Energy Conference in 2009. This conference brought executives from clean energy businesses and leading American clean energy researchers to Estonia to develop contacts and share their knowledge. And again we have encouraged and applauded Estonia’s efforts to unify the Baltic electricity market and link it to NordPool and the rest of the EU. Estonia has routinely demonstrated leadership on this issue, through projects such as Estlink 1 & 2, by beginning the process of opening the electricity market last year, and by encouraging your neighbors to create a single Baltic electricity market. A very good step in the right direction is also Estonia’s commitment to the Visaginas nuclear plant project in Lithuania. I was happy to see that the American-Japanese consortium of General Electric and Hitachi was chosen to move the project forward and my embassy stands ready to assist in next steps and to further progress in any way we can. Nuclear energy will offer Estonia, Latvia and Lithuania a stable, reliable energy supply that will not contribute to climate change or be subject to political pressures.

Transatlantic energy security discussions are fraught with emotion born from frustration and burdened by repeated inaction as we go from shock to trance. Our governments and our publics don’t always agree on the precise path or the pace toward a secure energy future, but there is zero argument about the ultimate goal. In the end nothing succeeds like success. Whatever works in getting us there, and does so in the fastest and most economically sound way, we will be able to agree on. Our assets are not only fossil fuels and modern renewable energy resources, but also a joint commitment to free markets that literally keep energy flowing.  Together we will keep the lights burning.

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1 Comment

Filed under economy, U.S. -Estonian Relations, U.S. Foreign Relations

One response to “A U.S./European Secure Energy Future

  1. …..The January 2009 Ukraine-Russia gas crisis demonstrated the costs of neglecting to develop a viable European Union EU energy policy. Despite progress in recent years towards greater integration and cooperation in the energy sphere the EU ultimately failed to provide the most basic of public goods to millions of its citizens warmth in winter. This failure resulted from an over-reliance on Russian energy supplies insufficient import alternatives and a lack of the institutional and physical infrastructure necessary to coordinate a European-wide response.

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