3 big questions will shape US energy sector

By Shelby Webb, Brian Dabbs | 03/25/2024 06:43 AM EDT

The CERAWeek energy conference zeroed in on issues well beyond oil and gas ahead of this year’s presidential election.

Wind turbines with cyber computer overlay collage

Claudine Hellmuth/E&E News (graphic); Willi Heidelbach/PxHere (turbines); metamorworks/istock (cyber overlay)

HOUSTON — Last week’s gathering of energy executives here exposed competing visions of the future U.S. energy mix: either a future supply of abundant low-carbon power or one dominated by fossil fuels to accommodate spiraling demand for electricity.

At the CERAWeek by S&P Global conference, Biden administration officials touted the Inflation Reduction Act and clean energy investments they say will speed up decarbonization of the energy sector — including hydrogen and renewable energy.

But oil and gas executives were quick to point to record global demand for fossil fuels they say is helping drive record U.S. production of oil and gas.


“It was a more nurturing conference for oil and gas companies,” said Hunter Hunt, CEO of Hunt Energy, on Friday. “The [Department of Energy] and government folks had much more of a nuanced, balanced discussion about the energy transition.”

Here are three questions that ran through the conference. The answers could help determine the trajectory of renewables, natural gas and electric vehicles.

Will the election affect energy investments?

During CERAWeek, energy leaders offered mixed reviews on how much the presidential election could affect their spending on new projects.

While the impacts of legislation like 2022’s Inflation Reduction Act and policies such as DOE’s pause on liquefied natural gas export permits have been widely felt, many in the energy sector said the overall trajectory of their industries don’t depend on day-to-day decisions in federal policy.

Corey Grindal, chief operating officer at Cheniere, said companies are used to adapting and working with new regulations and presidential administrations. The company’s first LNG export train was permitted under former President Barack Obama, and its project development continued to grow under former President Donald Trump and President Joe Biden, he said.

Biden is expected to face Trump in November’s election.

“We’ll see what the next administration is,” Grindal said. “But we have contracts that go out into the 2040s and some into the 2050s, so yes, we’re in an election year. But when you look at where we’re focused, or where we’re heading, we’re focused on the long term.”

Similarly, Martin Hupka, president of LNG and net-zero solutions at Sempra Infrastructure, noted investment decisions and project planning for massive infrastructure projects look far into the future, and are not dependent on near-term political shifts.

“These are hard projects. There’s a reason why many of them don’t actually launch. Many things will come up, and elections is just one of them,” Hupka said. “Don’t let yourself get pushed around merely by newspaper headlines — be concerned with what’s in front of you.”

Others said a potential shift in administrations could affect the pace of energy projects, considering the differences between Biden and Trump on issues such as tariffs and the role of the federal government in fostering new energy technologies.

Mike Sommers, CEO of the American Petroleum Institute, told POLITICO that he expected that permitting would speed up significantly for onshore and offshore oil leasing if Trump regains the White House, for instance.

Still, Sommers told E&E News that he thinks the oil and gas industry “would prefer policy stability more than anything else.“

While conservatives have pushed for rollbacks of Inflation Reduction Act spending, many energy leaders and trade groups here — including API — said they don’t expect or want to see the law gutted by a potential Trump administration. Investment from the law in energy projects is flowing despite the prospect of a change in administrations, they said.

“I don’t see any deterrence from capital coming in from Japan,” said Tak Ishikawa, CEO of Mitsubishi Heavy Industries America about the Inflation Reduction Act and the possibility of a change in administrations.

Samantha Gross, director of the Energy Security and Climate Initiative at the Brookings Institution, said the law is “quite durable even with a change in the presidential administration.”

According to Dan Brouillette, CEO of the Edison Electric Institute and a former Energy secretary under Trump, investments sparked by the Inflation Reduction Act and 2021 bipartisan infrastructure law are likely to “catalyze a lot of investments we need both on the generation side as well as the transmission side.”

Brouillette predicted during a CERAWeek panel that if those investments come together properly, the U.S. by 2030 will be able to triple electricity produced by renewables, which currently power about 20 percent of the electricity grid.

The Inflation Reduction Act is “durable” because it’s lowering costs for consumers and spurring job growth at clean energy projects, he said.

At the same time, Brouillette said “if these tax credits are not producing the investments that [experts] thought they might, perhaps you’ll see some change.”

“Rising energy prices are not hugely good for elections,” he said.

How is AI changing the energy sector?

Many panels at CERAWeek touched on artificial intelligence, with energy executives saying the technology could streamline their operations. Many also said their internal data showed new AI infrastructure and data centers could spike demand for electricity — and boost fossil fuels.

Scott Guthrie, executive vice president of cloud and AI for Microsoft, said one new data center opens every three days across the world.

Guthrie said the company has purchased 19 gigawatts of renewable power to run data centers to try to help meet the company’s goal to abate more carbon emissions than it creates by 2030. But executives of oil and gas companies said the growing energy needs of new AI infrastructure and data centers will need more than wind, solar and battery power to operate without interruption.

“The energy requirements just to fire that system and what’s coming with this huge revolution around artificial intelligence, I think the energy needs are gonna be enormous,” said Ryan Lance, CEO of ConocoPhillips. “I predict in the next five, 10 years that we’ll be building more gas-fired power generation in the U.S. more than anybody else in the world. We’re gonna need it in order to solve this energy problem, to maintain the competitive advantage we have as a country.”

The heads of natural gas companies, including CEO Alan Armstrong of pipeline company Williams, similarly said AI energy demands will likely lead to a boom of new gas-powered electricity generation.

The International Energy Agency estimates that data centers’ electricity consumption will jump by 2026 to more than double their consumption in 2022 and roughly near Japan’s annual electricity needs. Google has reported that 15 percent of its data centers’ energy use is devoted to AI.

Microsoft co-founder Bill Gates said at the conference that data centers will naturally pop up in places where electricity is cheaper, and where the grid can handle their demand.

At the same time, he said AI could be used to figure out better ways to reduce the energy demands of those same data centers and calculate climate impacts of emissions, as well as help energy companies run more efficiently.

“All of our sort of grid modeling and management, these AI tools will come in and play a role,” Gates said. “But the current techniques require a lot of electricity.”

Murray Auchincloss, CEO of BP, said AI has reduced the company’s need for internal and third-party coders by 30 percent in four months. It’s also helped the company process vast amounts of data that were previously inaccessible.

“If you think about the upstream side of the business, our engineers have digitized every well bore every facility they get so much data on their hands that they can’t interpret,” he said. “They probably use 2 percent of the data right now, but what [generative] AI gives them the ability to do is use 40, 50, 60 percent of that data to predict what’s going to happen, to make decisions, to run augmented scenarios.”

DOE officials say AI can help cut greenhouse emissions, given its ability to optimize electricity production and distribution. But the high levels of energy needed for AI means “we also have to think about more abundant primary energy,” according to Evelyn Wang, director at DOE’s Advanced Research Projects Agency-Energy.

In that regard, the administration is pushing to increase the size of several low-carbon industries to meet rising electricity demand, including offshore wind, advanced nuclear reactors, hydrogen powered by renewables and geothermal energy.

DOE released a road map last week on how to increase the current U.S. production of geothermal 20 times by 2050.

The U.S. now has “next generation technology largely perfected by the oil and gas industry” that “opens up all of these states in the West,” said Jigar Shah, director of the DOE Loan Programs Office, about geothermal during an interview.

“I think it’s going to be an increasing part of our mix,” he said.

The loan office, which has more than $200 billion to lend, currently has two loan requests from geothermal producers, he said.

Will minerals production keep pace with the energy transition?

Amid the administration push on low-carbon energy, global energy leaders here reiterated concerns that new big clean energy projects could be held up by a shortage of critical minerals — and by the Chinese stranglehold over mineral refinement.

“Overall, what we see is the demand for minerals is going to go up 3 ½ times by 2030,” said Tim Holt, a member of the executive board at Siemens Energy. “We’ve also seen since 2020 a big disruption of the supply chain.”

Supply chain challenges during the pandemic made a range of goods, from medical supplies to computer chips, more difficult to import to the U.S.

Holt said he’s particularly concerned about projected shortages of copper, which is used abundantly in wind energy and transmission equipment, and iridium, which is used in the electrolyzers that help to produce hydrogen energy with no greenhouse gas emissions.

Emily Olson, chief sustainability and corporate affairs officer with Vale Base Metals, said the Inflation Reduction Act is a “huge catalyst” for mining projects, even though the U.S. National Mining Association has blasted the administration for not doing enough to bolster domestic supplies of raw materials.

The Biden administration, meanwhile, is looking for new sources of minerals.

At the conference, Brad Crabtree, assistant secretary for DOE’s Office of Fossil Energy and Carbon Management, touted funding from the 2021 bipartisan infrastructure law to boost recovery of minerals from industrial waste, for example. Projects that DOE awarded earlier this year aim to extract rare earth elements and other minerals from coal byproducts and acid mine drainage.

“We have billions of tons in the United States of these legacy waste streams,” said Crabtree. “That’s a really big number. And we continue to generate them.”

The recovery projects could help to dramatically scale technology to turn the waste products into “feedstocks” for clean energy projects, Crabtree said.

The administration for years has also sought to expand access to minerals in allied nations. Last year, the U.S. struck a mineral deal with Japan that allows minerals produced there to qualify for electric vehicle tax credits. The State Department is also part of the global Minerals Security Partnership, which convened earlier this month in Canada.

In an interview in Houston, Kimberly Harrington, deputy assistant secretary at the State Department’s Bureau of Energy Resources, said the partnership currently has 23 global projects to boost mineral production in countries ranging from Mozambique, a major holder of graphite reserves, to Australia.

“We’re going to have a more formal integration of countries that are sourcing these minerals,” she said. “We want to offer a different route that doesn’t involve certain countries coming in and really taking these resources and bringing them overseas. We want a higher value added proposition.”