Greater Energy Efficiency Could Be An Unlikely Outcome of the Ukrainian Crisis

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It seems like an odd “butterfly effect”—a plane shot down over Ukraine could boost energy efficiency?  But it is not as far-fetched as it seems. 

“Fuel switching”—changing power plants over to natural gas from coal—is one of the compliance paths for achieving the carbon emission reductions in the EPA’s proposed existing power plant carbon emissions reduction rule.  Fuel switching is expected to be a popular compliance path because power companies are already taking advantage of the economic attractiveness of cheap natural gas (vs. coal) to convert their power plants.  Natural gas conversions have been a significant contributor to the 15% decrease in carbon emissions since 2005.  

When the Ukrainian crisis first emerged this spring, discussions in Washington turned to accelerating natural gas exports in the event that Russia was either unable (due to sanctions) or unwilling to sell its NG to Europe. The Energy Information Agency predicts that increased exports of natural gas will lead to lead to increased prices for natural gas domestically.  (See page 6 of the report).  

If the cost of natural gas increases, the comparative economic attractiveness of fuel-switching versus energy efficiency will change as well.  Energy efficiency applications that were previously not cost effective or more costly than fuel switching become more attractive.  As a result, states are likely incorporate more energy efficiency into their compliance plans than relying exclusively or largely on natural gas applications to achieve their emission reduction goals.

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EPA

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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