Fostering a diverse energy portfolio and spurring innovation in the USA: An interview with University of Southern California Energy Expert Professor Shon R. Hiatt

“Ocean energy is very relevant to the United States’ future energy needs for two reasons. First, marine energy helps diversify the country’s energy portfolio, creating a hedge for input disruptions and price volatility. Second, the US has abundant potential for ocean energy production. In particular, the west coast of the United States has prospective sites for harnessing wave energy.”

 

 

 

 

Short Introduction about your role

I am business strategy professor who researches innovation, sustainability, and strategy among energy firms, including hydroelectric, marine, geothermal, oil and gas, biofuels, biomass, and biogas.

“We will see a transition to clean energy in the United States mainly due to market forces. Retail customers and companies are increasingly demanding renewable and carbon-neutral energy due to climate change concerns, corporate ESG ratings, and the reporting of company Scope 2 Emissions – which are the indirect carbon emissions associated with the purchase of electricity.”

 

How would you summarise the USA’s current energy position and how must it adapt to enable the future energy transition?

Currently, the United States does not have a national policy for a low-carbon energy transition. Instead, energy transition policies are mainly composed at the state level through what is known as Renewable Portfolio Standards (RPS); these are mandates regarding electricity generation sources. Fifteen states have RPS, including highly populated New York and California. I don’t see the United States enacting a national energy policy of carbon neutrality in the near term due to the current inflationary environment, the federal elections in November 2022, and the likelihood that both chambers of Congress will flip from Democrat to Republican party control. Instead, we will see a transition to clean energy in the United States mainly due to market forces. Retail customers and companies are increasingly demanding renewable and carbon-neutral energy due to climate change concerns, corporate ESG ratings, and the reporting of company Scope 2 Emissions, which are the indirect carbon emissions associated with the purchase of electricity.

What are the key energy trends on a state level in California?

California has as an energy transition policy of 60% renewable electricity generation by 2030 and 100% by 2045. Although it currently obtains 60% of its electricity from non-carbon-based fuels, its renewable energy mandate (RPS) and accompanying policies exclude hydropower sources over 20MW in size and nuclear and is biased towards intermittent wind and solar. Obviously, this presents a problem for utilities that must invest in expensive storage or overcapacity to provide electricity when the wind stops blowing and in the evening. Consequently, the state is threatened with blackouts every summer, and electricity rates have been rising about 10-12% annually since 2018 and will continue to escalate to achieve the RPS. I believe California could achieve its RPS at a lower cost and with better results by taking a technology-neutral, zero-carbon approach rather than favoring certain technologies over others.

“As coal is increasingly phased out, new sources of energy generation must take its place so the United States does not become too reliant on a handful of energy sources that increases the risk of power disruptions.”

 

How relevant is ocean energy to the USA’s future energy transition?

I think ocean energy is very relevant to the United States’ future energy needs for two reasons. First, marine energy helps diversify the country’s energy portfolio. Currently, the United States has a fairly balanced portfolio of electricity generation, including renewables (hydro, wind, solar, geothermal, biomass) 20%, nuclear 19%, coal 22%, and natural gas at around 38%. This balanced portfolio creates a hedge for input disruptions and price volatility, allowing the United States to benefit from lower energy costs than most European countries. However, as coal is increasingly phased out, new sources of energy generation must take its place so that the country does not become too reliant on a handful of energy sources that increases the risk of power disruptions, such as what Europe experienced in the fall of 2021 when the wind stopped blowing and the skies became overcast.

Second, the United States has abundant potential for ocean energy production. In particular, the west coast of the United States has prospective sites for harnessing wave energy, and Maine and Alaska have excellent sites for tidal energy. In fact, Alaska’s Cook Inlet has the second-highest tidal range in North America. With thousands of islands and bays, the state of Alaska could conceivably overtake Scotland in terms of ocean energy generation.

What are the barriers for new energy innovations in the USA and what can society and governments do to bring them to fruition?

“If the United States had a national carbon-neutral goal, I believe that the most efficient and low-cost way to achieve that goal, foster energy portfolio diversity, and spur innovation would be to eliminate all current mandates and tax credits for incumbent technologies and enact a revenue-neutral carbon tax in lieu of the current federal corporate tax.”

 

A large barrier for new energy innovations is government policy. Currently, U.S. federal policies are not technology neutral but are skewed to favor intermittent wind and solar power even though solar and wind are mature (and in my opinion, inferior) technologies. This is largely due to incumbents’ lobbying power on Capitol Hill. Consequently, few companies seek to invest in new, innovative technologies such as low-temperature geothermal, small-scale modular nuclear, hydrogen, biogas, and ocean energy. If the United States had a national carbon-neutral goal, I believe that the most efficient and low-cost way to achieve that goal, foster energy portfolio diversity, and spur innovation in the United States would be to eliminate all current mandates and tax credits for incumbent technologies and enact a revenue-neutral carbon tax in lieu of the current federal corporate tax. This market-based approach would facilitate development of many radically new (and yet-to-be discovered) technologies that could provide reliable and affordable energy.

Who would you want us to interview next and why?  

Utah Governor Spencer J. Cox. or his energy adviser Thom Carter

What question would you like to ask him/ her?

Utah has successfully increased its portfolio diversity of new energy sources without an RPS, including expansion of geothermal energy and plans for small-scale nuclear. What is the secret to Utah’s success, and how can it be an example for other states?

Biography

Name: Professor Shon R. Hiatt

Job Title: Associate Professor of Business Administration, University of Southern California

Lives: Los Angeles, California, USA

Career in summary: Professor Hiatt is a global energy and agribusiness expert, where he examines entrepreneurship, strategy, innovation, and business sustainability. He has previously served as a visiting scholar at Católica Lisbon School of Business and Economics and professor at Harvard Business School.

 

 

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