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Shaping Energy Technology Transition

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Shaping Energy Technology Transition ( shaping-energy-technology-transition )

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Higher Prices The volatility and expected increase in the price of hydrocarbons will make them an unreliable and costly source of energy in the future. With the amount of remaining hydrocarbon supplies in question, there is great uncertainty surrounding hydrocarbon prices. The EIA reference case for the price for a barrel of oil in 2030 is $130. The EIA, however, recognizes the uncertainty of this projection and includes alternative cases in their analysis in which the price ranges from $50 to $200 per barrel.27 The cost of electricity is also expected to increase in the long-term future due to higher prices for hydrocarbon fuels, as well as capital expenditures to expand capacity with new projects.28 The growth of demand for hydrocarbons in China, India and other developing countries is exacerbating the problem and contributing to expectations of future oil price increases. Yet the depletion of hydrocarbons is only one of several factors that contribute to the expectation of future price increases. It is also likely that governments will raise the price of hydrocarbons in an attempt to reduce greenhouse gas emissions by internalizing the negative external costs of hydrocarbon use. This could be done by taxing the emission of these gases directly or installing a system of emission cap-and-trade programs. Trade Imbalance U.S. dependence on hydrocarbons is problematic because many of these energy sources are imported. Dependence on imported oil, primarily to sustain domestic transportation needs, presents an economic loss to society by creating a trade imbalance of U.S. energy exports over imports. Imported oil represents 26 percent of the total primary energy supply.29 In 2005, oil imports cost the United States $231 billion, representing 30 percent of the trade deficit that year.30 Reducing dependence on imported oil would decrease this trade imbalance and contribute to the future economic prosperity of the United States. Inefficiency Losses The previous abundance and affordability of hydrocarbons has damaged the nation’s energy assets by enabling an inefficient energy infrastructure. The United States is extremely wasteful in how it generates, distributes, and uses its energy. For every three units of energy that are converted to generate electricity, only one unit of energy reaches the consumer.31 The EIA reports that “approximately 67 percent of total energy input is lost in conversion; of electricity generated, approximately 5 percent is lost in plant use and 9 percent is lost in transmission and distribution.”32 These efficiency losses represent large economic costs for the United States. The Environmental Protection Agency (EPA) National Action Plan for Energy Efficiency has identified $500 billion in potential net savings from more efficient energy use that could be implemented by 2025.33 12

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