The political world is all abuzz about “alternative energy” and “green energy” – which actually means “subsidized energy.” Otherwise it would just be called “energy.” Companies that make their living providing natural resources and energy are struggling to understand this brave new world, a major challenge for many. The world’s most prosperous economy is now run by a government apparently determined to completely change the way we have powered our lives for more than a century.
America’s economy is driven by energy, especially from fossil fuels. Every year we use 750 million barrels of oil, 23 trillion cubic feet of natural gas, and 1.2 billion tons of coal. Only six percent of our energy comes from all the “alternative” sources combined. Our new government is spending hundreds of billions of dollars to change that, and seems determined to use its regulatory power to stop further advances in the exploration and production of traditional fuels. Natural resource providers can fight this dramatic shift in national priorities, or they can embrace it, but they probably can’t change it.
In my firm, we talk frequently with companies trying to digest this new direction, determine how successful it may or may not be, and strategize how to react to it. Some have trouble adapting their thinking to the new green reality, and they may be left behind. Those that go beyond survival and actually thrive will be the ones who embrace both views – traditional energy in a green package. Companies that used to provide timber can now subsidize that operation by using the “waste” to generate biomass energy, for example – and government will help pay for the addition. Coal mines can now capture the methane gas (the worst greenhouse gas) formerly vented into the atmosphere, and turn it into energy – and government will help pay for the required equipment. Utility companies can add important new generation capacity from new sources – and government will help pay. Even oil and gas companies have new options for greener approaches to their traditional work – that government will help pay for.
The recurring theme is government money, and leaders understand that “he who pays the fiddler calls the tune.” It leads to a fairly simple conclusion: producing greener energy is the business to be in. Does that mean no more fossil fuels? Of course not. No Administration can change the world that dramatically or that quickly (if we manage to triple the amount of alternative sources, fossil fuels will still provide 82 percent of all our energy). So the survivors, and the winners, will be the companies that can produce not only clean energy, but plenty of it. In many cases, whether the current political leaders admit it or not, that means greener ways to produce oil, gas and coal.