The International Energy Agency (IEA) has released a review of US energy policies, stating that while the United States is in a strong position to deliver a reliable, affordable and environmentally sustainable energy system, the country must establish a more stable and coordinated strategic approach for the energy sector than it has in the past.
The report said the US natural gas boom has resulted in stable wholesale electricity prices, lower greenhouse gas emissions and greater system flexibility, but it also noted that the US electricity market is in need of significant investment if the country expects to meet its electricity demand growth forecasts. Specifically, there is a concern that competitive electricity markets may not trigger investments in large, high-fixed-cost investments with long lead times, such as nuclear, carbon capture and storage, and large renewable portfolio projects.
Effective, coordinated national policies would reduce the uncertainties that impede investments in secure electricity supply, according to the report. Although renewable energy production has increased, there is persistent uncertainty around the durability of federal tax incentives and the Renewable Fuel Standard program.
Unconventional gas production, alongside increased output of light, tight oil has made a significant contribution to economic activity and competitiveness, but the IEA said the expansion in energy production is raising unease on environmental and safety grounds.
The IEA recommended the following policy actions for the United States:
- Complete the Quadrennial Energy Review (QER) and use its outcomes to re-establish a stable and coordinated strategic outlook for the energy sector.
- Support the development and implementation of demand-side measures and energy efficiency policies with an emphasis on the transportation and building sectors.
- Offer greater durability and predictability of fiscal incentives for renewable energy to maintain investor confidence.
The recommendations in the report, Energy Policies of IEA Countries: United States – 2014, build on the lessons learned and progress made since the previous IEA in-depth review of the United States was published in 2008.