As Russia Attacks Ukraine, U.S. Energy Policy Takes Center Stage

Last week, Russia invaded Ukraine, triggering a war that is destined to have a widespread effect on the whole world. While pundits in the media focus primarily on the impacts to the stock market, supply chains, and inflation, there should also be real concern about what this means for energy policy in the U.S. In this article we address three points of concern to monitor as the conflict continues including the Biden administration’s actions on both oil and gas production and pipelines, the added importance of diversifying our energy mix, and the serious threat of cyber attacks on our grid.

Administration Actions Impacting Energy Production and Pipelines

On the campaign trail, when running for President, Joe Biden famously said (1) , “I want you to look at my eyes. I guarantee you. I guarantee you. We’re going to end fossil fuel.” His actions in his first two years in office have proven that he is trying to make good on that promise. In his first hours in office, President Biden issued an executive order revoking a permit for the Keystone XL pipeline, effectively killing the multi-billion dollar project. That pipeline would’ve stretched from Canada to Nebraska carrying hundreds of thousands of barrels of crude oil to be refined and consumed here in the U.S. A letter to Energy Secretary Jennifer Granholm from a group of Republican Senators claimed that the Keystone project was “projected to provide approximately 11,000 jobs” and that Biden’s actions have “erased thousands of real, high-paying jobs and approximately $800 million in wages.”(2)

While stifling pipeline construction at home, the Administration seemed oddly anxious to promote such projects for Russia. In December 2019(3) President Trump placed sanctions on Russia, halting the Nord Stream 2 pipeline project which would’ve increased natural gas delivery from Russia into Germany. President Trump and some EU nations feared that increasing reliance on Russian energy supplies would pose a threat. “They (Germany and Russia) had many conflicts over the centuries, they fought for different reasons,” said Trump. “And now you are becoming hostages of this pipeline.” Fast forward to May of 2021, and the Biden Administration lifted the sanctions paving the way for the project’s completion. Texas Congressman Michael McCaul (R-10), now somewhat prophetically noted at the time, (4) “It is a Russian malign influence project that threatens to deepen Europe’s energy dependence on Moscow, render Ukraine more vulnerable to Russian aggression and provide billions of dollars to Putin’s coffers.” Since the invasion began, Western countries have now reimposed the Nord Stream 2 sanctions, but many leaders fear (5) that such action may be “too little, too late” as the pipeline has now completed construction and is close to going live. The point of the matter is that oil and gas production is down here in the U.S. and prices at the pump are up. In March of 2020, just after President Biden took office, retail gas prices averaged $2.12. Today that number stands at $3.53, a 66 percent increase.(6) This trend started before Russia’s invasion – in fact, Biden attempted to curb gasoline price spikes at Thanksgiving time by announcing the largest ever release from America’s Strategic Petroleum Reserves (SPR) – but sustained fighting only threatens to make things worse for average Americans at the pump.(7) Tom Kloza, Chief Global Analyst for the Oil Price Information Service, has warned that unleaded gasoline prices in the U.S. may reach $4.50 per gallon if fighting is prolonged.(8)

Expanding and Diversifying Clean Energy Production Protects America

Between 2005 and 2019, the share of U.S. energy production generated by coal has been cut in half, falling from 50% to 23%.(9) At the same time, renewable energy and natural gas generation have doubled. This movement away from a single source of electric generation providing half of our electricity to a more diverse energy mix has positioned the country well for the future. However, more can – and should – be done to ensure our national security moving forward.

What conflicts like the one in Ukraine show us, is that greater domestic control over energy production, shipping, and generation is good for national security. Yes, America should be increasing its production of energy from wind and solar. At the same time we should be exploring the future potential of new technologies like advanced nuclear reactors or geothermal energy, the role of hydrogen in electricity and transportation uses, offshore wind, energy storage of all flavors, or finding ways to make our existing baseload fleet more sustainable with carbon capture and storage modifications.

Knee-jerk pendulum swings in energy policy like those described surrounding U.S pipelines, jeopardize our market position in the world and our national security in times of crisis. Beyond that, they do little to move the needle on desired gains in fighting climate change, in fact they often do more harm. The Biden Administration has limited access to oil and gas supplies at a time when it is now needed most. Halting development of critical energy infrastructure, essentially overnight, only serves to amplify the damage of energy hiccups along the road to transition.

Germany has experienced this with their harsh pivot away from nuclear energy following the Fukushima incident in Japan. They have pledged to shut-down all nuclear power plants by the end of 2022. Germany has recently set a goal of 100% renewable energy by 2035 and has seen massive increases in renewable production since 2010. Unfortunately, such a drastic shift has caused prices to surge to $0.36/kwh for German households – more than double that in the

U.S.(10) Beyond that, the rapid policy change away from zero emission nuclear power, without the necessary runway to ensure adequate electric reliability, resulted in clean nuclear power being replaced not solely by wind and solar, but often coal power. Studies show that Germany actually increased annual emissions by 36 million tons per year, or 5% while experiencing over $12 billion dollars in annual costs.(11)

America should learn from Germany’s experience and continue developing a long-term clean energy transition plan that invests in research and development for new and innovative energy solutions, but also recognizes the value of flexibility and diversity in its prescriptions. Every state is different and will transition in its own way, this reality should be respected. If the last two decades are any indication, we can count on energy markets and technologies not only transforming quickly, but in ways that we cannot imagine. Leaders at all levels should embrace an ‘all of the above…AND below’ energy strategy to ensure security, reliability, sustainability, and affordability moving forward.

The Very Real Threat of Cyber Attacks on the U.S. Electric Grid

The conflict in Ukraine has also brought to the forefront the frightening threat of cyber attacks on our electric grid. Senator Mark Warner (D-VA) explained this week, “Do I expect Russia to up its game on cyber? Absolutely.” He continued, “I think we will probably see that in the coming days and weeks as Putin tries to lash out against these crippling level of sanctions we put on him.”(12)

While nations have hundreds, and even thousands of different avenues to launch cyber attacks, few have the destructive potential of a widespread effort to undermine the power grid. Even more worrisome is the fact that Russia is the primary historical cyber threat when it comes to the grid. On two separate occasions, Russian hackers have caused widespread outages in Ukraine in 2015 and 2016. At one point Ukraine’s former President Petro Poroshenko noted that there had been 6500 cyberattacks on 36 Ukrainian targets in a single two month span. Michael Hayden, who served as the Director of both the CIA and NSA during the George W. Bush administration, succinctly explained the significance of the Ukrainian blackouts, “Somebody just used a new weapon, and this weapon will not be put back in the box.”(13)

U.S. Officials have known for years that the grid was, is, and will be a target of malicious actors. The Aurora Simulation in 2007 was the first to definitively prove that power plants were vulnerable to cyber attacks.(14) According to Bloomberg News: “In late December, U.S. officials privately warned utilities they could be targeted if relations with Russia deteriorate, telling them their security teams shouldn’t take the holidays off, according to two people familiar with the briefing. On Jan. 11, U.S. officials publicly called on utilities to comb their networks for signs of Russian intrusions. Secretary of the Army Christine Wormuth recently told reporters that the power grid would also be a target in a conflict with China over Taiwan.”(15)

So just how devastating would a massive cyber attack on the grid be? According to a 2015 simulation run by Lloyd’s partnering with the University of Cambridge, a large-scale attack on the electric grid in the Northeastern U.S. would leave 93 million people across 15 states in the dark. Some for weeks. The total estimated cost would be over $1 trillion dollars to the U.S. economy.(16)

In May of 2020 President Trump actually issued an Executive Order declaring a national emergency over the potential threats to the U.S. grid. “Additional steps are required to protect the security, integrity, and reliability of bulk-power system electric equipment used in the United States,” Trump wrote. “In light of these findings, I hereby declare a national emergency with respect to the threat to the United States bulk-power system.”The Biden Administration has also worked to mitigate cyber threats, initiating a 100-day Plan in 2021 to address electric system vulnerabilities. “The United States faces a well-documented and increasing cyber threat from malicious actors seeking to disrupt the electricity Americans rely on to power our homes and businesses,” said Energy Secretary Jennifer Granholm. “It’s up to both government and industry to prevent possible harms—that’s why we’re working together to take these decisive measures so Americans can rely on a resilient, secure, and clean energy system.”(18)

Some experts on the issue argue that we are not doing enough to address the threat. Some argue it is close to impossible to adequately tackle the issue, given the current resources available. “The problem is, there simply aren’t enough people with the right skills in the industry to keep our grids secure,” says Michael John, Director at the European Network for Cyber Security. “There are no magic bullets. This will all require time and resources – possibly in significant amounts. However, a tipping point is imminent where inaction is far costlier than action.” Beyond the need for talent, coordinating a vast grid run by 3000 different companies and multiple layers of bureaucracy and government oversight is difficult. “What we need at this point is to get the White House to put all the key players together in a room to identify the biggest vulnerabilities and then take steps to reduce them,” argues Dr. Granger Morgan of Carnegie Mellon University. “It has not been done. And it needs to happen now.”

Conclusion

The importance of energy policy in the U.S. has never been in question. Historically, it has been a major source of domestic and international debate and conflict for generations. But as fighting continues in Ukraine, China threatens to attack Taiwan, and competing energy and environmental agendas intersect, we need to evaluate U.S. policy moving forward. After all, energy security is national security.

We should be actively – albeit responsibly – exploring, producing, transporting, and refining our vast oil and gas resources. Securing these supplies is an economic necessity. We cannot afford to be held hostage by the militant whims of Vladamir Putin or other leaders who choke off global energy supplies or whose actions impact prices.

At the same time we must embrace the clean energy revolution taking place around the globe and position the U.S. as a leading force and innovator in the space. We must continue to support research and development of new and innovative technologies while maintaining free markets and recognizing states rights. While climate issues are a pressing threat, we must not jeopardize necessary long-term sustainable environmental gains in the name of short-term political policy wins.

Finally, we must secure the grid. As we grow more digitally connected and we continue to add features and technology to an ever-growing smart grid, the reality and impact of cyber threats increases. While the electric grid itself has been described as an engineering marvel of modern history and has enabled the development of technology and societies we could not have imagined a century ago, its sabotage and collapse would be equally historic and utterly devastating.

As we continue moving forward, through the Ukraine crisis and onto the next challenges the world will face, leaders at all levels must be aware of these issues and work tirelessly to solve them.