Energy policy of the United States facts for kids
The energy policy of the United States is how the country decides to produce, share, and use energy. This includes rules about how much energy buildings use, how far cars can go on a gallon of gas, and even how people travel to work. These rules come from federal (national), state, and local governments. They can be laws, regulations, or even court decisions.
Since the 1973 oil crisis, some people have said that US energy policies often react to problems quickly, focusing on expensive, fast solutions instead of long-term plans.
Even though Americans are less than 5% of the world's population, they use about 26% of the world's energy. This energy helps produce a lot of the world's goods. Thanks to new technologies like fracking (a way to get oil and gas from deep underground) and horizontal drilling, the US became the world's top oil producer in 2014. By 2018, the US was exporting more coal, natural gas, and oil products than it was importing, which meant it was more "energy independent." However, this changed in 2020.
Many international groups, like those behind the 1997 Kyoto Protocol and the 2015 Paris Agreement, have tried to set goals for energy and climate policies around the world.
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History of US Energy Use
In the early days of the United States, people used timber (wood) for heating and industry. Wind and water power helped with tasks like grinding grain. Later, in the 1800s, coal became very popular. People also used whale oil for lamps.
Natural gas was first used for lighting in America in 1816. It has become very important, especially for making electricity. For a long time, coal was the main energy source in the US. Many homes had coal furnaces. Over time, these were replaced by oil furnaces, which were easier and safer.
From the 1940s onwards, the US government and oil companies worked together to manage oil resources around the world. By 1950, the US was using more oil than coal. Oil was cheap, easy to move, and powerful, especially for cars.
After World War II, oil heating became common. Oil-powered trains replaced coal trains, and oil-fired power plants became popular. Cars powered by gasoline became the main way people traveled. As the US imported more oil, its foreign policy became more involved in the Middle East to ensure a steady supply.
Hydroelectricity (electricity from water power) started in the US in 1883 at Niagara Falls, New York. Large dams like the TVA Project, Grand Coulee Dam, and Hoover Dam still produce some of the cheapest electricity. Power lines were also built to bring electricity to more rural areas.
To save energy, a national speed limit of 55 miles per hour was set in 1974 (and removed in 1995). Rules called CAFE standards were also put in place in 1975 to make cars more fuel-efficient. The United States also created the Strategic Petroleum Reserve in 1975, which stores oil for emergencies.
In 1977, the Weatherization Assistance Program was created. This program helps people make their homes more energy-efficient, which saves money on heating bills.
On August 4, 1977, President Jimmy Carter created the United States Department of Energy (DOE). This new agency brought together different energy-related programs from other government groups.
In 1980, the Energy Security Act was passed. This law helped promote renewable energy, energy efficiency, and better power grids. It also supported the Strategic Petroleum Reserve.
Between 2002 and 2008, the US government gave more money to fossil fuels (like oil and gas) than to renewable energy. Fossil fuels received about $72 billion, while renewable fuels received $29 billion.
Some people believe that during the Reagan administration, the US used oil prices to weaken the Soviet Union's economy. They reportedly worked with Saudi Arabia to keep oil prices low, which hurt the Soviet Union's oil exports.
The Energy Policy Act of 2005 focused on many energy topics, including efficiency, renewable energy, oil, gas, coal, and nuclear power. It also started a loan program for energy projects.
The Energy Independence and Security Act of 2007 helped improve building codes and encouraged the use of energy-saving light bulbs like fluorescents and LEDs. It also set a goal for cars to get 35 miles per gallon by 2020.
In 2009, the American Recovery and Reinvestment Act provided a lot of money for energy projects. This included funding for weatherization, energy efficiency, research, and improving the electric grid. It also offered tax credits for renewable energy and electric vehicles.
In 2016, the federal government provided about $6.6 billion in support for renewable energy, $489 million for fossil fuels, and $365 million for nuclear energy.
On June 1, 2017, President Donald Trump announced that the US would leave the Paris Agreement on climate change mitigation. However, on November 3, 2020, incoming President Joe Biden announced that the US would rejoin the agreement.
The Energy Information Administration (EIA) predicted that the drop in energy use in 2020 due to the COVID-19 pandemic would take many years to recover. For many decades, the US imported most of its oil, but in 2020, it became a net exporter.
In December 2020, President Trump signed the Energy Act of 2020. This law was the first major update to US energy policy in over ten years. It included more support for energy efficiency, better funding for weatherization, and plans to rebuild energy research.
Under President Joe Biden, one-third of the Strategic Petroleum Reserve was used to help lower energy prices during the COVID-19 pandemic. He also used a special law to boost the making of solar cells, renewable energy generators, heat pumps, and electric vehicle batteries.
Biden also signed the Infrastructure Investment and Jobs Act, which will invest $73 billion in the energy sector. A large part of this money will go to improving the power grid and supporting domestic nuclear power.
In August 2022, Biden signed the CHIPS and Science Act to boost energy research. He also signed the Inflation Reduction Act, which created programs to help lower the cost of solar power in low-income areas and offered many tax credits for clean energy and home energy upgrades.
Around spring 2024, the Biden administration made several changes to its energy policy. These included new limits on car emissions, higher fees for oil and gas companies on federal lands, and new standards for power plant carbon emissions. The Department of Energy also took on a bigger role in approving new power transmission projects.
Department of Energy
The United States Department of Energy (DOE) works to make sure America is secure and successful. It does this by solving energy, environmental, and nuclear challenges through science and technology.
As of 2023, the DOE's main goals are:
- To quickly change the nation's energy system and make the US a leader in clean energy.
- To keep the US strong in science and engineering, which is key to economic success.
- To improve nuclear security through defense and environmental efforts.
- To create a flexible plan that uses the best ideas from everyone involved to achieve its goals.
Import and Export Policies
Petroleum
The US does not allow energy imports from certain countries, like Russia and Venezuela. It also limits oil exports from Iran. Even though the US exports a lot of energy, it still imports energy from many countries, with Canada being the biggest source.
Clean Technology
In May 2024, the Biden administration increased fees (tariffs) on solar cells and lithium-ion electric vehicle batteries imported from China. These higher fees will be put in place over three years.
Energy Exports
In 1975, the United States stopped most crude oil exports. This happened two years after OPEC (a group of oil-producing countries) stopped selling oil to the US, which caused gas prices to skyrocket. Long lines at gas stations were a common sight.
Forty years later, in 2015, Congress voted to allow the US to export crude oil again. Since then, crude oil exports have increased by almost 600%.
Under President Biden, the US continued to approve new oil and gas projects, many of which are meant to boost exports. In January 2024, Biden temporarily stopped approvals for new natural gas export terminals. However, a federal judge later temporarily halted this suspension.
Strategic Petroleum Reserve
The United States Strategic Petroleum Reserve is a large storage of oil. It can hold as much as 600 million barrels of oil for emergencies.
Energy Consumption
Utilities
In the US, utility companies (which provide electricity, gas, etc.) are regulated at the national level by the Federal Energy Regulatory Commission (FERC). Each state also has a public utility commission (PUC) that regulates electricity, gas, and other power services within that state.
In the 1990s, some states started to make electricity systems less regulated to encourage competition and lower costs. While local companies still manage power lines, wholesale markets were created. These markets allow power plants to sell electricity and utilities to buy power for their customers. Regional transmission organizations (RTOs) run these wholesale markets.
This deregulation led to new energy suppliers, giving customers more choices for their electricity provider.
Energy Efficiency
There are many ways to use energy more wisely across the economy, including in buildings, transportation, and manufacturing. Some ways need new technology, while others just need people to change their habits.
Making buildings more energy-efficient can involve better water heaters, refrigerators, heating and cooling systems, windows, and lighting.
More efficient vehicles save money on gas, produce less pollution, and can even improve health by reducing air pollution.
Heat engines, like those in cars, are only about 20% efficient at turning oil into useful work. However, heat pumps are very efficient, sometimes up to 300%, at moving heat.
Energy Budget, Initiatives, and Incentives
Most energy policies use financial incentives. These can include tax breaks, tax reductions, loans, and subsidies (government support).
Laws like the Energy Policy Act of 2005, the Energy Independence and Security Act of 2007, and the Inflation Reduction Act have all provided such incentives.
Tax Incentives
The US offers tax credits to encourage clean energy. The Production Tax Credit (PTC) lowers federal income taxes for owners of renewable energy projects based on how much electricity they produce. The Investment Tax Credit (ITC) lowers taxes based on how much money is invested in renewable energy projects. There's also a tax credit for making clean energy equipment in the US.
Loan Guarantees
The Department of Energy's Loan Guarantee Program helps finance energy projects by guaranteeing up to 80% of a project's cost.
Renewable Energy
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By 2020, renewable energy made up 21% of electricity generation in the United States. Oil use is expected to decrease because vehicles are becoming more efficient and natural gas is replacing crude oil in some industries. Some predictions say that electric vehicles could drastically reduce oil demand by 80% by 2050.
A Renewable Portfolio Standard (RPS) is a state or local rule that requires electricity providers to get a certain percentage of their power from renewable sources.
Biofuels
The federal government has many programs to support the development of biofuels, which are fuels made from plants or animals.
Landowners who grow biofuel crops can get help with startup costs and annual payments. Loan guarantees help build large biofuel refineries. Grants help build smaller, demonstration refineries and improve existing ones. There are also grants and tax credits to help with things like gas pumps that dispense ethanol fuels.
The government also supports research and training to help people learn about and use biofuels.
Producer Subsidies
The 2005 Energy Policy Act offered billions in tax reductions for nuclear power, fossil fuel production, clean coal technologies, renewable electricity, and energy efficiency improvements.
Federal Leases
The US government leases federal land to private companies for energy production. The amount of land leased has changed with different presidents. For example, during the first 19 months of the Joe Biden administration, 130,000 acres were leased, compared to millions under previous administrations.
The Inflation Reduction Act requires that oil and gas auctions on federal lands happen before wind and solar leases are considered.
Electricity Transmission and Distribution
When electricity travels through power lines, some energy is lost as heat. About 23% of the energy from power plants is lost before it reaches the consumer. Reducing the distance electricity travels helps reduce these losses. For every five units of energy that go into a typical fossil fuel power plant, only about one unit reaches the consumer in a usable form.
Natural gas transport also loses energy because compressor stations along pipelines use energy to keep the gas moving.
Making electricity closer to where it's used, or storing it locally, can help reduce these losses and save money for consumers.
In October 2023, the Biden administration announced the largest investment in the US power grid since 2009.
The Federal Energy Regulatory Commission (FERC) is the main agency that regulates how electricity is transmitted and sold wholesale across states. Local power distribution and retail sales are handled by state governments.
FERC Orders and Acts
- Order No. 888 (1996): This rule made it easier for different electricity generators to use existing power lines to send their power. It aimed to increase competition and lower costs for consumers.
- Energy Policy Act of 2005 (EPAct): This law gave FERC more power to regulate power transmission. It also allowed FERC to offer incentives to encourage investment in electricity transmission.
- Order No. 1000 (2010): This order required regional power organizations to plan for future transmission needs and share the costs of new projects.
- Order No. 841 (2018): This rule allowed individual energy storage systems (like large batteries) to participate in wholesale electricity markets. This means they can buy and sell electricity, helping to balance the grid.
- Order No. 2222 (2020): This order allowed smaller, local energy resources (like batteries and smart devices that reduce energy use during peak times) to participate in regional wholesale electricity markets.
- Infrastructure Investment and Jobs Act: This law will invest $11 billion into the electric grid to help it adapt to more renewable energy. This money will go to new loans for power lines and studies for future transmission needs. In October 2023, the first $3.46 billion in grants from this act went to 58 projects in 44 states.
- Inflation Reduction Act: This law helps speed up transmission projects by providing funds to buy wholesale electricity contracts. It also gives money to states and local areas to help approve high-voltage power lines faster.
- Order No. 2023 (2023): This rule regulates how renewable energy projects connect to the large-scale grid. It helps organize projects and sets deadlines for studies.
- Coordinated Interagency Transmission Authorizations and Permits (2024): This rule sets a two-year deadline for approving energy projects and makes the Department of Energy the main agency for most new power transmission projects. It aims to make the approval process faster and more transparent.
- Order Nos. 1920 and 1977 (2024): These orders require utilities to plan 20 years ahead for regional transmission needs and to cooperate on cost-sharing. They also give FERC more power to approve power line locations in important areas if states don't act.
Greenhouse Gas Emissions
The United States has historically released the most greenhouse gases of any country. However, its share of ongoing emissions is now smaller than China's. Since 1973, the amount of emissions per person in the US has dropped by 40%. This is due to better technology, a shift from manufacturing to services, changing consumer choices, and government policies.
Many states and local governments have started their own initiatives. Cities in 50 states have supported the Kyoto Protocol. Northeastern US states created the Regional Greenhouse Gas Initiative (RGGI), which is a program to limit and trade emissions.
In 2007, the US and other major countries agreed on a plan for a global system to limit carbon emissions, but it did not happen.
Some experts believe that to limit global warming, the world needs to greatly reduce CO2 emissions. One model suggests that the US would need to reduce its emissions by 95% by 2050.
In 2012, a study found that every US state has the potential to produce more renewable electricity, mostly from solar and wind, than it currently uses. However, the study noted that this doesn't consider things like transmission lines or costs.
In 2022, the EPA received funding for a "green bank" called the Greenhouse Gas Reduction Fund. This fund, part of the Inflation Reduction Act, aims to reduce carbon dioxide emissions. It will provide money to green banks and local energy funds to support clean energy projects, especially in low-income communities.
See also
- United States hydrogen policy
- 2000s energy crisis
- Carbon tax
- Climate change policy of the United States
- Electricity sector of the United States
- Energy in the United States
- List of United States energy acts
- List of U.S. states by electricity production from renewable sources
- United States Secretary of Energy
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US oil reserves increased until 1970, then began to decline.
