Recapping Energy in 2011

It's been a transformative year for the energy industry. After decades of reliance on foreign oil, the narrative has turned to drilling in the U.S., Brazil, and recently Angola. Unconventional and ultra-deepwater oil plays are now shaping our energy future along with energy alternatives.

This year, natural gas took some major steps toward becoming a major transportation fuel and a major U.S. export. And the solar industry crossed grid parity and continued to grow at an astounding rate domestically. Here are some of the industry's highlights.

In 2011, shale became the talk of the town
Not only did shale and fracking become more commonly used terms in 2011, but some of the more isolated places in the continental U.S. are now suddenly on people's radars. Who would have thought five years ago that Williston, N.D., would be put on the map as a jobs haven and a focal point of our energy independence? Growth of oil drilling has happened so quickly in the area that they can't build houses fast enough to meet the demand in these small North Dakota towns.

Companies including Continental Resources (NYS: CLR) , Whiting Petroleum (NYS: WLL) , and Kodiak Oil & Gas (NYS: KOG) have acquired hundreds of thousands of net acres for oil production and are continuing to change the energy picture in the United States.

While the Bakken shale play has gotten much of the attention for its oil production, across the country from New York to Utah, oil and natural gas are being found in a variety of shale plays. The Marcellus, Barnett, and Utica shale plays are changing the way we look at energy production and causing a shift in where our energy comes from.

Oil independence continued
Don't look now, but in a matter of just a few years, we may reduce our dependence on foreign oil to the point where we don't need Middle East oil at all. The expansion of shale drilling and ultra-deepwater offshore drilling has helped reduce our net petroleum imports to 45.4% of consumption in 2011 from 60.3% in 2005. The reduction has accelerated since 2008, when we had net imports of 57%.

In 2012, the trend should continue as shale drilling grows and the Obama administration opens drilling in Alaska. And if you include expanded oil-sands production in Canada, our energy future is looking pretty bright.

Natural gas development
With all of this new shale gas in the U.S., the real possibility of using a compressed or liquefied version for widespread transportation fuel is coming closer to reality. In 2011, Clean Energy Fuels (NAS: CLNE) made progress on expanding a "Natural Gas Highway" by expanding its CNG and LNG distribution. The company also partnered with natural gas giant Chesapeake Energy (NYS: CHK) on a plan to build 150 more truck-fueling stations across the country.

Our natural gas production has come so far that Cheniere Energy (ASE: LNG) signed deals for 10.5 million metric tons of LNG exports in 2011. When the company opens its Sabine Pass export facility, it could help make natural gas a major export of the United States.

Solar took a big step forward in 2011
Despite the naysayers, the fastest-growing part of the energy industry in 2011 was solar power. Installations in the United States grew 99% in the first three quarters of 2011, and we will probably see another record installation level in the fourth quarter.

With demand from European countries waning this year, module prices fell to around $1 per watt, a level unimaginable a decade ago.

Federal loan guarantees and a cash grant program also helped the solar industry push to new highs in 2011. With California Gov. Jerry Brown signing a requirement that the state get 33% of its electricity from renewable sources by 2020, a mad rush began to build solar.

But what was good for the solar industry as a whole was terrible for solar stocks. Even U.S- based industry leaders such as SunPower and First Solar (NAS: FSLR) saw their shares plunge as weak global demand put pressure on margins and losses cast a shadow on the industry. Then there was the high-profile Solyndra bankruptcy that was fodder for those who needed an excuse to dismiss solar.

In all, renewable energy, including wind and solar, continued to grow and become more competitive with fossil-fuel energy generation in 2011. It will be a rocky couple of years ahead, but after the progress made in 2011, I think the strong growth trend will continue in 2012.

Foolish bottom line
Whether it was oil, natural gas, or solar power, 2011 was a year of growth and change in the U.S. energy market. With new technologies and changing costs, it's now conceivable that you could own a car powered by natural gas and power your air conditioner on solar power without paying through the nose. Just a few years ago, those concepts seemed like a far-fetched dream, but 2011 took them a few steps closer to reality for all of us.

If you're interested in more about energy stocks check out what our analysts think is "The One Energy Stock You'll Ever Need." You can find out in a free report.

At the time thisarticle was published Fool contributorTravis Hoiumowns shares of SunPower and First Solar. You can follow Travis on Twitter at@FlushDrawFool, check out hispersonal stock holdings, or follow his CAPS picks atTMFFlushDraw.The Motley Fool owns shares of First Solar.Motley Fool newsletter serviceshave recommended buying shares of Chesapeake Energy and First Solar. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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