American Energy - Worldwatch Institute · American Energy The Renewable Path to Energy Security Project Team Worldwatch Institute Christopher Flavin, President Janet L. Sawin, Ph.D.,

American EnergyThe Renewable Path to Energy Security

Worldwatch InstituteCenter for American Progress

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needs and protect the environment, as well as the broader challenge of building a sustainable global economy.

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September 2006

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American EnergyThe Renewable Path to Energy Security

Project Team

Worldwatch InstituteChristopher Flavin, President

Janet L. Sawin, Ph.D., Project Director and Senior AuthorLisa Mastny, Editor

Molly Hull Aeck

Suzanne Hunt

Amanda MacEvitt

Peter Stair

Center for American ProgressJohn Podesta, President and CEO

Ana Unruh Cohen, Ph.D., Co-Project DirectorBracken Hendricks, Co-Project Director

Theresa Mohin

September 2006

A M E R I C A N E N E R G Y

The American Energy Vision

merica is a nation blessed with bountiful natural resources and boundless entrepre-

neurial spirit. We have always prospered by facing daunting challenges and trans-

forming them into opportunities for innovation, industry, and growth. From the

opening of the transcontinental railway to the development of the microchip and the Internet

revolution, America has always risen to great challenges to become a stronger and more pros-

perous nation.

Today, America faces grave challenges in the field of energy—from the gathering storm of

global warming to a dangerous addiction to oil that jeopardizes our national and economic

security. We must meet these twin threats of climate change and oil dependence head-on, with

that same spirit of hope and optimism that has characterized our finest hours.

We, as a nation, have the ingenuity, know-how, and determination necessary to create an

energy-secure America. By working together, we can find exciting new ways to build America’s

use of domestic, non-polluting renewable energy. By capturing the energy of the wind and the

light of sun, the power of a mighty river or heat stored in the crust of the Earth, we can find

new untapped resources that create jobs, improve our security, and build the health of our peo-

ple, our planet, and our economy.

American Energy: The Renewable Path to Energy Security shows that an energy future based

on abundant and clean renewable resources is not only urgently needed, but achievable. The

time is ripe for a strong national commitment to enacting new policies at the federal, state, and

local levels that will allow the United States to become a world leader in building a 21st century

energy system. Meeting that challenge will require concerted action by governments, businesses,

and citizens across our nation.

We are committed to mobilizing our friends, communities, and leaders to share in this

vision for a clean, secure, and prosperous future with American Energy.

To sign the American Energy Vision Statement, download thereport, and learn more about what you can do to bring about an energy-secure America, visit www.americanenergynow.org.

A

Table of Contents

2 1 S T C E N T U R Y E N E R G Y 6

V I S I O N F O R A M O R E S E C U R EA N D P R O S P E R O U S A M E R I C A 8

E n h a n c i n g E n e r g y S e c u r i t y 8

Cre at ing Jobs 10

The Global Mar ke t place 11

Invest ment O pp or tunit ies 12

B U I L D I N G A N E W E N E R G Y E C O N O M Y 13

Building for th e Future 13

Me e t ing th e Tr ansp or tat ion Chal lenge 14

A New Future for Ag r iculture 15

Power ing the Ele ct r ici t y Gr id 16

Micro Power 17

A C L E A N E R , H E A L T H I E R A M E R I C A 18

Cle aner Air and Water 18

Climate Change and Ener g y 19

Conser v ing L and and Water 20

R E S O U R C E S A N D T E C H N O L O G I E S 21

Ener g y Eff ic iency 21

Biofue ls 22

Biop ower 24

Ge other mal Ener g y 25

Power from the Wind 26

Ro oftop S olar Power 28

Deser t S olar Power 30

S olar He at ing 31

Hydrop ower 32

Mar ine Ener g y 33

A M E R I C A N E N E R G Y P O L I C Y A G E N D A 34

Sources of Addit ional Infor mation 36

Cont r ibutors 37

Addit ional Resources 38

A M E R I C A N E N E R G Y

21st century energy

f there was ever a time when a major shiftin the U.S. energy economy was possible,it is now. Three decades of pioneering

research and development by both the gov-ernment and the private sector have yielded ahost of promising new technologies that turnabundant domestic energy sources—includ-ing solar, wind, geothermal, hydro, biomass,and ocean energy—into transportation fuels,electricity, and heat.

Today, renewable resources provide justover 6 percent of total U.S. energy, but that

figure could increase rap-idly in the years ahead.Many of the new tech-nologies that harnessrenewables are, or soonwill be, economicallycompetitive with the fossilfuels that meet 85 percentof U.S. energy needs. Withoil prices soaring, thesecurity risks of petrole-um dependence growing,and the environmentalcosts of today’s fuelsbecoming more apparent,the country faces com-pelling reasons to putthese technologies to useon a large scale.

Energy transitions taketime, and no single tech-nology will solve ourenergy problems. Butrenewable energy tech-

nologies, combined with substantial improve-ments in energy efficiency, have the potentialto gradually transform the U.S. energy systemin ways that will benefit all Americans. Thetransition is easier to envision if you look atthe way the oil age emerged rapidly and unex-pectedly in the first two decades of the 20thcentury, propelled by technologies such asrefineries and internal combustion enginesand driven by the efforts of entrepreneurssuch as John D. Rockefeller.

Americans today are no less clever orambitious than their great-grandparents were.A new and better energy future is possible if

the country can forge a compelling vision ofwhere it wants to be. Recent developments inthe global marketplace show the potential:

• Global wind energy generation has morethan tripled since 2000, providing enoughelectricity to power the homes of about 30million Americans. The United States led theworld in wind energy installations in 2005.

• Production of electricity-generatingsolar cells is one of the world’s fastest growingindustries, up 45 percent in 2005 to six timesthe level in 2000.

• Production of fuel ethanol from cropsmore than doubled between 2000 and 2005,and biodiesel from vegetable oil and wasteexpanded nearly four-fold over this period.

Global investment in renewable energy(excluding large hydropower) in 2005 is esti-mated at $38 billion—equivalent to nearly 20percent of total annual investment in the elec-tric power sector. Renewable energy invest-ments have nearly doubled over the past threeyears, and have increased six-fold since 1995.Next to the Internet, new energy technologyhas become one of the hottest investmentfields for venture capitalists.

These dynamic growth rates are drivingdown costs and spurring rapid advances intechnologies. They are also creating new eco-nomic opportunities for people around theglobe. Today, renewable energy manufactur-ing, operations, and maintenance provideapproximately two million jobs worldwide.

The United States will need a muchstronger commitment to renewable energy ifit is to take advantage of these opportunities.As President Bush has said, America is“addicted to oil,” and dependence on fossilfuels is rising, even in the face of high oilprices and growing concern about globalwarming. Of particular concern is the wellover 100 coal-fired power plants now on the drawing boards of the U.S. electricityindustry—most of which lack the latest pollution controls and could still be pumpingcarbon dioxide into the atmosphere a half-century from now.

In order to break the national addiction tooutdated fuels and technologies, America willneed a world-class energy policy. The promi-

A M E R I C A N E N E R G Y6

Wind turbines in Minnesotacornfield.

NREL

I

2 1 S T C E N T U R Y E N E R G Y

nent positions that Germany and Spain holdin wind power, for example, and that Japanand Germany enjoy in solar energy, wereachieved thanks to strong and enduring policies that their legislatures adopted in the1990s. These policies created steadily growingmarkets for renewable energy technologies,fueling the development of robust new manufacturing industries.

By contrast, U.S. renewable energy policiesover the past two decades have been an ever-changing patchwork. Abrupt changes in direc-tion at both the state and federal levels havedeterred investors and led dozens of compa-nies into bankruptcy. If America is to join theworld leaders and achieve the nation’s fullpotential for renewable energy, it will needworld-class energy policies based on a sus-tained and consistent policy framework at thelocal, state, and national levels.

Across the country, the tide has begun toturn. All but four U.S. states now have incen-tives in place to promote renewable energy.More than a dozen have enacted new renew-able energy laws in the past few years, and fourstates strengthened their targets in 2005, sig-naling fresh political momentum. If such poli-cies continue to proliferate, and are joined byfederal leadership, rapid progress is possible.

Several states are demonstrating just howquickly renewable energy can take hold withthe right policies. California already gets 31percent of its electricity from renewableresources; 12 percent of this comes from non-hydro sources such as wind and geothermalenergy. Texas, whose history is closely identi-fied with the oil industry, now has the coun-try’s largest collection of wind generators.And Iowa produces enough ethanol that ifthis were all consumed in-state, it would meethalf the state’s gasoline requirements.

A national coalition of more than 200business and citizens organizations—led bythe farm and forestry sectors—has proposed anational commitment to obtaining 25 percentof U.S. energy from renewable resources by2025. A new economic analysis by the RandCorporation for the Energy Future Coalitionconcludes that if the United States were to get25 percent of its electric power and trans-

portation fuels from renewable energy by2025, the country's energy costs would bereduced, with large savings occurring by 2015.And national carbon dioxide emissions wouldfall by one billion tons.

What would a U.S.economy powered byrenewable energy look like?Likely changes include:

• The energy economywould become moredecentralized and efficient,allowing homes and busi-nesses to meet many oftheir own energy needs.

• Dependence onPersian Gulf oil woulddecline, improving U.S.national security.

• Trade deficits wouldfall as oil imports decline,reducing the roughly $300billion the United States isexpected to spend onimported oil in 2006.

• The air would becleaner, reducing asthmaand other respiratory diseases and savingAmerican lives.

• Emissions of globalwarming gases would decline, reducing thethreat to cities and coastal properties fromrising sea level and the threat to agriculturefrom drought and higher temperatures.

• Hundreds of thousands of new jobswould be created in the agricultural, manu-facturing, and service companies that would emerge to meet the demand for renewable energy.

• Rural communities would be revitalizedas farmers and ranchers, who own the landwhere much of the renewable energy can beharnessed, would reap the benefits.

This vision will become reality only ifAmericans come together to achieve it,mobilized behind the goal of increasing ournational self-reliance and leaving a healthyenvironment for the next generation. Thetime is now.

A M E R I C A N E N E R G Y 7

2 1 S T C E N T U R Y E N E R G Y

U.S. Energy Consumption by Source, 2004

Renewables 6%Nuclear 8%Coal23%

Natural Gas23%

Petroleum40%

Solar1%

Wind2%

Geo-thermal

6%Hydro45%

Biomass47%

Average Annual Global Growth Ratesof Various Energy Sources, 2000-2005

Grow

thra

te(%

)

0

5

10

15

20

25

30

OilNaturalGas

CoalBiofuelsWindPV

29.226.4

17.1

4.42.5

1.1

Nuclear

1.6

Source: EIA

Source: BP, Worldwatch

Enhancing Energy Security

merica’s dependence on importedoil is undermining the country’snational security by tying the U.S.

economy to unstable and undemocraticnations, thus increasing the risk of militaryconflict in political hotspots around theglobe. Renewable energy can reduce oildependence and improve the country’s security in several key ways.

The United States currently imports some13 million barrels of oil each day—over 60percent of its total daily consumption—at an

annual cost of$300 billion. Ifcurrent trendscontinue,America willdepend onimports for 70percent of itsoil by 2025. AsPresident Bushsaid in his2006 State ofthe Unionaddress,America is“addicted tooil.” This

addiction requires billions of dollars in mili-tary expenditures to secure the country’senergy supply lines.

The United States was once the world’slargest oil exporter, but domestic productionpeaked in 1970. More recently, oil productionhas peaked in countries such as Indonesia,Norway, and the United Kingdom. As accessible reserves in the world’s stableregions have been depleted, oil extraction hasgradually shifted to more dangerous cornersof the globe. Today, the world’s oil frontierincludes a list of countries that mirrors a catalog of global trouble spots, includingAngola, Azerbaijan, Chad, Nigeria, Sudan,and Venezuela.

Most of these countries rank disturbinglylow in many measures of political liberty,human rights, and corruption. Furthermore,an estimated 85 percent of the world’s oil

reserves are now either owned or controlledby national petroleum companies, whichgreatly limits private investment in explo-ration and infrastructure development.

The Middle East contains a remarkable 60percent of the world’s remaining proven oilreserves, and each day, nearly half the world’soil exports travel through the Straits ofHormuz at the mouth of the Persian Gulf.Because of their geographical proximity,Europe and Asia import a larger share of theiroil from the Middle East than the UnitedStates does. But this does not lessen the U.S.exposure to imported oil. For three decades,the Middle East has been the world’s marginaloil supplier, and disruptions in the flow of oilare reflected in the world price of energy andthe balance of global economic power.

In recent years, however, even the large oilreserves in the Persian Gulf have been insufficient to keep up with rising globaldemand, most of it coming from the UnitedStates, the Middle East, China, and otherAsian countries. If supply fails to keep upwith rising demand, oil prices could rise farabove their recent record highs. Every oilprice spike over the past 30 years has led to an economic recession in the United States;such price spikes will become more frequentas global competition for remaining oil supplies intensifies.

Full U.S. energy independence will takedecades to achieve; until then, national security could be greatly improved if Americamoved from its current path of rising oilimports to reducing national reliance on oil.That is an eminently achievable goal—through both transportation efficiencyimprovements and increased reliance on biofuels and other renewable resources.

Improving efficiency and diversifying fuelchoices will take the pressure off energyprices, while enabling the country to makediplomatic and security decisions based onAmerican interests and values rather than therelentless need to protect access to oil. Inmany areas of the world, the U.S. diplomatichand would be greatly strengthened if energyimports were going down rather than up.


Oil pipeline damaged by Iraqiinsurgents, 2005.

AP Images

A

V I S I O N F O R A M O R E S E C U R E A N D P R O S P E R O U S A M E R I C A

America’s current energy system under-mines national security in other ways as well.The centralized and geographically concen-trated nature of the country’s power plants,refineries, pipelines, and other infrastructureleaves it vulnerable to everything from natu-ral disasters to terrorist attacks. One yearafter Hurricane Katrina crippled approxi-mately 10 percent of the nation’s oil refiningcapacity, oil and gas production and trans-portation in the Gulf of Mexico still had notbeen fully restored.

Security experts believe that a well-orches-trated physical or electronic attack on the U.S.electricity grid could cripple the economy foran extended period. It is estimated that the2003 Northeast blackout cost between $4 bil-lion and $10 billion over the course of just afew days.

The country’s 104 nuclear power plantsand their associated pools of high-levelradioactive waste present another U.S. securi-ty threat. If one of the planes that struck theWorld Trade Center on September 11, 2001,had instead hit the Indian Point nuclear plantjust north of New York City, the human andeconomic toll of that fateful day could havebeen vastly greater.

The distributed nature of many renewableenergy technologies helps reduce the risk ofaccidental or premeditated grid failures cas-cading out of control. An analysis of the 2003Northeast blackout suggests that solar powergeneration representing just a small percent-age of peak load and located at key spots inthe region would have significantly reducedthe extent of the power outages.

A 2005 study by the U.S. Department ofDefense found that renewable energy canenhance the military’s mission, providingflexible, reliable, and secure electricity sup-plies for many installations and generatingpower for perimeter security devices atremote installations. Renewable energy pro-vided more than 8 percent of all electricityfor U.S. military installations by the end of2005. Both the military and the CentralIntelligence Agency are turning to new light-weight solar technologies to replace heavy

batteries in the field and for use in intelli-gence applications.

Renewable energy can play an importantrole in providing power to critical infrastruc-ture in the aftermath ofcatastrophes as well. Forexample, the LouisianaState Police used solar-powered lighting in critical areas around New Orleans followingHurricane Katrina; else-where in Louisiana, thelack of power slowed thework of emergency andrecovery workers. Officialsat New Jersey’s AtlanticCounty Utilities Authorityplan to install solar and wind power at awaste-water facility to keep the plant operat-ing during blackouts.

Renewable technologies can be coupledwith traditional backup diesel generators toextend the fuel supply andincrease the total poweravailable. Renewable powercan also come back on linemuch more quickly thancoal or nuclear powerplants can, helping toreduce economic lossesassociated with power fail-ures and minimize the timethat critical facilities suchas hospitals and emergencycommunication centersmust go without power,thus saving lives. Some states already viewsolar power, wind power, and other distrib-uted technologies such as fuel cells as essentialfor public safety and emergency preparedness.

As with oil dependence, the broader energy security threats cannot be eliminatedovernight. But immediate steps to invest in adiverse, decentralized energy system that relies more heavily on domestic renewableresources will allow the United States tosteadily enhance its security in the years ahead.



1950 1960

I M P O R T S

1970 1980 1990 2000

25

15

10

5

0

Domestic Production and Consumption of Oil, 1950–2005

Milli

onba

rrel

s/da

y

20 C o n s u m p t i o n

P r o d u c t i o n

1986 1990 1994 1998 2002 2006

70

80

50

60

20

30

40

10

0

Crude Oil Spot Prices, 1986–2006

Dolla

rspe

rbar

rel(

curr

ent$

)

Source: EIA

Source: EIA

Creating Jobs

xpanding the use of renewable energywill have a positive impact on employ-ment, according to more than a dozen

independent studies analyzing the impact ofclean energy on the economy. Renewable

energy creates morejobs per unit ofenergy producedand per dollarspent than fossilfuel technologiesdo. Several studieshave shown thatgreater reliance on renewable ener-gy would havelarge, positiveimpacts on theU.S. economy,creating significant

numbers of new jobs, driving major capitalinvestment, stabilizing energy prices, andreducing consumer costs.

A transition away from fossil fuels andtoward renewable energy would create both

winners and losers, butmost studies show thatmany more jobs wouldbe created than lost. A2004 analysis by theUnion of ConcernedScientists found thatincreasing the share ofrenewable energy in theU.S. electricity system to20 percent—addingmore than 160,000megawatts (MW) ofnew renewable energy

facilities by 2020—would create more than355,000 new U.S. jobs.

If the increased use of renewable energyled to significant reductions in fossil fuelprices, consumer savings on electricity andnatural gas bills would ripple through the U.S.economy, spawning even more jobs. It wouldalso provide a tremendous economic boost torural communities. Most of the jobs created in

renewable energy would be high-paying posi-tions for skilled workers, in fields such asmanufacturing, sales, construction, installa-tion, and maintenance.

A 2004 Renewable Energy Policy Projectstudy determined that increasing U.S. windcapacity to 50,000 MW—about five timestoday’s level—would create 150,000 manu-facturing jobs, while pumping $20 billion in investment into the national economy.Renewable heating and biofuels also offer significant employment opportunities. TheU.S. ethanol industry created nearly 154,000jobs throughout the nation’s economy in 2005 alone, boosting household income by$5.7 billion.

Booming markets for renewables aroundthe world may provide additional opportuni-ties for U.S. companies and workers. A 2003study by the Environment California Research and Policy Center determined thatCalifornia’s Renewable Portfolio Standard—which required that 20 percent of electricitycome from renewable sources by 2017 (a target date since pushed to 2010)—would create a total of some 200,000 person-years of employment over the lifetimes of plantsbuilt through that period, at an average annual salary of $40,000. An estimated 78,000 of these jobs would serve overseasexport markets.

By contrast, employment in the fossil fuel industries has been in steady decline fordecades, in large measure due to growingautomation of coal mining and other processes. Between 1980 and 1999, while U.S. coal production increased 32 percent,related employment declined 66 percent,from 242,000 to 83,000 workers. The coalindustry is expected to lose an additional30,000-some jobs by 2020, even if coaldemand continues to rise. Further, high pricesfor fossil fuels have a negative impact on theeconomy, even leading to the transfer ofmanufacturing jobs overseas. Expanding theuse of renewable energy can help minimizethese losses and provide new opportunitiesfor displaced workers.



E

Installing PV system.

PowerLight Corporation

5000 1000 1500 2000 2500

Jobs in Renewable Energy and Fossil Fuels

PV

Wind

Biomass

Coal

Natural Gas

Person-years per MWh

Source: REPP, GP, EWEA, CalPIRG, BLS

The Global Marketplace

enewable energy is rapidly becomingbig business around the world.Between the mid-1990s and 2005,

annual global investments in “new” renewableenergy technologies (excluding large hydro-power and traditional biomass) rose from$6.4 billion to $38 billion. It is estimated thatinvestment in renewable energy technologycould approach $70 billion by 2010.

Wind and solar power are the world’sfastest growing energy sources today, withcapacity expanding at double-digit rates everyyear over the past decade. Other sources aregrowing rapidly as well, at rates far outpacingthose for traditional energy sources. The glob-al power industry is now adding more windenergy generating capacity to the world’sgrids each year than it is nuclear capacity.Solar thermal capacity for domestic hot waterand space heating increased 16 percent in2005, while global production of ethanol andbiodiesel grew by nearly 20 percent and 60percent respectively that year.

The effects of such rapid growth includeimpressive technology advances, dramaticcost reductions, and an increase in politicalsupport for renewable energy around theworld. Not surprisingly, these industries areattracting some of the largest players in theworld energy market, including BP, RoyalDutch/Shell, and General Electric (which hasmoved into both the wind and solar cell mar-kets in recent years). They are even drawingother major companies—including Dupontand Honda—into the energy arena for the first time.

Most of the investment to date hasoccurred in a relatively small number ofcountries, driven by consistent, forward-look-ing policies that aim to create markets forrenewable energy. Germany and Spain, forexample, have forged a dominant position inwind energy over the past decade, and arenow turning to other renewables as well.Japan and Germany lead in solar electricity,with Japan responsible for nearly half of glob-al solar cell production and Germany domi-nating the marketplace. Brazil has moved tothe forefront of biofuel production with itssuccessful alcohol fuels program. And China

is the world leader in small hydropower andsolar water heating, with well over half theglobal market in each.

Despite strong publicsupport and rapidly risinginterest in renewable ener-gy, the United States hasnot kept up with the stronggrowth in renewables overthe past decade; as a result,its market share has fallensteadily. For example, whileU.S. solar cell manufactur-ing has risen year by year,the nation’s share of globalproduction has declinedfrom 44 percent in 1996 to below 9 percent in 2005.

Time is growing shortfor the United States to get back in the game andcompete for what could be some of the largest new markets of the next few decades. A strong partnership between government and the private sector is essential if that kind of leadership is to be achieved.



1980 1985 1990 1995 2000 2005

Global Construction Starts for Windand Nuclear Power, 1980–2005

Cons

truct

ion

star

ts(m

w)

0

5000

10000

15000

20000

NuclearWind

R

Green Power Markets

Voluntary purchases have played a major role in driving the U.S. renewable energy market. By the endof 2004, “green power” demand had topped 2,200MW of renewable capacity, up from 167 MW in 2000.The U.S. Air Force is the nation’s leader in greenpower purchasing, followed by Whole Foods Marketand a growing list of corporate and governmentoffices. The Statue of Liberty now gets 100 percent ofher power from renewable energy. In most cases,green power subscribers pay a premium price for electricity, but some customers in Colorado and Texasare now paying less than non-subscribers due to risingnatural gas prices.

New York Stock Exchange.

Source: Worldwatch, BTM Consult, AWEA, EWEA

Investment Opportunities

nnual global investment in “new”renewable energy has risen almostsix-fold since 1995, with cumulative

investment over this period of nearly $180 billion. The $38 billion invested in renewablesin 2005 compares to the roughly $150 billioninvested worldwide in the conventional power

sector in 2004.Market growth hasbeen driven bytechnologyimprovements, ris-ing fossil fuelprices, governmentpolicies, and thegrowing familiarityof investors andlenders with theopportunities and

risks posed by the wide range of renewabletechnologies and projects.

Renewable energy technologies tend to bemore capital intensive than traditional fossilfuel technologies, with higher upfront costs.At the same time, they do not expose owners

to the risks of fuel priceincreases or the cost offuture retrofits or penal-ties associated with cli-mate change and otherenvironmental and healthproblems. As a result,renewable and fossil fuelprojects have very differ-ent financial profiles.

In light of the long-term risks of investing in conventional energysystems, institutional

investors, such as the California PublicEmployees Retirement System (CalPERS),have begun directing large blocks of funds tothe environmental sector, including to renew-able energy, much of it under the rubric ofsustainable or socially responsible investing.

But investing in renewables is no longerjust about doing the right thing; it’s also aboutmaking money. Renewable energy is increas-ingly viewed as an attractive investment byprivate and public equity investors alike.

In November 2005, Goldman Sachs com-mitted to investing more than $1 billion inrenewable energy projects, including biofuels,solar power, and wind energy. The Nasdaqstock market launched its “Clean Edge U.S.Index” in May 2006 to track the performanceof clean energy companies, including severalin the renewable energy and efficiency indus-tries. In the world of venture capital, cleanenergy is the hottest new investment arena,having just passed semiconductors in annualdeal flow, according to the Cleantech VentureNetwork. Kleiner Perkins general partnerJohn Doerr, one of the first investors inGoogle, believes that green technologies“could be the largest economic opportunity of the 21st century.”

Project lenders, principally banks, are pro-viding loans to ethanol plants, wind farms,and other large-scale renewable power proj-ects, and direct lending by U.S. banks andinstitutional investors is on the upswing. Still,U.S. banks lag behind those in Europe. Onereason is that the financing of renewableenergy projects in the United States is domi-nated by equity investments by the unregulat-ed subsidiaries of electric utility companies,which benefit from the Production Tax Credit(PTC). The PTC has been available for windpower and certain waste projects, and wasexpanded in late 2004 to include solar, bio-mass, and geothermal power plants.

The scores of ethanol plants now underconstruction are being financed by a widearray of agricultural coops, corporations suchas Archer Daniels Midland, and equityinvestors ranging from large institutions toMicrosoft Chairman Bill Gates.

Public sector financing of renewable energyprojects has been evolving for several years andis likely to increase substantially in the nearterm. By mid-2005, 17 Clean Energy Fundsworth nearly $3.5 billion had been establishedin 13 states to support renewable energy development through grants, subsidies, loans,and investments that often leverage privatesector financing. Cities are getting involved aswell, using bond financing for renewable energy and energy efficiency projects.



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1995 1997 1999 2001 20052003

Global Investment in Renewable Energy, 1995–2005

2005

dolla

rs

10

0

20

30

40

Source: Martinot

Building for the Future

ommercial and residential buildingsconsume about one-third of all U.S.energy and two-thirds of U.S. elec-

tricity. In addition, they account for more car-bon emissions than any other sector. Butbuildings’ demand for energy can be dramati-cally reduced, and renewable energy can meeta significant share of the remaining needs.

The burgeoning “green building” move-ment seeks to tap consumer demand for envi-ronmentally friendly, healthy, and affordablehomes and offices. Designers of green build-ings aim to minimize energy consumptionwith more-efficient materials and appliancesand integrated renewable energy systems; toreduce demand for water and open space; touse sustainably produced products (includingrecycled materials); and to provide convenientaccess to public transportation.

The movement officially began with thefounding of the U.S. Green Building Council,which in 2000 published LEED (Leadership in Energy and Environmental Design) stan-dards to guide developers’ decisions on sitedesign, water use, indoor air quality, andenergy generation and use. Today, nearly6,000 member organizations and companiesplan to construct new buildings or renovateold ones according to LEED standards, and agrowing number of state and local govern-ments—including in Atlanta, Boston, and SanFrancisco—have incorporated them into lawsand regulations for new public buildings. Bymid-2006, nearly 500 U.S. buildings wereLEED certified.

Solar energy is playing a role in many ofthese buildings. The pharmacy chainWalgreens plans to install solar photovoltaics(PVs) on 112 of its stores, enabling the facili-ties to meet 20–50 percent of their powerneeds on site. In Battery Park in New YorkCity, developers built the world’s first greenhigh-rise. The “Solaire” apartments use 35percent less energy and 65 percent less elec-tricity than an average building, with solarcells meeting at least 5 percent of demand. By2009, all developments covering Battery ParkCity’s 92 acres will be LEED certified and willhave solar panels.

The Chicago Center for Green Technologyuses geothermal energy for heating and cool-ing, and the Dallas/Fort WorthAirport relies on solar energyfor air conditioning, reducingcooling costs by 91 percent attimes of peak demand. Andmajor housing developers suchas Centex and Premier Homesare now incorporating solarinto new homes in California.

There are good economicreasons for constructing greenbuildings, which generally havehealthier employees, higherworker productivity, lower turnover, and sig-nificant energy and water savings. A study bythe California Sustainable Building Task Forcefound that an upfrontinvestment of 2 per-cent (the average costpremium) in green-building design resultsin average savings of atleast 10 times the ini-tial investment over a20-year period. Andcosts are falling asthose who design, con-struct, and maintaingreen buildings gainexperience. Further,green buildings tend tohave higher occupancyrates and rents, andtherefore betterreturns on investment,than conventionalbuildings. And gener-ating power and heaton-site with renewableenergy can reduce thechances of a poweroutage, while hedgingagainst an increase inelectricity prices.


B U I L D I N G A N E W E N E R G Y E C O N O M Y

C

More Examples of Green Buildings in the United States

Ford Motor Company installed a “green roof” on the 10.4-acre rooftop of its Rouge River Plant in Michigan in 2004.Replacing dark, heat-absorbing roof surfaces with plantskeeps buildings cooler in summer and warmer in winter,reducing energy use for heating and cooling by 10–50 per-cent; it also filters the air and rainwater.

A new building at the Natural Energy Laboratory of Hawaiiis “net zero energy,” using no electricity from the grid.Seawater is piped in for space cooling, and condensationfrom the pipes is used for irrigation.

The office tower 4 Times Square, headquarters of CondéNast, is powered by fuel cells and has a PV façade; recycled materials make up 20 percent of the building.

Pittsburgh’s David L. Lawrence Convention Center includesnumerous features that reduce the energy bill by at leastone-third, or enough to meet the needs of 1,900 house-holds. Its curved roof allows hot air to escape through ventsand cool breezes to flow in from the river. Constructioncosts were comparable to or lower than other (non-green)centers built in recent years.

Genzyme’s headquarters in Cambridge, Massachusetts, wasthe first large U.S. office building to achieve “platinum”LEED standards, the highest level of certification. The build-ing includes a green roof, uses natural light and ventilation,is sited on a reclaimed brownfield and close to a subwaystation, and provides indoor bike storage, showers, andlockers for employees.

David L. LawrenceConvention Center,Pittsburgh, Pennsylvania.

Brad Keinknopf

Meeting the Transportation Challenge

ransportation accounts for two-thirdsof U.S. oil consumption and is thepredominant source of domestic

urban air pollution. Recent gasoline priceincreases have combined with growing envi-ronmental concerns to spur interest in new

fuels to run the nation’stransportation fleet,which relies on oil formore than 95 percent ofits energy. Renewablefuels currently representonly around 2 percent of the total.

The immediateoptions for running theU.S. transportation system on renewable

energy are more limited than those for other sectors of the economy, such as build-ings and industry. In the short term, the mainpotential is in the use of biofuels derived fromcrops and wastes. In the long term, electricity

and hydrogen derived from sourceslike wind and solar energy are likelyto become viable alternatives.

Most cars and SUVs on the roadtoday can run on blends of up to 10percent ethanol, and motor vehiclemanufacturers already producevehicles designed to run on muchhigher ethanol blends. Ford,DaimlerChrysler, and GM areamong the automobile companiesthat sell “flexible-fuel” cars, trucks,and minivans that can use gasolineand ethanol blends ranging frompure gasoline up to 85 percent

ethanol (E85). By mid-2006, there wereapproximately six million E85-compatiblevehicles on U.S. roads.

The goal now is to expand the market forbiofuels beyond the farm states where theyhave been most popular to date. Flex-fuelvehicles are assisting in this transition becausethey allow drivers to choose different fuelsbased on price and availability. The EnergyPolicy Act of 2005, which calls for 7.5 billiongallons of biofuels to be used annually by2012, will also help to expand the market.

The impact of bio-fueled cars can be maxi-mized by making them as efficient as possible.A new generation of highly efficient andclean-burning diesel engines is one option.Another is hybrid gas-electric technology thatis up to 30 percent more fuel efficient thanconventional vehicle technology.

A federal law provides tax credits for pur-chasers of hybrid and alternative fuel vehicles.Many states also offer incentives for buyingthese vehicles. The same “green” consumerswho have made hybrid gas-electric vehicleshot items in auto showrooms in recent yearsare now showing strong interest in biodieseland other renewable fuels.

Running motor vehicles on solar energyand wind power is more challenging, thoughnot a pipe dream. Electric cars on the markettoday can be plugged into an outlet andrecharged at home. Homeowners withrooftop solar systems—or in regions rich inhydro or wind power—can already fuel theirvehicles with renewably generated electricity.And a new generation of plug-in hybrids willsoon provide a similar opportunity, while giv-ing drivers the option of extending the typical100-mile range of an electric vehicle by usinggasoline or biofuel in the tank.

In the more distant future, hydrogen offersa means of storing energy sources such assolar and wind power. Hydrogen can be pro-duced from water using any energy sourcethat generates electricity. Because it can bereadily stored in tanks and transported inpipelines, hydrogen is a logical long-termreplacement for oil and natural gas. A newgeneration of experimental fuel-cell vehicles isbeing developed that efficiently uses hydrogento turn the wheels, with water vapor the onlytailpipe emission.

As renewable energy becomes a larger partof the electricity system and as costs decline,renewably generated hydrogen is likely tobecome a growing part of the transportationfuel mix.



T

Bus fueled by soy biodiesel.

NREL

Estimated Number of Alternative-Fueled Vehicles in Use in the United

States, by Fuel, 2000 and 2004

Fuel 2000 2004

Liquefied PetroleumGases (LPG) 4,435 9,036

Natural Gas 9,912 4,292

Hydrogen 0 77

Ethanol 600,832 652,779

Electricity 18,172 2,633

Total 633,351 668,817

Source: EIA

A New Future for Agriculture

enewable energy—particularly bio-fuels and wind power—could providea new source of revenue for thousands

of farmers and agricultural processors, creat-ing economic opportunities in rural areas thathave suffered from decades of falling cropprices. Already, the growing ethanol and bio-diesel industries are providing jobs in plantconstruction, operations, and maintenance,mostly in rural communities. According tothe Renewable Fuels Association, the ethanolindustry created almost 154,000 U.S. jobs in2005 alone, boosting household income by$5.7 billion. It also contributed about $3.5 billion in tax revenues at the local, state, andfederal levels.

The emerging industry of cellulosicethanol, with its low-cost feedstock and newconversion techniques, is poised to offer evengreater economic and environmental benefits.Farmers can reduce disposal costs and gain asecondary source of income by convertinghigh-cellulose crop residues into fuel.Marginal land that is unsuitable for most cultivation can be planted with a variety offast-growing energy crops that are lessresource-intensive than annual crops, requireless maintenance, and can improve degradedsoils while providing wildlife habitat.

People in rural areas can benefit from biofuels in three ways: wealth remains in thelocal community, farmers are paid for pro-ducing feedstock, and biofuels provide themwith cleaner energy at lower cost (nearly halfof U.S. soybean farmers now use biodiesel,for example). Some proponents foresee afuture in which local “bio-refineries” churnout a combination of fuels, chemicals, phar-maceuticals, and plastics—creating local jobsand tax revenues while gradually replacing the oil refineries that are central to today’s oil-based economy.

Farmers and rural communities can alsoincrease their revenue by tapping local windresources to generate electricity. Some of thecountry’s most valuable winds sweep acrosssome of its poorest farmlands. Here, farmersand ranchers can generate income even whencropland is parched from drought. They canbecome wind developers themselves, or opt to

have others install turbines on their land and,in turn, receive annual lease payments orshare the revenues from a wind project.

Payments range from $1,000 to $4,000 a yearfor each wind turbine installed, as much asdoubling the economic yield from the land.While turbines harness the wind, farmers and ranchers can continue to raise crops andlivestock beneath them.

Solar energy benefits farmers as well, bylighting and heating buildings and green-houses, drying crops, and powering waterpumps and irrigation systems. One ofCalifornia’s largest vegetable growers now irri-gates 600 acres of farmland with solar power,helping to ease pressure on the Californiaelectricity grid during peak demand periods.

In early 2006, rising awareness of the myriadbenefits of renewable energy led a cross-sec-tion of agriculture and forestry groups tolaunch “25 x ’25,” a call to meet 25 percent oftotal U.S. energy demand by the year 2025with clean, secure, and renewable energy fromAmerica’s farms, ranches, and forests. Themovement is quickly gathering steam, withsupport from a broad coalition of forces,including the agriculture and forestry com-munities, organized labor, businesses, securityhawks, and religious and environmentalgroups. By mid-2006, 25 x ’25 had beenendorsed by 13 governors and 4 state legisla-tures, 32 U.S. Congressmen, and a bipartisangroup of 19 influential U.S. Senators.



Cows grazing beneath turbines, Blue Canyon WindProject, Oklahoma.

RHorizon Wind Energy

Powering the Electricity Grid

he U.S. economy, as well as publichealth and safety, depends on a reliable power system that provides

electricity 24 hours a day, 365 days a year.The costly disruptions resulting from theNortheast blackout of August 2003 were a powerful reminder of how dependent thecountry is on the reliability of large powerplants and the transmission networks thatconnect them.

The U.S. electric power industry now relieson large, central power stations, includingcoal, natural gas, nuclear, and hydropowerplants that together generate more than 95percent of the nation’s electricity. Over thenext few decades, renewable energy couldhelp to diversify the nation’s bulk power sup-ply. Already, renewable resources (excludinglarge hydropower) produce 12 percent ofnorthern California’s electricity.

Most electric utilities operate a combina-tion of baseload plants (often coal andnuclear) that operate most of the time and

others (often natural gas)that are utilized only whendemand is high. Somerenewable power plantscan provide steady powerwhenever it’s needed—using geothermal, concen-trating solar (with stor-age), and bioenergy, forexample. Other powersources are intermittent,meaning they are availableonly when the sun is shining or the wind is

blowing. Yet even intermittent sources canadd significant value to the system by providing electricity when it is most neededand most costly to produce with conventionalsources. In many parts of the country, forexample, periods of peak sunlight coincidewith peak power demand for air conditioning.

All power systems rely on backup genera-tors, since even baseload plants must closeoccasionally due to technical problems. In the case of intermittent renewables, windresources can already be forecast at least twodays in advance, and fluctuations in power

output can be reduced if not eliminated byspreading solar or wind generators across asufficiently wide region. Studies show thateven when wind power alone provides 20 per-cent of the total electricity on a regional grid—as it does in Denmark and large parts ofGermany—backup capacity is rarely needed.Above that level, some backup capacity may berequired, but at much less than a 1:1 ratio. Inthe future, new technologies like advanced gasturbines and fuel cells, as well as new storagedevices, will likely reduce the cost of providingbackup capacity, allowing much higher levelsof dependence on intermittent generators.

Renewable energy sources also providegrid operators with real economic benefits (inaddition to their peaking value) that are justbeginning to be recognized. Conventionalpower plants based on coal and nuclear powercan take 5–15 years to plan and construct, aserious disadvantage given the uncertaintiesof future power demand and the risks of bor-rowing hundreds of millions of dollars whilethe plants are built. Construction lead timesfor large renewable projects are often in therange of 2–5 years, reducing the risk to utili-ties and allowing capacity to be added incre-mentally to match load growth. According toFPL Energy, it can take as little as 3–6 monthsfrom ground breaking to commercial opera-tion with new wind farms. Once on line,renewable facilities can begin operation morerapidly than conventional power plants afterblackouts, reducing associated economic andsecurity costs.

At a time when the price of natural gas, themost popular fuel for recently constructedpower plants, has increased significantly,renewable power has become a valuable component of a utility power portfolio and ahedge against future fuel-price increases.Wind farms are already competitive with gasand coal, and GE Wind has predicted thatwind turbine sales could surpass gas turbinesales within the next few years. Since renew-able power plants are emissions free, or closeto it, they also represent a hedge againstfuture environmental regulations, includingpossible caps on mercury and carbon-dioxide emissions.



T

Wind farm with transmissiontower.

Paul Langrock/Zenit/Greenpeace

U.S. Net Electricity Generation by Source, 2005

Renewables 9%

Nuclear21%

Fossil fuels70%

Source: EIA

Micro Power

lthough most of today’s electricitycomes from large, central-stationpower plants, new technologies offer

a range of options for generating electricitywhere it is needed, saving on the cost oftransmitting and distributing power andimproving the overall efficiency and reliabilityof the system. These new options includerenewable energy technologies such asrooftop solar cells and bio-fueled generators,as well as devices such as gas turbines and fuelcells that may run on energy sources derivedfrom fossil fuels.

Micro (or distributed) power is in effect areturn to the vision of Thomas Edison, whodesigned small, city-based power plants, thefirst of which was built near Wall Street in1882. Economies of scale quickly renderedthis approach obsolete, but new technologiesthat can be mass-produced at low cost arebringing us back to the future.

Locally based generators that connect tolocal distribution lines generally have generat-ing capacities of 5 MW or less, and are sitedin or adjacent to residential, commercial, orpublic buildings. These micro power plantsprovide additional value to the electricity system because they do not require extrainvestment in transmission or distribution,and they reduce or eliminate line loss. Theirpopularity is also fueled by the need for reliable power supplies for the electronicequipment that is so central to today’s econo-my. Since most power outages are caused byweather-related damage to power lines,locally based generators can dramaticallyimprove reliability.

Japanese companies have demonstratedthat the development of simple, integratedtechnology packages can quickly and signifi-cantly reduce the cost of home-sized solar generators. Recently, U.S. companies haveintroduced so-called “plug-and-play” solarsystems that are modular and elegant—easilyintegrated into a new or existing buildingwithout the need for custom design work.Solar experts believe that as these systemsbecome more standardized, commercial andresidential consumers will see the units

proliferating in their neighborhoods over thenext few years.

One business that has taken advantage ofsmall-scale solar power is the FedExCorporation. In 2005, FedEx completed asolar electric system atopits hub at OaklandInternational Airport.The 81,000-square-footsystem generates enoughelectricity to power 900homes, and provides 80percent of the facility’speak load while protect-ing the roof from UVrays and reducing heat-ing and cooling needs.

That micro generatorsare not widely used today reflects in part thefact that everything from electricity laws toenvironmental and tax regulations are oftenstructured in ways that disadvantage thesetechnologies.Despite suchimpediments,businesses andconsumersincreasinglydemand the abil-ity to generatetheir own powerand to sell elec-tricity to otherconsumers at afair price. Under“net-metering”laws that havebeen enacted inseveral states, it is now possible for consumersto sell some of their extra power back to thegrid at the same price the consumer pays forit. These laws have helped spur the growingpopularity of rooftop solar power systems,particularly in California.



Individual UtilitiesStatewide Programs

U.S. States with Net Metering Laws

C A N A D A

U N I T E D S T A T E S

0

300mi

300km

0

MEXICO

A

120 kW solar electric arraypowering Domaine Carneros’Winery, Napa, California.


Source: DSIRE

Cleaner Air and Water

he emissions-free nature of mostrenewable energy technologies is oneof their principle advantages com-

pared to fossil fuels.Power plants, motorvehicles, and industriesthat burn fossil fuelsemit a host of pollu-tants that imperilhuman health, imposeheavy economic costs,and degrade the naturalenvironment.

A 2002 study pub-lished in the Journal ofthe American Medical

Association determined that exposure to airpollution poses the same risks of dying from

lung cancer and heart disease as doesliving with a smoker. A 2004 studyby Abt Associates estimated that fineparticulate pollution from powerplants causes nearly 24,000 prema-ture deaths annually in the UnitedStates. Thousands more Americansexperience asthma attacks, and mil-lions of workdays are lost annuallydue to pollution-induced illnesses.The result is more than $160 billionper year in medical expenses due toair pollution from power plants alone.

Sulfur emissions, resulting prima-rily from the burning of coal in con-ventional power plants to produceelectricity, are the main source ofacid rain, which damages crops,forests, and buildings and can makelakes and rivers too acidic to supportlife. Nitrogen oxides (NOx) combinewith other chemicals to formground-level ozone, or smog. Theburning of fossil fuels also releasesvolatile organic compounds. Somecombine with NOx to create smog;others are directly toxic and are asso-ciated with cancer, developmental

disorders, and adverse neurological andreproductive impacts.

Coal and oil contain toxic metals such asmercury, arsenic, and lead that are released

into the air when these fuels are burned andfind their way into drinking-water supplies.Coal-fired power plants are the nation’slargest human-caused point source of mercu-ry pollution, emitting about 48 tons into theair each year. They alone are responsible for42 percent of the nation’s mercury emissions.

Once in the environment, toxic metalsaccumulate in fatty tissue of humans and animals. In August 2004, the head of the EPAwarned that fish in nearly all of the nation’slakes and streams are contaminated with mercury. Studies show that one in sixAmerican women of childbearing age mayhave blood mercury concentrations highenough to cause damage to a developingfetus. Mercury damage can affect the centralnervous system and may damage reproduc-tive, immune, and cardiovascular systems.

Conventional power plants require significant amounts of water for ongoingmaintenance and cooling. Withdrawal ofsurface water can kill fish, larvae, and otherorganisms trapped against intake structures,while wastewater discharge releases chemicalsand heat into surrounding ecosystems,affecting plants, fish, and animals.

Fuel extraction and transport pose severehealth and environmental threats as well.Black-lung disease kills an estimated 1,500former coal miners annually. In theAppalachian states of West Virginia, Kentucky,and Tennessee, mountaintop coal mining(which involves blasting away mountain topsto expose coal seams within) has buried orpolluted more than 1,200 miles of streams,destroyed more than 7 percent of Appalachia’sforests, and eliminated entire communities. Ifcurrent trends continue over the next decade,affected land will cover 2,200 square miles, anarea larger than the state of Rhode Island.

The European Union has found that envi-ronmental and health costs associated withconventional energy and not incorporatedinto energy prices equal an estimated 1–2 percent of EU gross domestic product,excluding costs associated with climatechange. A dramatic increase in our use ofrenewable energy could significantly reducethese burdens.


T

Costs of Air Pollution

More than 150 million Americans—morethan half the nation’s people—live inareas where air quality threatens theirhealth.

A 2005 study by the Mount Sinai Schoolof Medicine’s Center for Children’sHealth and the Environment estimatedthat the cost in lost productivity to theU.S. economy due to mercury’s impact onchildren’s brain development totaled $8.7billion per year.

Researchers at the Harvard UniversitySchool of Public Health and Brigham andWomen’s Hospital in Boston found thateach 1 microgram decrease in soot percubic meter of air reduces by 3 percentthe U.S. death rates from cardiovasculardisease, respiratory illness, and lungcancer—thereby extending the lives of75,000 people annually.

The city of Atlanta improved public tran-sit and limited downtown vehicle use forthe 1996 Olympic Games, cutting peakozone concentrations by more than 25percent and reducing by 42 percent thenumber of asthma acute care events inthe Georgia Medicaid claims files.

A C L E A N E R , H E A L T H I E R A M E R I C A

Emissions from an oil refineryin San Pedro, California.

Sean Carpenter, Stock.xchng

Climate Change and Energy

ost renewable energy sources addlittle or no carbon dioxide (CO2)to the atmosphere. They are there-

fore one of the key elements of a global strat-egy to reduce the threat of climate change.

Atmospheric CO2 concentrations haveclimbed 20 percent since measurements beganin 1959 and nearly 36 percent since the dawnof the Industrial Revolution. Over the pastcentury, the average global temperature hasrisen by 1.8 degrees Fahrenheit; more thanhalf of this warming has taken place in thepast 30 years. The burning of fossil fuels forenergy production and use is responsible foran estimated 70 percent of the global warm-ing problem, and the United States accountsfor about one-quarter of total global emissions.

In its 2001 report, the IntergovernmentalPanel on Climate Change, the most authorita-tive scientific body synthesizing the vastresearch on climate change, concluded that“there is new and stronger evidence that mostof the warming observed over the last 50 yearsis attributable to human activities.” Expectedimpacts of global warming include sea-levelrise; flooding of coastal areas; increased fre-quency and severity of floods, droughts,storms, and heat waves; reduced agriculturalproduction; massive species extinction; andthe spread of vector-borne diseases such asmalaria and dengue fever.

There is growing concern that societies andecosystems will not have time to adapt tothese changing conditions. Rising economiclosses due to weather-related disasters are partof a trend being linked to climate change. TheWorld Health Organization estimates that climate change is already responsible for150,000 deaths annually. While developingcountries will likely see the highest toll,impacts will be significant in industrialnations as well, including the United States.

The concentration of CO2 in Earth’satmosphere is now higher than at any time inthe past 650,000 years, and the rate ofincrease is accelerating. In June 2004, a new,more-accurate atmospheric model revealedthat global temperatures could rise more rap-idly than previously projected. The extent ofwarming by the end of this century will be

determined by the amount of fossil fuels wecontinue to burn and the sensitivity of the climate system.

The steady rise of atmospheric CO2 lev-els—and the consequent risk of climatechange, whether gradual or abrupt—is receiv-ing the attention of everyonefrom urban planners to Pentagonstrategists. U.K. Chief ScientificAdvisor David King has said thatclimate change is “the mostsevere problem that we are facingtoday—more serious even thanthe threat of terrorism.” At theirJuly 2005 meeting in Gleneagles,Scotland, G-8 leaders issued astatement acknowledging that“climate change is a serious andlong-term challenge that has thepotential to affect every part ofthe globe.” And former U.S. pres-ident Bill Clinton has warnedthat climate change is the onlyproblem “that has the power toend the march of civilization aswe know it,” adding that a “serious global effort” to promote clean energy is required.

Global emissions must be reduced dramat-ically over this century toavoid catastrophic climatechanges. The sooner soci-eties begin to reduce theiremissions, the lower willbe the impacts and associ-ated costs of both climatechange and emissionsreductions. The KyotoProtocol, which enteredinto force in early 2005,requires 39 industrialnations to reduce theiremissions. Although theUnited States is not party to the treaty, U.S.companies that operate within signatorycountries face pressure to reduce their emis-sions as well. Dramatically increasing the useof renewable energy, alongside significantimprovements in energy efficiency, will provide an important means of doing so.


M

Hurricane Katrina, late August2005.

NASA-Goddard Space Flight Center


1950 1960 1970 1980 1990 2000

6000

4000

2000

0

U.S. Carbon Emissions from Energy, 1950–2004

Milli

onm

etric

tons

Source: EIA

Conserving Land and Water

enewable energy is commonly viewedas too land-intensive to be practical.Yet harnessing renewable energy

requires less land and water than does ourcurrent energy system. Disputes over the loca-tion of renewable energy projects—particu-

larly wind farms, such asthe Cape Wind projectoff the Massachusettscoast—are not uncom-mon; they are no less sofor fossil or nuclear proj-ects. Solid regulatoryprocedures and strongpublic participation canensure that a balance is

struck between energy production and envi-ronmental and aesthetic considerations.

Studies show that wind resources in threestates—Kansas, North Dakota and Texas—

could in principlemeet all currentU.S. electricityneeds. Althoughwind farmsappear to occupyas much as 60acres permegawatt,depending on theterrain, the tur-bines and accessroads actuallycover under three acres permegawatt. Byconservative esti-

mates, this means that fewer than 1,400 acresare needed to produce one billion kilowatt-hours (kWh) of electricity each year. Farmingand grazing can continue beneath the windturbines, enabling farmers and ranchers tosupplement their incomes with payments forgreen power production. Moreover, the GreatPlains, where most of the best wind resourceis located, is one of the least densely populat-ed parts of the country.

Geothermal electricity is estimated to needjust 74 acres of land to generate one billionkWh of electricity annually, enough to power

nearly 94,000 American homes. By contrast,coal-fired power requires 900 acres per billionkWh generated annually—most of it for min-ing and waste disposal. The geothermal plantcan go on producing electricity on the sameland for a century or more, as can windfarms, while a coal plant depends on mininghundreds of additional acres each year.

Solar power plants that concentrate sun-light in desert areas require 2,540 acres perbillion kWh. On a lifecycle basis, this is lessland than a comparable coal or hydropowerplant requires, and because most deserts aresparsely populated, there is plenty of room forsolar power plants. A little over 4,000 squaremiles—equivalent to 3.4 percent of the landin New Mexico—would be sufficient to pro-duce 30 percent of the country’s electricity.

In addition, sunlight can be used to producepower without using any land at all, simply byinstalling solar cells on the available roofs andwalls of U.S. buildings. It is estimated that thenation has 6,270 square miles of roof area and2,350 square miles of façades that are suitablefor harnessing solar power. Mounting solarpanels on just half of this area could supplynearly 30% of U.S. electricity.

Solar and wind power require virtually nowater to operate. Large fossil and nuclearplants, in contrast, need enormous quantitiesof water for cooling and ongoing mainte-nance. According to the Union of ConcernedScientists, a typical 500-MW coal plant takesin 2.2 billion gallons of water—enough for acity of 250,000 people—each year simply toproduce steam to drive its turbines.

Crops grown for biofuels are the mostland- and water-intensive of the renewableenergy sources. In 2005, about 12 percent ofthe nation’s corn crop (covering 11 millionacres of farmland) was used to produce four billion gallons of ethanol—which equates toabout 2 percent of annual U.S. gasoline con-sumption. For bioenergy to make a muchlarger contribution to the energy economy,the industry will have to accelerate the devel-opment of new feedstocks, agricultural prac-tices, and technologies that are more land andwater efficient. Already, the efficiency of bio-fuels production has increased significantly.



Missouri farmland.

USDA

R

Solar Power

M E X I C O

C A N A D A


0

300mi

300km

0

(turbines and access roads occupy just 5%

of this area)

GeothermalEnergy

Wind Power

Land Required to Produce 30 Percent of the Nation’s Electricity with Wind Power, Solar Power, and Geothermal Energy

Source: NREL, AWEA, Pimentel et al.

Energy Efficiency

mproving energy efficiency represents themost immediate and often the most cost-effective way to reduce oil dependence,

improve energy security, and reduce thehealth and environmental impact of our ener-gy system. By reducing the total energyrequirements of the U.S. economy, improvedenergy efficiency will make increased relianceon renewable energy sources more practicaland affordable.

Energy efficiency has played a critical rolein the U.S. energy supply in recent decades,reducing total energy use per dollar of grossnational product (GNP) by 49 percent sincethe 1970s. Compared to a 1973 baseline,America now saves more energy than it pro-duces from any single source, including oil.Efficiency improvements stabilize energyprices by reducing demand, while also deliver-ing the same services we value—whether hotshowers or cold drinks—at lower cost.

The potential for additional energy savingsis vast: U.S. energy use per dollar of GNP isnearly double that of other industrial coun-tries. More than two-thirds of the fossil fuelsconsumed are lost as waste heat—in powerplants and motor vehicles.

The fuel economy of new U.S. motor vehicles advanced rapidly, from 14 miles pergallon in the mid-1970s to 21 miles per gallonin 1982, driven by rising fuel prices and gov-ernment-mandated fuel economy standards.But in 2006, new U.S. vehicles still averagedjust 21 miles per gallon; for over two decades,automakers have put most of their engineer-ing efforts into building larger vehicles withmore powerful engines, offsetting the poten-tial fuel economy gains from new technologies.

The time is ripe for another great leap invehicle efficiency. New technologies such ashybrid drive trains, clean-burning dieselengines, continuously variable transmissions,and lightweight materials could allow vehicle fuel economy to double over the next two decades.

Significant efficiency gains are also possiblein the electricity sector. Americans spend$200 billion annually on electricity, but cur-rent demand could be halved with cost-effec-tive technologies already available on the mar-

ket. Furthermore, decreasing electricitydemand reduces the need for new, largepower plants, allowing smaller, distributed,renewable generation to play a greater role inmeeting our energy needs.

Past experience demonstrates that stronggovernment policies can spur the private sec-tor to invest in efficiency improvements. Sincenational home appliance efficiency standardswere enacted in 1987,manufacturers haveachieved major savingsin appliance energy use.Refrigerator efficiencynearly tripled between1972 and 1999, anddishwasher efficiencyhas more than doubledin the last eight years.

California’s “FlexYour Power” campaign,enacted in response tothe state’s 2001 energycrisis, immediately reduced power demand by5,000 megawatts by replacing millions ofstandard light bulbs with compact fluorescentlights (CFLs), installing light-emitting diode(LED) traffic lights, and replacing inefficientappliances. Because of robust efficiency poli-cies, California has the lowest per capita ener-gy consumption in the nation, without sacri-ficing comfort or valued services.

Technologies available today could increaseappliance efficiency by at least an additional33 percent over the next decade, and furtherimprovements in dryers, televisions, lighting,and standby power consumption could avoidmore than half of the projected growth indemand in the industrial world by 2030.

The integration of efficiency with renew-able energy maximizes the benefits of both.For example, the correct building orientationcan save up to 20 percent of heating costs;those savings can jump to 75 percent whenrenewable energy and appropriate insulationare integrated into the building.

A national commitment to improved efficiency can transition the U.S. energyeconomy in ways that will yield dividends forall Americans.


I

R E S O U R C E S A N D T E C H N O L O G I E S

EPA

1975 1980 1985 1990 1995 2000 2005

10

15

20

25

5

0

Fuel Efficiency of U.S. Light Vehicle Fleet, 1975–2006

Mile

spe

rgal

lon

Source: DOT

U.S. EPA's energy efficiencylabel.

biofuels

iquid fuels derived from crops andagricultural wastes are poised to play a large role in meeting U.S. tranporta-

tion energy needs. In addition to burningmore cleanly than conventional fuels, biofuelsare renewable and can be produced in every

U.S. state. And, more thanany other renewable energy source, biofuels can reduce dependence on imported oil, the vastmajority of which is usedfor transportation.

Production of biofuelsalso creates jobs andincome in rural communi-ties. A typical 40 milliongallon per-year ethanolplant can provide a one-time boost of $140 millionto the local economy.

Once built, the plant increases annual directspending in the community while providingjobs throughout the economy.

Ethanol—a form of alcohol—is the pre-dominant biofuel in use today. The United

States and Brazil togetherproduce about 90 percentof global fuel ethanol.Sugar cane-based ethanolaccounts for approximate-ly 40 percent of Brazil’snon-diesel automotivefuel. In 2006, the UnitedStates passed Brazil tobecome the world’s largest producer.

America’s reliance onethanol has grown rapidlyin recent years, and in

2005, ethanol provided just over 2 percent ofU.S. motor vehicle fuel. While higher sharesare used in the Midwestern grain-producingstates where the industry is centered, ethanolproduction and use are expanding across the nation.

U.S. ethanol production doubled between2000 and 2005, reaching nearly four billiongallons annually. Currently, most U.S. fuel

ethanol is made from corn, the country’slargest crop, ensuring a strong basis of sup-port among U.S. farmers and agriculturalprocessors. Other feedstock include sorghum,brewery wastes, and cheese whey.

Ethanol can be blended at low concentra-tions as a fuel oxygenate and has been theprincipal replacement for MTBE (a fuel additive that is being phased out because it is a suspected carcinogen). As of early 2006,ethanol was mixed into at least 30 percent ofU.S. gasoline. The most common blend is 10percent ethanol, known as E10, which can successfully fuel all types of vehicles andengines that require gasoline. Ethanol is alsoused in higher concentrations up to E85 in anew generation of “flexible-fuel” vehicles thathave slight engine modifications.

Compared with ethanol, biodiesel is usedon a far smaller scale. But it has recentlybecome the country’s fastest growing fuel: in2005, the United States produced about 75million gallons, up from 500,000 in 1999.

Biodiesel consists of bio-esters that are typically derived from vegetable oils. Althougha wide variety of crops can be used, soybeansrepresent the predominant feedstock in theUnited States; canola oil and limited quanti-ties of animal tallow and recycled vegetableoils and fats (often gathered from foodprocessors and restaurants) are also used.

Biodiesel can be blended with ordinarydiesel fuel at any concentration. Most dieselvehicles can run on blends of up to 20 percentwith few or no modifications, and a fewengine warrantees allow for use of 100-per-cent biodiesel. More than 600 vehicle fleets,ranging from school buses to National ParkService vehicles, now use biodiesel. The U.S.Navy, the largest diesel user in the world, hasbegun processing its used cooking oil intocleaner-burning biodiesel.

To promote the sale of biofuels, the federalgovernment and several states offer excise taxcredits for biofuel blends. Domestically pro-duced ethanol, for example, receives a 51 centper gallon federal subsidy. And biofuels arebecoming more competitive as productioncosts fall and oil prices rise. According to the



LU.S. Ethanol Biorefinery Locations

Biorefineries in production (101)Biorefineries under construction (34)

1980 1985 1990 1995 2000 2005

U.S. and World Fuel Ethanol Production, 1980–2005

Mill

ion

gallo

ns

World

United States

0

2000

4000

6000

8000

10,000

12,000

Source: RFA

Source: RFA, F.O. Licht

U.S. Ethanol Biorefinery Locations, 2006

International Energy Agency (IEA), ethanolfrom corn is cost-competitive with gasoline inthe United States (even without subsidies, andaccounting for ethanol’s lower energy density)when the price of oil is above $45 per barrel—well below oil’s price in mid-2006.

Biodiesel costs vary, depending on factorssuch as feedstock and production methods,but the IEA estimates that it is competitivewith oil at about $65 per barrel. Costs mustcontinue to fall, however, if biodiesel is to beused widely.

Substantial cost reductions are possiblewith improvements in manufacturing andscale economies. Studies show that a triplingof ethanol plant size can result in a 40 percentreduction in unit cost. While a typical newethanol plant once had a capacity of 40 million gallons per year, many plants nowunder construction can produce 100 milliongallons annually.

Biofuels have the potential to reduce many environmental problems associatedwith transportation, but they can exacerbateothers if not developed carefully. The fuels areessentially a means for converting the sun’senergy into liquid form through photosynthe-sis. Yet one of the major concerns raisedabout them is their net energy balance—i.e.,whether the energy contained in these bio-fuels exceeds the energy (particularly fromfossil fuels) required to make them. Thanks to technological advances throughout the pro-duction process, all of today’s biofuels have apositive fossil energy balance. If bioenergy isincreasingly used for feedstock processing andrefining as well, the balance sheet tips furtherin biofuels’ favor.

There is also concern that, depending onthe feedstock used and how it is grown andprocessed, biofuels can negatively affect soiland water quality, local ecosystems, and eventhe global climate. For example, if biofuels are produced from low-yielding crops, grownwith heavy inputs of fossil energy on previ-ously wild grasslands or forests, and/orprocessed into fuel using fossil energy, theyhave the potential to generate as much green-house gas emissions as petroleum fuels do, or

more. However, if sustainable feedstock isused, and it is cultivated in the right way,biofuel crops can actuallysequester carbon in thesoil, helping to reduce theamount in the atmospherewhile also reducing soilerosion and runoff andproviding valuable habitatfor wildlife.

Conventional biofuelswill be limited by theirland requirements: produc-ing half of U.S. automotivefuel from corn-basedethanol, for example,would require 80 percentof the country’s cropland.Thus, large-scale relianceon ethanol fuel will requirenew conversion technolo-gies and feedstock. Muchattention has been focused on enzymes that convertplant cellulose into ethanol. Because cellulose-derived ethanol is made from the non-foodportions of plants, it greatly expands thepotential scale while reducing competitionwith food supplies. According to a joint studyby the U.S. Departments ofAgriculture and Energy, thenation has enough biomassresources to sustainablymeet well over one-third of current U.S. petroleumneeds if cellulosic tech-nologies and resources are employed.

Years of research onenzymes that break downthe cellulose in plants are nearing commercialproduction. IogenCorporation, based inOttawa, Canada, is already operating a smallfacility that can produce up to three millionliters (about 793,000 gallons) of cellulosicethanol annually; plans are under way for afull-scale commercial plant.



1992 1994 1996 1998 2000 2002 2004

1000

600

800

200

400

0

U.S. and World Biodiesel Production, 1992–2005

Milli

onga

llons

World

U.S.

Triple biofuels pump.

Source: NBB, F.O. Licht

NREL

Biopower

he same homegrown resources thatcan fuel America’s vehicles can heatand power our industries, businesses,

and homes. Biopower is the process of usingorganic matter from America’s fields, forests,and landfills to generate electricity. It is thenation’s largest non-hydropower source of

renewable electricity.Biopower currentlyprovides only about 2percent of U.S. elec-tricity, but it has thepotential to meet amuch larger share ofpower demand while reducing pollutionand revitalizing rural communities.

America’s biomassresources range fromagricultural andforestry residues, toanimal waste, to

fast-growing plants grown solely for energyproduction. Landfills can also be tapped, bycapturing methane from biodegrading organ-

ic wastes before it escapes tothe atmosphere. Biomass canbe burned directly to producesteam, which turns a turbineto generate power; it can beco-fired with fossil fuels; andit can be gasified to producesteam and electricity, or foruse in microturbines or fuelcells. Today, most biopower is used by the forest productsindustries, which producesteam and power with process residues.

More than 100 U.S. coal-fired power plantsare now burning biomass together with coal.Experience has shown that biomass can besubstituted for up to 2–5 percent of coal atvery low incremental cost; higher rates—up to 15 percent biomass—are possible withmoderate plant upgrades.

According to the Washington Departmentof Ecology, the state produces enough bio-mass to generate over 15.5 billion kWh of

electricity, or almost half of Washington’s resi-dential power consumption.

Growing energy crops for biopower posesthe same environmental concerns associatedwith biofuels. Burning biomass in powerplants releases particles that can affect humanhealth, as fossil fuel burning does, but pollu-tion control technologies can remove theseparticles from the smokestack. When burnedwith coal, biomass can significantly reduceemissions of sulfur dioxide, carbon dioxide(CO2), and other greenhouse gases (GHGs).Burning biomass destined for landfills alsoreduces the amount of organic waste thatwould ultimately decompose and releasemethane, a GHG that is 21 times more potentthan CO2.

Capturing methane from the decomposi-tion of organic matter found in landfills,sewage treatment plants, and livestock facili-ties provides premium fuel while reducing theamount of waste that must be disposed of.Using anaerobic digesters at all U.S. farmswhere they would be economical could avoidemission of an estimated 426,000 metric tonsof methane annually. This practice is startingto catch hold in large hog, poultry, and cattleoperations, driven by the need to controlemissions and by the lure of selling lucrativeenergy. Central Vermont Public Service sellselectricity produced from farm waste directlyto consumers, and will soon generate enoughpower for 1,400 Vermont homes.

Biopower can provide baseload electricity,and plants can be located close to the point ofdemand, reducing the need for expensiveupgrades to the power grid and minimizingtransmission losses. In addition, biopower cangenerate up to 20 times more local jobs thannatural gas-fired power plants do. Facilitiescan range in size from small farm-based operations to much larger plants.

As with other renewable technologies,inconsistent availability of subsidies has ham-pered industry development. In addition, thepermitting process is often time-consumingand expensive, and a lack of national grid-connection standards often complicates devel-opment. These policies must be reformed ifbiopower is to fulfill its promise.


Inspecting switchgrass field,Manhattan, Kansas.

T

1992 1994 1996 1998 2000 2002 2004

62

56

58

60

50

52

54

U.S. Net Electricity Generation from Biopower, 1992–2005

Milli

onM

Wh


Jeff Vanuga, USDA, NRCS

Source: EIA

Geothermal Energy

eothermal resources represent apotentially vast supply of domesticenergy, with the ability to provide

dependable, baseload power at stable cost.Geothermal energy flows from the Earth’smantle, reaching the surface in the form ofhot springs, geysers, and volcanoes.Geothermal systems are designed to bringunderground heat to the surface and convertit to useful forms of energy.

Low-to-moderate heat resources can betapped for a number of direct uses, includingspace heating, industrial processes, and green-houses. All areas of the United States havenearly constant ground temperatures suitablefor geothermal heat pumps, which use theearth or groundwater as a heat source in win-ter and a heat sink in summer to regulateindoor temperatures. More than 600,000geothermal heat pumps are operating today,and the market is growing at an annual rateof 15 percent. The city of Boise, Idaho, devel-oped four direct-use district systems thattogether heat 366 buildings, including thestate capitol.

The highest-temperature resources can beused for power generation. Hydrothermal sys-tems, which transfer the geothermal resourceto power stations via steam, are the primarytechnology in use today, but geopressured,hot dry rock, and magma technologies arecurrently under development.

By the end of 2005, geothermal electriccapacity totaled 8,932 MW in 24 countries,and produced about 57 billion kWh of powerannually. The United States leads the world ingeothermal electric and thermal heat installedcapacity, with more than 2,828 MW of powercapacity operating in four states: California,Hawaii, Nevada, and Utah. Each year, U.S.geothermal energy displaces the energy equiv-alent of more than 60 million barrels of oil,prevents the emission of 22 million tons ofCO2, and produces $1.5 billion worth ofelectricity—enough to meet the power needsof about four million people.

The largest barriers to geothermal develop-ment have been the initial cost and risk ofproving new resources. Investors may bedeterred because only one in five exploratory

wells is successful. But improved technology isreducing the risks and costs of exploration.Together with the inclusion of geothermalenergy in the 2005 federal production taxcredit and state renewable standards, advancesare spurring renewed interest in geothermalpower projects. Projects now planned orunder development in nine western U.S. statescould nearly double current capacity.

The Geothermal Energy Association esti-mates that by 2025, U.S. geothermal resourcescould provide more than 30,000 MW ofpower, enough to meet 6 percent of today’selectricity demand. New development couldcreate 130,000 new jobs and add more than$70 billion of investment to the economy. Buthalf of this development potential depends oncontinued federal R&D.

Extracting geothermalenergy is nearly emissionsfree, but small amounts ofhydrogen sulfide, CO2,and other gases can bereleased. New technolo-gies are able to reducethese emissions substan-tially, if not eliminatethem. CO2 emissionsfrom geothermal powerplants are a fraction of theemissions from equivalentfossil fuel power plants. The land and fresh-water requirements for geothermal powerplants are among the lowest for any generat-ing technology, anddistrict heating sys-tems and geothermalheat pumps are easily integrated into com-munities with little visual impact.

Advanced tech-nologies can convertlower-temperatureresources into elec-tricity, allowing thecountry to harness amuch larger fraction of its geothermalresources.



G

The Geysers, NorthernCalifornia.

Calpine Corporation

U.S. Geothermal Resource Areas

Idaho National Laboratory

Power from the Wind

he wind that sweeps across America isone of the country’s most abundantenergy resources. About one-fourth of

the total land area of the United States haswinds powerful enough to generate electricityas cheaply as natural gas or coal at today’sprices. According to government-sponsoredstudies, the wind resources of Kansas, North

Dakota, and Texas aloneare in principle suffi-cient to provide all the electricity the nationcurrently uses.

Although windpower presently pro-vides less than 1 percentof U.S. electricity, it ispoised to expand dra-matically. Wind energytechnology hasadvanced steadily overthe past two decades.

Average turbine size has increased from lessthan 100 kW in the early 1980s to more than1,200 kW today, with machines up to 5,000kW under development. The largest machineshave blade spans over 300 feet, compared with

roughly 200 feet fora typical jumbo jet.

Additional ad-vances, from lighterand more flexibleblades to sophisti-cated computer controls, variablespeed operation, anddirect-drive genera-tors, have drivencosts down to thepoint where windfarms on good sites

can generate electricity for 3–5 cents per kilo-watt-hour. These advances, together withsharp increases in natural gas prices, havemade wind power the least expensive sourceof new electricity in many regions.

Meanwhile, the global wind power marketis advancing rapidly. Installations increasedfrom 1,290 MW in 1995 to 11,770 MW in2005. Today, private sector R&D dwarfs

government investment, and the wind powerindustry is in a race to drive costs down evenfurther in the coming years.

Global turbine manufacturing is dominat-ed by companies based in the largest markets:Germany, Spain, and Denmark. However, theUnited States is still in the game: the world’slargest power-generation company, GeneralElectric, entered the wind business in 2002and has become one of the world’s top tur-bine producers. On the project developmentside, the U.S. industry is dominated by a large,diversified power company, Florida Power andLight, which develops and owns wind farmsthroughout the country.

The United States led the world in windenergy capacity in the 1980s, but abruptchanges in federal and state policies led tomarket collapse. Since the 1990s, a new feder-al tax credit, combined with an increasingnumber of supportive state policies, has led toa growing but episodic market. Short-termextensions of the federal tax credit, often afterlong delays, have caused wild swings in newinstallations—from about 400 MW in 2002and 2004, to approximately 1,700 MW of newcapacity in 2001 and 2003—which have dis-couraged the industry from making long-term investments.

Extension of the credit through 2007helped drive another upswing in 2005: theUnited States installed a record 2,431 MW,adding more wind power capacity than anyother country for the first time in over adecade. Wind farms were the country’s secondlargest source of new generating capacity builtin 2005, after natural gas-fired plants. By theend of that year, the nation had enoughcumulative wind capacity to meet the needs of 2.3 million U.S. households, andtrailed only Germany and Spain in totalinstallations. The industry expects morerecord-setting years in 2006 and 2007.

In Denmark and some areas of Germanyand Spain, wind meets more than 20 percentof electricity needs. The key to success inthese countries is laws that provide renewablepower producers with long-term power pur-chase agreements at prices sufficient to covercosts. By maintaining a consistent set of poli-



T

Trent Mesa Wind PowerFacility (150 MW),Sweetwater, Texas.

GE Wind Energy

1980 1985 1990 1995 2000 2005

70

60

30

20

40

50

10

0

Cumulative Global Wind Capacity, 1980–2005

Thou

sand

MW

Source: AWEA, EWEA, BTM Consult

cies, and by gradually lowering the purchaseprice as technology improves, Europeancountries have nurtured a wind power indus-try that is already cost-competitive with newgas-fired power plants in most countries.

Wind resources in the United States are farmore plentiful than in Europe. The U.S. windresource is well distributed across the country,with the most abundant winds in the GreatPlains, a region that has been described as apotential “Persian Gulf” of wind power. Andthe Department of Energy estimates that theoffshore wind resource within 5–50 nauticalmiles of the U.S. coastline could supportabout 900,000 MW of wind generating capac-ity—an amount approaching total currentU.S. electric capacity. Although much of thisresource will likely remain undevelopedbecause of environmental concerns and com-peting uses, the nation’s offshore wind energypotential is enormous, and much of it liesnear major urban load centers.

More fully tapping that wind will requirenew policies to provide more-ready access toexisting high-voltage transmission lines, andin the longer run, the expansion of transmis-sion capacity to allow Great Plains windpower to reach cities in the Midwest and onthe West Coast. In the meantime, sizable wind power projects are planned or beingdeveloped in states from California to NewYork, Texas, and Montana. The country’slargest offshore wind project (500 MW) hasbeen proposed off the Texas coast in the Gulfof Mexico.

As with all energy technologies, there areenvironmental costs associated with windpower, which have generated opposition fromlocal residents concerned about the rapid pro-liferation of new projects in many parts of thecountry. The greatest controversy has arisenfrom the fact that wind turbines in some loca-tions have killed significant numbers of birdsand bats. Yet housecats, vehicles, cell phonetowers, buildings, and habitat loss pose fargreater hazards to birds, and progress hasbeen made in reducing bird strikes throughtechnological changes, such as slower rotatingspeeds, and careful project siting.

On balance, the environmental, economic,and social benefits of wind power outweighthe costs. During 2005, wind turbines operat-ing in the United States offset the emission of3.5 million tons of carbon dioxide, whilereducing natural gas demand for power gen-eration by 4–5 percent. Wind farms can bepermitted and built far faster than conven-tional power plants. And by some estimates,every 100 MW of wind capacity creates 200construction jobs, 2–5 permanent jobs, andup to $1 million in local property tax revenue.

As new wind farms come on line, a grow-ing number of electric utility managers arelearning how to integrate an intermittentresource into their power grids. These gridsare designed to routine-ly manage variability indemand and supply.The amount of windpower capacity that canbe accommodateddepends on the size ofthe regional grid andthe flexibility of othertypes of generationattached to it. In bothEurope and NorthAmerica, electric utili-ties have demonstratedthe ability to manage wind generation thatexceeds 20 percent of total capacity. Highershares of wind power will be possible withmodest operational adjustments and betterwind forecasting.

The key to achieving this potential is astrong and consistent policy framework, atboth the state and federal levels. The on-againoff-again tax credit for wind power and simi-larly intermittent state policies have under-mined the stability that companies require toinvest in new installations, technologies, andfactories in a sustained manner.

If solid and consistent policies are imple-mented, wind power’s contribution to theU.S. electricity supply could grow rapidly. InJune 2006, the Department of Energy com-mitted to developing an action plan with thegoal of providing up to 20 percent of U.S.electricity with wind power.


1980 1985 1990 1995 2000 2005

Annual Wind Power Capacity Additions inthe United States and Europe, 1980–2005

Thou

sand

MW

-10

1

2

3

4

5

6

7

Europe

United States

Source: AWEA, BTM Consult, Gipe, EWEA, GWEC


Rooftop Solar Power

olar cells (also known as photovoltaiccells, or PVs) that convert sunlightdirectly into electricity are one of the

most revolutionary new energy technologiesto be commercialized in recent decades.These devices are most often composed ofcrystalline silicon chips similar to those found in computers. They are adaptable to a remarkable range of uses, from handheld

electronic devices tomountaintop weather sta-tions, large desert powerplants, and America’srooftops. Solar cells canproduce electricity almost anywhere—thesolar resource in Maine,for example, is about 75 percent of that in Los Angeles.

Annual global produc-tion of solar cells hasincreased six-fold since

2000, exceeding 1,700 MW in 2005, and theindustry plans to continue its dramaticexpansion. Global grid-connected PV capacityincreased 55 percent in 2005, to 3.1 gigawatts,making it the world’s fastest growing sourceof power.

Solar cells were originally developed foruse in orbiting satellites and, until recently,were far too expensive for most earthboundenergy applications. Improved manufactur-ing, efficiency gains, and economies of scalein production and installation have steadilylowered costs. Since 1976, prices havedropped by about 5 percent annually, andthey continue to fall. New technologies underdevelopment, such as plastic solar cells, nano-materials, and dye-sensitized solar cells, couldenable the industry to leapfrog far beyondcurrent technologies, further reducing costswhile improving performance.

Solar power is already the most economi-cal way of providing electricity in many cir-cumstances, particularly for small-scaledevices like roadside call-boxes and off-gridtelecommunications installations. Such usesare important but represent relatively smallmarkets. Major opportunities exist, however,for customers who value the security, powerquality, and reliability that PV systems canprovide—for emergency preparedness andsecurity uses, for example.

Thousands of solar-powered homes havealready been built in the United States—manyof them in suburban neighborhoods, whereexcess power is fed into the electric grid,which later provides electricity for the homewhen the sun isn’t shining. In southernCalifornia, builders and developers havebegun promoting solar power as an invitingnew feature. And elsewhere around the coun-try, PVs are appearing on high-rise apartmentbuildings, atop urban metro stations, and onthe rooftops of rural businesses.

In some locations, rooftop solar power isnow competitive with peak electricity prices,which often coincide with peak sunshine. AndPVs can be cheaper than other façade materi-als, such as granite or marble, with the addedbenefit of producing power.

Solar PV manufacture requires hazardousmaterials, including many of the chemicalsand heavy metals used in the semiconductorindustry. However, there are techniques andequipment to reduce the environmental and



S

PV panels atop U.S. CoastGuard Building, Boston,Massachusetts.


1980 1985 1990 1995 2000 2005

Cumulative Global Photovoltaic Production, 1980–2005

MW

0

1000

2000

3000

4000

5000

6000

7000

Source: PV News

safety risks, and the industry is movingtoward recycling of old solar cells.

Japan has led the solar PV industry formost of the past decade, despite having halfthe solar resource of California. Strong incen-tives from government policies—includinggradually declining rebates, net metering,low-interest loans, and public education pro-grams—boosted Japan from a minor player in the early 1990s to the world’s largest pro-ducer and user of solar PV within a decade.Japan’s policies drove down system costs bymore than 80 percent, to the point whererooftop power is now competitive withJapanese electricity prices, which are amongthe world’s highest.

Today, Japan remains the world’s leadingsolar PV manufacturer, accounting for 48 per-cent of production in 2005, but Germany isnow the leading market. High purchase pricesfor PV-generated electricity have been a pow-erful driver of German demand. Germanyadded an estimated 600 MW during 2005alone—far more than cumulative U.S.installed capacity. Both Germany and Japanhave reaped significant employment and eco-nomic benefits from strong policies aimed atexpanding markets and driving down costs.Spain, the first country to require installationof PV in new and renovated buildings, willlikely join them soon.

Rapid growth in Japan and Europe hasencouraged major companies—some enteringthe energy industry for the first time—to stepup investments in solar PV. These investorsinclude Japan’s Sharp and Kyocera companies,oil giants BP and Royal Dutch/Shell, andGeneral Electric and Dupont in the United States.

The United States is the birthplace of thesolar cell industry and, as recently as 1996,U.S. producers held 44 percent of the globalsolar cell market. By 2005, that figure had fall-en to below 9 percent as markets boomed inother parts of the world, and U.S. producershad lost much of the market at home as well.But this trend could reverse due to new statepolicies driving demand.

In early 2006, California state regulatorsapproved $3.2 billion in customer rebateswith the goal of installing 3,000 MW of PVon the rooftops of one million Californiahomes, businesses, and public buildings by2017, up from about 100MW today. New Jersey,which offers a rebate andsales tax exemption forsolar PV, has the secondlargest U.S. market after California.

The InternationalEnergy Agency (IEA) esti-mates that PV installed onappropriate rooftops,facades, and buildingenvelopes in the UnitedStates could meet about 55percent of U.S. electricitydemand. The Solar EnergyIndustries Association aimsfor PV to provide half ofall new U.S. electricity gen-eration by 2025; SEIA proj-ects that by 2020, the PVindustry could provideAmericans with 130,000new jobs.

Beyond rooftops, solarcells can replace diesel gen-erators for water pumpingon America’s farms, wastewater treatmentplants, and other uses. And they can producepower on a large scale in the U.S. Southwest.According to an IEA study, very-large-scalePV systems installed on just 4 percent of theworld’s deserts could generate enough elec-tricity annually to meet world power demand.



1993 1995 1997 1999 2001 2003 2005

Annual PV Capacity Additions in Japan, the United States, and Germany, 1993–2005

MW

0

100

200

300

400

500

600

700

Japan

Germany

United States

1976 1981 1986 1991 1996 2001

PV Module Prices, 1976–2004

Mod

ule

price

(200

5$)

0

10

20

30

40

50

60

70

Source: Strategies Unlimited, BP Solar

Source: Maycock, REN21/Worldwatch

Desert Solar Power

arge desert-based power plants con-centrate the sun’s energy to producehigh-temperature heat for industrial

processes or convert it into electricity that isavailable when demand is greatest. Resource

calculations showthat just seven statesin the U.S. Southwestcould provide morethan 7 million MWof solar generatingcapacity—roughly 10 times the totalU.S. generatingcapacity from allsources today.

Four concentrat-ing solar technolo-gies are being devel-

oped. To date, parabolic trough technologyprovides the best performance and lowest costof all types of solar power plants. Nine plants,

totaling 354 MW, haveoperated reliably inCalifornia’s Mojave Desertsince the mid-1980s. Dish-engine and power towersystems are in earlierstages of prototype andcommercial development.Natural gas and otherfuels can provide supple-mentary heating when thesun is inadequate, allow-ing solar power plants togenerate electricity whenever it is needed.In addition, heat-storingtechnologies are beingdeveloped to extend theoperating times of solarpower plants.

Since the first 14 MWtrough plant was installedin California in the early1980s, generating costs

have dropped from 45 cents/kWh (in 2005dollars) to 9–12 cents/kWh (competitive with

peak power). Costs are expected to drop to4–7 cents/kWh by 2020.

Several solar power plants are now beingplanned in the U.S. Southwest, spurred bystate requirements that a minimum share ofelectricity come from solar technologies.Renewed federal support and rising naturalgas prices have also stoked new interest inconcentrating solar power. Solargenix is constructing a 64 MW trough plant inNevada that should be operational in early2009. While earlier trough plants needed a 25percent natural gas-fired backup, this plantwill require only 2 percent backup. StirlingEnergy Systems has signed power purchaseagreements with two California utilities totaling 1,750 MW and plans to begin con-structing a 1 MW pilot plant in California by the end of 2006.

Utilities in states with large solar resources(Arizona, California, Nevada, and NewMexico) are considering installation of solardish systems as well. No commercial centralreceiver or tower plants have been built todate, but an 11 MW generator is under construction in Spain. According to theWestern Governors’ Association Solar TaskForce report, within the next decade, 4,000MW of central solar plants could be installedin the United States, generating thousands of new jobs.

For solar energy to achieve its potential,plant construction costs will have to be fur-ther reduced via technology improvements,economies of scale, and streamlined assemblytechniques. Development of economic storagetechnologies can also lower costs significantly.

The U.S. Southwest has some of the mostvaluable solar resources in the world, withmuch of this potential close to major urbanareas and on land that has few if any alternative economic uses. According to theNational Renewable Energy Laboratory, asolar plant covering 10 square miles ofdesert would produce as much power as theHoover Dam. Desert-based power plantscould well provide a large share of thenation’s commercial energy.



Solar power facility at KramerJunction, California.

L

Concentrating Solar Technologies

Parabolic trough technologies track the sun withrows of mirrors that heat a fluid. The fluid then pro-duces steam to drive a turbine.

Central receiver (tower) systems use large mirrorsto direct the sun to a central tower, where fluid isheated to produce steam that drives a turbine.Parabolic trough and tower systems can provide large-scale, bulk power with heat storage (in the form ofmolten salt, or in hybrid systems that derive a smallshare of their power from natural gas).

Dish systems consist of a reflecting parabolic dishmirror system that concentrates sunlight onto a smallarea, where a receiver is heated and drives a smallthermal engine.

Concentrating photovoltaic systems (CPV) usemoving lenses or mirrors to track the sun and focus itslight on high-efficiency silicon or multi-junction solarcells; they are potentially a lower-cost approach toutility-scale PV power. Dish and CPV systems are wellsuited for decentralized generation that is locatedclose to the site of demand, or can be installed inlarge groups for central station power.

Solar Heating

he sun’s energy could provide much ofthe heating and cooling for America’shomes and industries. Solar water

heaters, which have been used for decades, area particularly convenient way to use the sun’senergy. Simple rooftop collectors made ofsteel, glass, and plastic heat water, while natural gas or electricity is used for backupwhen the sun isn’t shining.

Solar systems can be used from NewEngland to California and are more cost-effective in Chicago than Miami, due toChicago’s higher energy prices. In some cli-mates, solar heaters can provide up to 80 per-cent of a home’s hot water.

Residential solar water heating systems ini-tially cost between $1,500 and $3,500, com-pared to $150–$450 for electric and naturalgas water heaters, but they typically pay forthemselves in 4–8 years through fuel savings.Savings continue for the remaining 15–40year life of the system. Newer systems withlow-cost plastic polymers and highly efficientvacuum tubes are providing new options andlower costs.

The United States led the solar heatingindustry in the 1980s, but since then thealmost complete elimination of governmentincentives, combined with falling natural gasprices, left the United States far behind. Morethan 1.5 million U.S. homes and businessesnow use solar water heating, and their systemsproduce enough energy annually to offset theoutput of a nuclear power plant. Only about 8percent of these systems are used for waterand space heating; the rest heat swimmingpools. Hawaii leads the nation in per capitause of solar water heating, thanks to utilityrebate programs and the lack of natural gas,which have driven significant demand for residential systems.

Solar energy is being tapped for spaceheating in commercial and industrial build-ings as well. Typically, a building’s south-fac-ing wall is covered with dark-colored perfo-rated metal sheeting, which collects solar heatthat is distributed into the building throughconventional ductwork. Up to 80 percent of

available solar radiation is converted to heat.Solar space heating systems are more expen-sive than waterheating sys-tems, but willbecome morecompetitive asconventionalheating costsrise. And solarenergy can beused for cool-ing via the oldest form ofair condition-ing technolo-gy—absorptioncooling—with the same devices used to provide heat in the winter.

Worldwide, solar heating is booming:the global market doubledbetween 2000 and 2005,with the greatest increasesin China and Europe. TheInternational EnergyAgency estimates that totalglobal installations of solarheating panels for all usesamount to about 196 million square yards,enough to cover the equiv-alent of more than 30,000football fields.

A Department ofEnergy study projects thathalf of residential spaceheating and 65–75 percentof water heating needscould be met with solar.But stronger governmentsupport at the federal,state, and local levels willbe needed if the UnitedStates is to keep up withthe solar heating boom inother countries.



T

1995 1997 1999 2001 20052003

Total World Solar Water Heating Capacity (excluding pool systems) 1995–2005

Mill

ion

squa

rem

eter

s

20

40

0

60

80

100

120

140

Solar Hot Water Capacity, by Country/Region, 2005(excluding pools)

Others 4%

U.S. 2%

Brazil 2%

Israel 4%

Japan 6%

Turkey 6%

China 63%

E.U. 13%

Source: REN21/Worldwatch

Source: IEA, Martinot

SunEarth Inc.

Solar water heating systematop a commercial buidling.

Hydropower

ydropower uses the natural energy offalling and flowing water to produceelectricity or mechanical energy.

Water wheels were widely used to grind grain and later to run America’s factories

until grid-connectedelectricity freedindustrial processesto locate away fromfalling water.

Today, hydro-power providesabout one-fifth ofthe world’s electricityand nearly 7 percentof U.S. power—thelargest share of anyrenewable resource.In 2004, hydropowergenerated 270 billionkWh of electricity in

the United States, a figure that has remainedroughly constant for three decades.

Hydropower plants cost relatively little torun and can be operated and maintained bytrained local staff. They generally have a longproject life: equipment such as turbines canlast 20–30 years, while concrete civil workscan last a century or more.

Unlike most power plants, the amount ofelectricity generated at hydro dams can bequickly increased or decreased, giving regionsthat have a large portion of hydro genera-tion—like the Pacific Northwest—added flexibility in how they operate their powersystems. Hydropower can help maintain gridstability and can be called up when otherpower sources fail. Flexibility allows for a sizable share of intermittent renewable capacity from solar or wind energy—whichcan be easily backed up with hydropower.

In principle, U.S. hydropower generationcould be increased significantly. TheDepartment of Energy (DOE) reports thathydropower could double its current contri-bution of more than 78,000 MW. Accordingto DOE, 21,000 MW of capacity could beadded simply by improving existing projectsand installing generators at dams that do not have them. Of the 80,000 dams in the

United States, only 3 percent are used to generate electricity.

Despite this potential, the industry hasexperienced sluggish growth over the pastdecade. As with other renewables, upfrontcapital costs are high. The licensing processcan be time consuming and costly, and thelack of tax incentives for hydropower hasserved as a disincentive to growth.

In the past, extensive damming of rivershas destroyed unique landscapes and elimi-nated fish habitats. Critics argue that habitatalteration, disruption of fish migrations,trapping of sediment, displacement of com-munities, and greenhouse gas emissions fromrotting organic material are among the possi-bly irreversible impacts of hydropower. Theindustry is pursuing a variety of measures toreduce such impacts.

The vast majority of the nation’shydropower comes from large-scale facilities,but a significant share of U.S. hydro plantstoday are micro-scale (up to 100 kW) orsmall-scale systems (100 kW to 30 MW).Rather than using a large dam and storagereservoir, micro- and small-scale projects gen-erally use “run-of-river” designs that produceelectricity by diverting only part of a stream.Most consist of small turbines that rely onwater pressure or velocity to generate power.

Small hydro facilities often have difficultygaining affordable grid connections, andpower purchase agreements with utilities aregenerally required for independent powerproducers to operate such systems. And evensmall hydro is hindered by the perception thatit can adversely affect fishing. But environ-mental impacts can be curtailed throughgood system design and appropriate construc-tion and operating practices. Small-scalehydro systems cause little change in streamchannel and flow, and thus have minimalimpact on water quality, fish migration, andsurrounding habitat.



Tygart River, West Virginia.

NREL

H

Hydropower GeneratingCapacity in Top 10 U.S. States, 2005

Washington 21,010 MWCalifornia 13,475 MWOregon 8,261 MWNew York 5,659 MWTennessee 3,950 MWSouth Carolina 3,455 MWGeorgia 3,313 MWVirginia 3,091 MWAlabama 2,961 MWArizona 2,890 MW

Source: EIA

Marine Energy

ust off America’s coastlines are energyresources with the potential to contri-bute substantially to the U.S. economy.

Oceans cover roughly 70 percent of theEarth’s surface and collect and store a tremen-dous amount of heat from the sun as well asmechanical energy in the form of tides andwaves. Seawater is about 800 times as dense asair, so even slow velocities of water containenormous quantities of energy. Globally, waveand ocean thermal energy individually areestimated to be of the same order of magni-tude as present world energy demand, whileenergy from tides and currents is capable ofmaking a roughly 10 percent contribution.

From the Middle Ages until the IndustrialRevolution, tide mills were common sightsalong the coasts of western Europe. Today,tidal power is the most commerciallyadvanced of the ocean energy technologies,and recent innovations in tidal power tech-nologies avoid the environmental impacts ofdamming bays or estuaries. Other forms ofmodern marine energy conversion are still at the early stages of development, with avariety of technology types being explored.Engineers consider these technologies to be10–20 years behind wind power, but to becoming of age rapidly.

Small-scale wave and tidal current projectsare now being installed around the world.Europe, Australia, and Japan are further alongin development of these sources than theUnited States, primarily because of moreextensive government support. As a result,major private investors such as Electricité deFrance are now involved in prototype projects.

Recently, a few U.S. states, cities, and elec-tric utilities have begun to fund research andcommit to purchasing electricity fromdemonstration plants. Small projects havebeen proposed for the cities of New York and San Francisco and off the coasts ofMassachusetts, Washington, Oregon, andHawaii. A tidal project planned for NewYork’s East River could eventually providepower for 8,000 homes.

While ocean thermal energy and currentenergy are concentrated in specific areas(Hawaii for ocean thermal and Florida for

current energy), most coastal states could taptheir wave and tidal energy. Ocean energyresources are generally moreconsistent than wind orsolar energy, and offer significant potential for jobcreation in coastal commu-nities where shipbuildingand commercial fishing are in decline. The ElectricPower Research Institute(EPRI) estimates that U.S.near-shore wave resourcesalone could generate some2.3 trillion kWh of electricityannually, or more than eighttimes the yearly output fromU.S. hydropower dams.

U.S. ocean energy devel-opers face significant regu-latory uncertainty when itcomes to siting and licens-ing projects, which makes itdifficult to obtain financing.A one-megawatt wave ener-gy project off the coast ofWashington state has facedmore licensing hurdles thanthose confronted by most large-scale fossil fuel plantsbecause of jurisdictionaluncertainty.

Marine energy is not yeteconomically competitivewith conventional energy,but it is already attractivefor islands and isolatedcoastal communities thatare off the grid. A recentEPRI report concluded thatelectricity generation fromwave power, for example,could be economically feasi-ble in the near future.Ocean Power Technologies,the world’s first publiclytraded wave power compa-ny, claims that total costswill be 3–4 cents/kWh for 100 MW systems.



JMarine Energy Technology Options

Tidal Power Tidal power technologies harnessenergy from the rise and fall of the tides, usingdams to trap water in a bay or estuary at high tide.When the ocean level outside the dam has fallenenough to create a sufficient pressure difference,the trapped water is returned to the sea throughconventional hydroelectric turbines. Tidal power hasthe advantage of being fairly predictable. Suchplants have been in use for decades in Canada,China, Russia, and France (where the largest system,240 MW, is operating).

Ocean Current Power Ocean currents, such as theGulf Stream off the U.S. East Coast, are in effectmassive rivers in the world’s oceans, and they repre-sent enormous quantities of energy. Technologiesthat harness these energy flows look like underseawind turbines. A handful of prototype turbines nowoperate in the United Kingdom and Norway, and atleast two U.S. companies are developing ocean cur-rent turbines. Ocean current energy is very site-spe-cific (in the United States, only the eastern coast ofFlorida has significant potential), but it has theadvantage of being highly predictable.

Wave Energy Some wave energy devices consist ofa floating buoy or hinged-raft that uses pistons topump fluid through hydraulic motors. Oscillating watercolumn devices use the up-and-down motion of thewater surface in a “capture chamber” to alternatelyforce air out and draw it in through a pneumatic tur-bine. Only a few wave energy devices have beendemonstrated in the ocean for more than a fewmonths, mainly in Europe and Japan. The greatestpotential is close to coastlines, often in areas with high population densities, such as the U.S. West Coast.

Ocean Thermal Energy Conversion (OTEC) OTECharnesses the temperature difference between sun-warmed surface waters of the tropical ocean anddeep water at near-freezing temperatures. Warmwater is used to vaporize a working fluid, whichexpands through a turbine and is then condensed bythe deep, cold-water, enabling continuous flow ofvapor through the turbine to generate electricity or tosplit seawater into hydrogen. In the tropics, therequired temperature difference is nearly constant,so OTEC can provide baseload power. Small “proof-of-concept” experiments have been conducted inHawaii and Japan, but no full-scale OTEC plantshave been built.

American Energy Policy Agenda

merica needs a fresh and innovativeapproach to energy policy. Today’senergy system has been shaped by a

century of government subsidies and regula-tory support. Even today, fossil fuels receive

billions of dollars of federalsubsidies each year, whilethe health, environmental,and security costs of thosefuels are paid by society atlarge—and are not reflectedin the market price of energy.

Over the past threedecades, governments in theUnited States and abroadhave experimented with avariety of policies to pro-mote renewable energy and

improve energy efficiency. Although frequentshifts in government support have hindereddevelopment, policymakers can learn muchfrom these experiences, which will help tobuild a policy framework that allows renew-

able energy toflourish.

Across theUnited Statesand aroundthe world,there is oneclear lessonfrom past policy experi-ments: wher-ever renew-able energyindustrieshave emerged,governmentpolicy reformshave played a

central role. The key to a bright Americanenergy future and a new wave of economicactivity and innovation is a robust partner-ship between government and the private sector—providing incentives to jumpstart thenew energy industries while minimizing thecost to American taxpayers.

To fully utilize America’s renewable energyresources, policies should be enacted that:

• Establish a consistent, predictable, andlong-term framework of rules and incentives.Renewable resource developers, like othercapital financers, need certainty to makeinformed investments.

• Create performance-based incentives.To leverage the most energy from each dollarof public investment, incentives must bebased on the amount of energy generated orsaved, rather than the cost of installation. Inaddition, incentives should evolve over timein a predictable manner to spur investmentand innovation.

• Incorporate external costs and benefits intoenergy pricing, especially the introduction ofgreenhouse gas cap-and-trade. The full securi-ty, economic, and environmental costs offossil fuels, and the full benefits of renewables,are not reflected in their prices. Including thefull cost associated with energy generation inpricing would encourage producers and con-sumers to adjust their behavior toward moresustainable practices.

• Reduce subsidies for fossil fuels. In recog-nition of the maturity of the fossil fuel indus-tries and the public benefit of reducing fossilfuel use, subsidies to these industries shouldbe reduced or eliminated.

• Enact complementary policies for energyefficiency. Renewable energy and energy effi-ciency go hand in hand. Policies to increaseenergy efficiency—including stronger buildingcodes, increased vehicle fuel economy standards,and advanced efficiency standards for appli-ances—should complement policies designed toexpand renewable energy production.

• Involve stakeholders at all levels.Stakeholder involvement should be encouragedat all levels of policymaking and implementa-tion, from policy design to project ownership.Successful development of resources requiresthe involvement of all affected groups.

• Promote cooperation regionally and inter-nationally. Increasing reliance on renewableresources also increases the need for greaterregional cooperation to ensure reliability. Theelectricity sector is already moving in thisdirection, and policies to continue thisregional integration should be supported.The United States should actively cooperate


U.S. Capitol Building,Washington, D.C.

Ruth Tsang, Stock.xchng

A

A M E R I C A N E N E R G Y P O L I C Y A G E N D A

U.S. States with Renewable Portfolio Standards and/or Renewable Energy Funds

C A N A D A


0

300mi

300km

0

State with Renewable Portfolio Standard AND Renewable Energy FundsState with Renewable Portfolio Standards ONLYState with Renewable Energy Funds ONLY

MEXICO

Source: DSIRE

with and learn from the many countries thatare developing renewable energy and the policies to support it.

Although numerous policies meet theseoverarching principles, the following specificrecommendations should be establishedimmediately. Governments, at all appropriatelevels, should:

• Establish clear and long-term goals andtargets for renewable energy use and energy efficiency gains. State and local governmentsshould be allowed to establish more ambi-tious targets beyond federal requirements.

• Provide long-term, low interest loans andbonds to address high upfront costs and reducerisk. Renewable energy sources often requirehigher capital expenditures and have differentdepreciation timeframes than traditionalenergy sources. Government-backed financialinstruments can help bridge the gap betweentraditional energy financing as investorsadjust to the new investment requirements ofrenewable energy.

• Use government purchasing power togeth-er with the private sector to build large, aggre-gated markets for renewable energy.

Policies needed in the electricity and heat-ing sectors include:

• Ensure fair market access and pricing forrenewable electricity. Several countries havesignificantly increased their share of renew-able energy by the use of “feed-in” lawsrequiring that a fixed price be paid for eachunit of renewable electricity produced for thegrid. Several U.S. states have enacted or areconsidering similar mechanisms. Standardizedinterconnection procedures are also needed.

• Implement siting regulations to addressenvironmental, aesthetic, and other concernsand to reduce uncertainty for stakeholders. Likeany energy project, renewable energy resourcesmust be developed in an environmentallyresponsible way; currently, developers areconfronted by a patchwork of regulations andguidelines that can change rapidly. The sitingprocess should be fair and consistent.

• Enact “high-performance” building codesto improve efficiency and increase the share ofenergy provided from decentralized renewablesources. California and other states and cities

have demonstrated the powerof rigorous building codes toincrease building efficiency andpromote renewable energy.Governments at all levelsshould commit to meeting thehighest standards in all newbuildings and to retrofittingolder buildings during sched-uled renovations.

Policies needed in the trans-portation sector include:

• Require most new vehiclessold to be flexible-fuel vehicles.Together with increased effi-ciency, raising the number ofvehicles that can run on highblends of biofuels is crucial toreducing our oil use.

• Establish quotas for biofuelsthat gradually increase theirshare of transport fuel whileincreasing the share derived fromadvanced techniques and sources.The early success of theRenewable Fuel Standard inincreasing production andinvestment in biofuels must benurtured by gradually raisingthe target levels. Added require-ments and incentives should beintegrated into the RFS to spurthe production of biofuels fromadvanced technologies thatreduce greenhouse gas emis-sions beyond current production techniques.

• Ensure the creation of fuel-ing infrastructure. Flex-fuel vehi-cles will fulfill their potentialonly when drivers can easily filltheir tanks on high blends ofbiofuels. Policies are required toensure that the number of bio-fuel pumps keeps up with theproduction of biofuels and flex-fuel vehicles.


A M E R I C A N E N E R G Y P O L I C Y A G E N D A

Cumulative Federal Energy R&D Funding, 1974–2005

Nuclear$49.7049%

Fossil$25.4025%

Fossil$20.0522%Nuclear

$47.9352% Efficiency

$11.7113%

All RE$12.3913%

Billions, 2005$

Feed-in Laws Explained

In contrast to Renewable Portfolio Standards(RPS), which set a target quantity of electricityfrom renewable energy, feed-in laws set a priceand allow the market to determine quantity. Anycompany or individual who meets the technicaland legal requirements can sell renewable elec-tricity into the grid and receive a long-term,guaranteed price. Prices are generally set aboveconventional power costs, reflecting renewableenergy’s societal benefits.

To date, pricing laws have consistently been themost effective regulatory framework for advanc-ing renewable electricity, propelling Germanyand other European countries to market domi-nance. The combination of guaranteed demandand long-term minimum payments has reducedthe uncertainties and risks associated withinvesting in renewable energy, making it far eas-ier to obtain financing.

While it is often assumed that feed-in laws areinherently more expensive than quota systems,under the quota system in the United Kingdom,the price paid for wind electricity was similar in2003 to payments for wind power in Germany.Over time, feed-in prices can be reduced as tech-nologies become more economical.

Furthermore, feed-in laws can help avoid theneed for additional subsidies while helping tointernalize the social and environmental costsassociated with electricity production.

Worldwide, 41 countries, states, and provinceshave enacted feed-in laws, and versions of thelaw have begun to appear in several U.S.states—including Minnesota, New Mexico,Washington, and Wisconsin. Other states arenow considering implementing similar laws.

Source: IEA

Sources of Additional Information

Alliance to Save Energywww.ase.org

American Coalition on Ethanolwww.ethanol.org

American Council for an Energy EfficientEconomywww.aceee.org

American Council on Renewable Energywww.acore.org

American Solar Energy Societywww.ases.org

American Wind Energy Associationwww.awea.org

Biomass Councilwww.biomasscouncil.org

Biomass Research and Development Initiativewww.bioproducts-bioenergy.gov

Center for American Progresswww.americanprogress.org

Center for Resource Solutionswww.resource-solutions.org

Clean Energy Groupwww.cleanegroup.org

Clean Energy States Alliance www.cleanenergystates.org

Clear the Airwww.cleartheair.org

Climate Solutionswww.climatesolutions.org

Database of State Incentives for Renewable Energywww.dsireusa.org

Energy Efficiency and Renewable Energy, DOEwww.eere.energy.gov

Energy Future Coalitionwww.energyfuturecoalition.org

Environmental and Energy Study Institutewww.eesi.org

Environmental Protection Agencywww.epa.gov

European Renewable Energy Councilwww.erec-renewables.org

European Union, New and Renewable Energieseuropa.eu.int/comm/energy/res/index_en.htm

Florida Solar Energy Centerwww.fsec.ucf.edu

Geothermal Energy Associationwww.geo-energy.org

Green Building Alliancewww.gbapgh.org

Green-e Renewable Electricity CertificationProgramwww.green-e.org

International Energy Agency (IEA)www.iea.org

IEA, Photovoltaic Power Systems Programmewww.oja-services.nl/iea-pvps

Interstate Renewable Energy Councilwww.irecusa.org

Eric Martinot’s Research Sitewww.martinot.info

National Biodiesel Boardwww.biodiesel.org

National Hydropower Associationwww.hydro.org

National Renewable Energy Laboratorywww.nrel.gov

Ocean Energy Resourceswww.his.com/~israel/loce/ocean.html

Pew Center for Climate Changewww.pewclimate.org

RenewableEnergyAccess.com (news)www.renewableenergyaccess.com

Renewable Energy Policy Network for the 21stCenturywww.ren21.net

Renewable Energy Policy Projectwww.repp.org

Renewable Energy World (journal)www.jxj.com/magsandj/rew

Renewable Fuels Associationwww.ethanolrfa.org

Rocky Mountain Institutewww.rmi.org

Solar Buzz (news)www.solarbuzz.com

Solar Energy Industries Associationwww.seia.org

Union of Concerned Scientistswww.ucsusa.org

U.S. Green Buildings Councilwww.usgbc.org

Utility Wind Integration Groupwww.uwig.org

Worldwatch Institutewww.worldwatch.org


Full report source information:www.americanenergynow.org

Contributors

Peter Altman, Clear the Air

Fred Beck, Environmental and Energy StudyInstitute

Roger Bedard, Electric Power Research Institute

Gerry Braun, En-Strat Associates

Jesse Broehl, RenewableEnergyAccess.com

Jim Callihan, RenewableEnergyAccess.com

Linda Church Ciocci, National HydropowerAssociation

Steve Clemmer, Union of Concerned Scientists

Hank Courtright, Electric Power Research Institute

Jeff Deyette, Union of Concerned Scientists

Michael Eckhart, American Council on RenewableEnergy

Lew Fulton, United Nations EnvironmentProgramme

Karl Gawell, Geothermal Energy Association

Mark Gielecki, Energy Information Administration

George Hagerman, Virginia Tech AlexandriaResearch Institute

Doug Hall, Idaho National Laboratories

Glenn Hamer, Arizona Republican Party

Craig Hanson, World Resources Institute

Eric Haxthausen, Environmental Defense

Herbert Hayden, Arizona Public Service

Christy Herig, Around Tampa Bay

Gregory Hernandez, National Oceanic andAtmospheric Administration

Bill Holmberg, Biomass Coordinating Council

Alyssa Kagel, Geothermal Energy Association

Noah Kaye, Solar Energy Industries Association

David Kearney, Kearney & Associates

Tom Kerr, Environmental Protection Agency

Anne Lackmann, German Renewable EnergyFederation

David Landes, Pacific Gas & Electric Company

Deron Lovaas, Natural Resources Defense Council

Peter Lowenthal, Solar Energy IndustriesAssociation

Kenneth MacLeod, Western GeoPowerCorporation

Birger Madsen, BTM Consult ApS, Ringkøbing,Denmark

Thomas Mancini, Sandia National Laboratory

Robert Margolis, National Renewable EnergyLaboratory

Eric Martinot, Worldwatch Institute

Fred Mayes, Energy Information Administration

Mark Mehos, National Renewable EnergyLaboratory

Eliot Metzger, World Resources Institute

Lew Milford, Clean Energy States Alliance

Roy Mink, Department of Energy

Fred Morse, Morse Associates Inc.

Alan Nogee, Union of Concerned Scientists

Joshua Owens, U.S. Green Buildings Council

Alex Pennock, Center for Resource Solutions

Richard Perez, State University of New York,Albany

David Pimentel, Cornell University

Jean Posbic, BP Solar

Lew Pratsch, Department of Energy

Bill Prindle, American Council for an EnergyEfficient Economy

Christine Rasig, Massachusetts TechnologyCollaborative

Christine Real de Azua, American Wind EnergyAssociation

Rhone Resch, Solar Energy Industries Association

Jodie Roussell, American Council on RenewableEnergy

Meghan Shaw, ICF International

Fred Sissine, Congressional Research Service,Library of Congress

Scott Sklar, The Stella Group, Ltd.

Kari Smith, PowerLight Corporation

Glenn Strahs, Department of Energy

Frank Tugwell, Winrock International

Maria Vargas, Environmental Protection Agency

Paul Vaughnn, First Solar

Werner Weiss, AEE INTEC, Austria

Carol Werner, Environmental and Energy StudyInstitute

Tom White, Marathon Capital

Jetta Wong, Environmental and Energy StudyInstitute

Peter Wong, Energy Information Agency

Dara Zycherman, U.S. Green Building Council



Biofuels for Transportation:Global Potential andImplications for SustainableAgriculture and Energy inthe 21st Century

Worldwatch Institute in col-laboration with the GermanAgency for TechnicalCooperation (GTZ) and theGerman Agency of RenewableResources (FNR)

June 2006

World Watch Magazine: PeakOil Forum


ISSN: 0896-0615

January/February 2006

Renewables 2005: GlobalStatus Report Updated July 2006

Worldwatch Institute and theREN21 Network

November 2005

Mainstreaming RenewableEnergy in the 21st Century


ISBN: 1-878071-73-4

May 2004

America is Addicted toOil: 10 Tough Questionsand Answers for PresidentBush on Kicking the OilHabit

Center for AmericanProgress

February 2006

Resources for GlobalGrowth: Agriculture,Trade and Energy in the21st Century

Center for AmericanProgress

December 2005

Biofuel Basics: What YouNeed to Know

Center for AmericanProgress and the EnergyFuture Coalition

December 2005

Meeting the ClimateChallenge

The International ClimateChange Taskforce

January 2005

To order print or electronic copies, visitwww.worldwatch.org.

To order print or electronic copies, visitwww.americanprogress.org.

Additional Resources from Worldwatch Institute

Additional Resources from Center for American Progress

To purchase additional copies of this report or to download a free PDF version with full source information, go to www.americanenergynow.org.

“Renewable energy is one of the great stories of recent years,and it’s going to be a bigger story in the years to come.”

—George W. Bush, President of the United States

“This field of greentech could be the largest economic opportu-nity of the 21st century.”

—John Doerr, venture capitalist for Kleiner Perkins Caufield & Byers

“The Stone Age did not end for lack of stones, and the Oil Agewill end long before the world runs out of oil.”

—Sheikh Yamani, former Oil Minister of Saudi Arabia

“The best way to predict the future is to invent it.”

—Alan Kay, pioneer of personal computing

w w w. a m e r i c a n e n e r g y n o w. o r g

Documents

American Energy - Worldwatch Institute · American Energy The Renewable Path to Energy Security Project Team Worldwatch Institute Christopher Flavin, President Janet L. Sawin, Ph.D.,