US renewables becoming competitive

22 September 2006

The cost of green energy is fast catching up with fossil fuels in the US as oil price soar but policies need to change to fulfil the country's renewables potential, according to a new report from two influential US think tanks.

But the US is still lagging behind other countries because of its policy-makers' failure to support the growth of green power, the Worldwatch Institute and the Center for American Progress say in the American Enery Now report published this week.

Long-term policies in Germany and Spain led these countries into positions of power in the area of wind energy; the same can be said of Germany and Japan in the solar energy sector. "By contrast, US renewable energy policies over the past two decades have been an ever-changing patchwork" with "abrupt changes in direction at both state and federal levels," says the report.

While the world embraces the opportunities represented by investment in renewables, the US is falling behind, the report argues. It cites recent global growth in renewables, with global wind energy generation more than tripling since 2000, solar cell production up by 45% on 2005, now six times the level in 2000, and ethanol production more than doubling between 2000 and 2005.

While America has some of the world's best renewables resources, these currently provice 6% of the US's energy - but the proportion could increase rapidly over coming years with rising oil prices and energy security accelerating the transition.

"With oil prices soaring, the security risks of petroleum dependence growing, and the environmental costs of today's fuels becoming more apparent, the country faces compelling reasons to put these technologies to use on a larger scale," the report argues, pointing out that a quarter of US land area has the potential to generate wind power as cheaply as coal or natural gas-powered stations, while seven Southwest states alone could generate ten times the current electricity demand.

"Many of the new technologies that harness renewables are, or soon will be, economically competitive with the fossil fuels that meet 85% of US energy needs," the report reads. But "across the country, the tide has begun to turn," it adds.

All but four US states have incentives in place to promote green energy generation, a dozen of which have introduced laws favourable to renewables in recent years. California already gets 31% of its electricity from renewables and, perhaps more surprisingly, Texas is now home to the largest inventory of wind turbines in the US.

The report gives fuel cells as an example where the country's global market share declined from 22% in 1996 to under 9% in 2005 despite more American fuel cells coming off factory lines each year.

The think tanks make a series of policy recommendations to support the growth of the US renewables industry, including long-term, predictable rules for developers and financers, performance-based incentives based on the amount of energy generated per dollar of public investment, incorporating external costs of fossil fuels into energy pricing - especially through the introduction of a carbon cap-and-trade system, and reducing subsidies for fossil fuels.