The US Department of Energy's latest budget proposal puts energy from renewable sources in useful perspective. It trims spending in this area by 36%. Announcement of the plan naturally provoked moans of regret from renewable-energy promoters. But it forces policymakers and energy consumers to take a clear view of what reasonably can be expected from renewable resources.
There can be no doubt that the US needs energy from renewable sources and will need more of it in the future. Someday, in fact, all energy will come from renewable resources.
But the country can't now rely on renewable sources to meet a significant share of its energy needs and shouldn't pass laws or impose regulations pretending to the contrary. Exaggeration about the supply potential of renewables distorts regulation and detracts from the future of energy forms on which the US will, indeed, one day depend.
EIA projections
That the day will not soon arrive is evident in a long-term supply-demand projection published last December by DOE's Energy Information Admin- istration. EIA based projections through 2020 on a complex quantitative model sensitive to such important variables as price, the economy, and technology in different sectors of consumption.
Public and energy-industry attention has tended to focus on EIA's projection for total energy consumption. And well it should. The 32% demand increase EIA presents in its reference case for 1999-2020 represents a concern for consumers and a challenge to energy suppliers and their regulators. All that energy-127 quadrillion btu of it-must come from somewhere.
The share that can come from renewables, however, is small. Under any reasonable set of assumptions, renewable resources can't and won't provide enough energy in the next 2 decades to represent a proper priority for policymaking. Manipulations needed to coax renewables toward the center of the energy mix would be economically ruinous and politically unacceptable. No one should believe the common and quaint suggestion that the US stands at the threshold of the era of renewables. It doesn't.
In the reference case of EIA's long-term projection, the amount of energy from renewable sources increases to 2020 from 1999 by 26%. For a business requiring grassroots development of infrastructure, that's impressive.
Yet, because of overall market growth, the renewable share of total energy consumption in the reference case doesn't budge from its 1999 level of 7%. Fossil energy continues to dominate: petroleum products 40%, natural gas 28% (up from 23% in 1999), and coal 21%. What's more, the renewable growth that does occur, averaging 1.1%/year, comes mostly from state mandates rather than commerce.
Wishful thinkers will ask why the federal government doesn't aggressively specify a market share for renewables. The reason is that it can't do so without imposing costs far out of proportion to whatever benefits might be presumed to accrue from the still tiny ground renewables would gain in the energy mix.
Sensitivities in the EIA study illustrate some of the offsets that doom government efforts to force-feed the energy market. With oil prices assumed to be 21% higher in 2020 than in the reference case, energy from renewables grows 27% over the 20-year study period-a change from the reference case growth rate of just 1 percentage point. And the renewables market share stays at 7%.
Renewables consumption amounts fare better under assumptions of economic growth of 3.5%/year rather than the reference case's 3%/year. With faster economic growth, demand for energy from renewable sources increases 33% over the projection period. But the renewable market share slips to 6%.
An implication of these figures is that trying to stimulate renewables by taxing oil costs too much for too little gain. Another implication is that consumption of renewable energy is greatest when the economy grows the fastest. For producers of renewable energy truly concerned about market development, therefore, mandates and subsidies-which hurt economies-would do more harm than good.
The budget effect
None of this changes because DOE decides to spend $177 million studying renewable energy in fiscal 2002 instead of the $277 million planned for 2001. Renewables, whatever their other attractions, have no central part to play in US energy supply now and for at least the next 20 years.
The US needs renewables, to be sure. It just needs energy from other sources more-much more.
