George Sterzinger is executive director of the Renewable Energy Policy Project.
In the summer of 2005, people are waking up to a daily barrage of bad energy news. Gasoline and natural gas prices move relentlessly to record highs. The Chinese government seems intent on buying up U.S. oil companies and their oil and gas reserves. While the economic, environmental and security consequences of our present default energy policy are disastrous, we seem hopelessly unable to produce a new national energy policy that will solve these pressing problems.
It is very easy to blame this impasse on cowboy politicians intent on a national policy that gives lip service to renewables and solid support to Big Fossil Fuel projects. Easy—but not terribly productive. In some sense, we should expect to get the energy policy we insist upon having. If average citizens are lulled into indifference about what is done in the name of a national energy policy, then those citizens should blame themselves as much the cowboy, Big Fossil politicians.
Case in point: Will the House and Senate conferees now debating the final specifics of the Energy Policy Act of 2005 keep the Renewable Energy Standard passed in the Senate to mandate that at least 10 percent of the electricity used in the United States by 2020 be generated from renewable resources? The "smart money" in Washington is betting right now that they won't. Do you care? Should you care?
The Standard Saves Money
In order to understand why it is important to move on renewable energy now, it is best to begin with the most basic energy fundamentals. Virtually every credible energy economist recognizes that "business as usual" activities lead the United States to a serious shortfall of natural gas. Domestic production peaks at about 25 trillion cubic feet per year; demand is expected to grow to more than 30 trillion cubic feet—much of that growth driven by the use of natural gas as a fuel to generate electricity. We can meet that shortfall either by increasing imports of Liquefied Natural Gas or we can meet some or all of the shortfall by turning to renewable electric generation.
Let's look at some numbers. Right now, natural gas sells for roughly $7.00 per million BTUs. New combined-cycle plants that use natural gas as a fuel to generate electricity need about 8000 BTUs to generate one kWh. That means that for every $7.00 you spend on natural gas, you get enough fuel to generate about 125 kWh. The fuel alone costs $.056 per kWh. Recent wind projects in West Texas, Minnesota and other states have come online with 10 to 20 year contracts for between $.025 and $.03 per kWh. Wind is by far the most competitive of the renewable technologies, but geothermal, solar and biomass based technologies all have the potential to compete in regions where the resources are abundant.
That simple economic advantage spins out to provide a portfolio of other benefits: fuel diversity, price stability, reduced CO2 emissions, fuel security and economic development benefits that make renewable energy even more attractive. Wind contracts are long-term fixed price for up to twenty years. You cannot get a 20-year contract for natural gas at $7.00 per million BTU. Every kWh of wind avoids on average 1.3 pounds of CO2 emissions from natural gas generation and is therefore at least a step towards a prudent climate stabilization policy. Relying on imported natural gas will greatly increase our security problems; developing renewable energy reduces that risk. But perhaps the most important and least understood attraction of a major, national commitment to renewable development can be seen if we trace the economic impact of major development efforts.
Renewable Standard = American Jobs
Wind, one of the lowest-cost renewable energy resources, would be very likely to provide a large part of the renewable energy developed under any national program. Since the best wind resource is in the upper Great Plains region, many opponents of the renewable energy standard have argued that since a large portion of the wind developed will be in that region, a majority of the benefits from a national policy would flow from the Southeast and Rust Belt to North Dakota.
That argument neglects to look at the chain of manufacturing related to components and subcomponents that go into constructing a modern wind generator. While the economic benefits produced by the construction and operation phases of wind development are important and significant, a substantial portion of the benefits from the investment will result from manufacturing the equipment and will flow to those states and localities that either have or can develop the firms to supply the subcomponents.
The Renewable Energy Policy Project has broken down every major renewable technology into the component parts, and traced where the firms are that could manufacture those parts if the demand were there. For all the technologies, the numbers are impressive. (Check out the results for wind here.) There are 16,163 firms that are now manufacturing parts similar to those required in a modern wind turbine. Using data from the Census of Manufacturing, it is also possible to trace which states have the greatest concentration of businesses and therefore the greatest potential to provide the component parts.
Here is the conclusion from our Wind Report:
Notably, the 20 states benefiting the most from investment in wind are almost identically the 20 states that have lost the most manufacturing jobs in the country over the past 3 years. These states account for more than 76 percent of the manufacturing jobs lost. Investment in wind will particularly benefit these states, sending new jobs where they are needed most. Furthermore, these states are also the most populous, indicating that investment in wind will benefit a large range of people in the country.
This national Renewable Standard will lower the nation's fuel bill, take an important step towards controlling climate change, reduce our energy insecurity and potentially deliver benefits precisely to the regions and states that have suffered the worst job losses over the past four years. The "smart money" inside the beltway doesn't have to be right this time.
