Geology Reference
In-Depth Information
Studies by researchers at Stanford University and other institutions have found that
the United States has plentiful renewable resources; and, unlike Europe, the United
States has enough open space to build sizable solar and wind generating plants.
Skeptics point out that renewables are not steady suppliers—the wind doesn't
always blow and the sun doesn't always shine. They maintain that until a solution
is found, we will rely on fossil fuels for the next several decades. Moreover, a shift
in America from fossil fuels to wind, water, and sun would be expensive and cum-
bersome. To use renewable energy on a large scale requires modifying power grids
and is generally more expensive than sticking with traditional carbon-based fuels.
Fatih Birol, chief economist at the IEA, says that as important as reducing
greenhouse gases is, improving the energy efficiency of industry, vehicles, and
homes is a quicker, easier approach than revamping the nation's grid.
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The transition to renewables will take time. It is likely that for quite awhile,
users will rely on a combination of natural gas, other hydrocarbons, and renewable
energy. The question remains, though: what will the ideal mix prove to be?
The free market can instill a rigid discipline on energy markets, and one side-effect
of fracking is that it provides so much cheap natural gas that it undermines the more
expensive renewables it is supposed to provide a “bridge” to.
According to the Harvard researchers Michael McElroy and Xi Lu, the break-
even price for electricity produced by a modern coal-fired plant is about 5.9 cents
per kilowatt-hour. At $5 per million BTUs, the price of electricity from gas is about
the same as that from coal; but when natural gas prices drop below $5 per MBTU,
then coal cannot compete.
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The cost of producing wind power is about 8.0 cents per kilowatt-hour. Wind
can compete with $5 per MBTU gas only if it can continue to benefit from the gov-
ernment's production tax credit (PTC), currently 2.2 cents per kilowatt-hour. If gas
prices were to rise above $8.3 per MBTU, wind would be competitive even in the
absence of the PTC. But in this case, coal plants would be cheaper than either gas
or wind-generated power.
Thus, as McElroy and Lu pointed out in a
Harvard Magazine
article, the free
market alone might not ensure that renewables succeed. If gas prices rise above $5
