February 27, 2006

Renewable Interest

By: by Inside Bay Area


A COUPLE OF YEARS AGO, Juli Robinson wanted to install a solar system on the roof of her Oakland home until she found out it would cost upwards of $35,000. She decided against it after a little math showed it would take 20 to 30 years to recoup the investment.

San Francisco resident Chris Lowden said he was planning to trade his full-sized truck for a hybrid car until the salesman told him it would cost $3,000 more than its gas-powered counterpart.

He kept the truck.

"It bothers me that I'm, I guess, contributing to America's oil habit," he said. "But I just couldn't bear to throw down the extra cash."

Both would-be conservationists decided against going green when they realized that kicking their addiction would mean enduring some pretty unsettling economic side effects.

Tax credits, rebates and reimbursement programs are helping make hybrid cars, solar power and other renewable energy options more attractive, but the bottom line is that oil is still cheaper. And a key reason for that comes down to research - or a lack of it.

For the past 25 years, alternative energy technology was shuffled into the backseat of a U.S. energy market driven by the granddaddy of energy - oil.

While other countries such as Japan, Germany and Denmark made it a national priority to shift to renewable energy and end their dependence on oil and other fossil fuels, the United States focused its investments and policies toward keeping oil cheap for consumers, according to government and academic studies.

Even though the United States pioneered the development of energy from wind, water and the sun, the nation's investment in energy research has fallen steadily since the 1980s.

But policymakers and consumers seem to be paying more attention to alternative energy now, with high gas prices, growing global demand for oil and worries that trouble in the Middle East or other oil exporting countries could disrupt oil production or U.S. deliveries. While conservationists have long called for greater investment in alternative energy research, the movement has begun to attract some of the most unexpected supporters.

President Bush, a former oil man, recently proposed a fiscal 2007 federal budget that includes a $3.5 billion boost for science research, some of which would go toward renewable energy.

Yet while Bush's plan marks the biggest funding increase in decades for solar research - a 78 percent increase to $148 million - it met with sharp criticism from many energy wonks who want to see a greater shift toward alternative energy. Such investments would help the economy and the environment, they say.

Failure to make such a shift, they warn, could produce another energy crisis.

Daniel Kammen, a professor at the University of California, Berkeley and director of the Renewable and Appropriate Energy Laboratory, said the nation's investment in energy research is dangerously low at a time of soaring gas prices, widespread concern about U.S. dependence on foreign oil and mounting evidence that fossil-fuel waste hurts the environment.

Kammen's latest research, co-authored by doctoral candidate Greg Nemet, shows that public and private investment in new energy technology has fallen sharply since the 1980s. Adjusted for inflation, energy R&D funding peaked at more than $11 billion in 1980; today it's less than half that amount.

Their research showed a sharp decline in energy R&D spending by both government and private industry sources and noted a continued lack of funding could lead to a futureenergy crisis.

They recommend increasing energy funding by 5 to 10 times today's levels to create a grand alternative energy project reminiscent of the $2 billion ($20 billion in 2004 dollars) Manhattan Project to build the first nuclear weapons and the $265 billion, and counting, War on Terror.

"Energy issues facing the country warrant a massive increase in energy spending, and our findings show this can be done while bolstering the economy," Kammen said. He added that more government support would create more jobs and give venture capitalists more confidence in investing in startup energy companies.

A study by the Energy Department last year came to similar conclusions and recommended doubling the federal budget for energy research.

President Bush, who let energy research funding slip to its lowest level in 30 years during his first six years in office, may have done away with some of the partisan squabbling over energy research funding when he said during his State of the Union speech that America is "addicted to oil" and would be better off with energy that was made in the U.S.

He began a series of public appearances to tout the great unrealized potential of solar technology and biomass fuels.

"America's dependence on oil is a national security problem and an economic security problem," Bush said last week in Michigan during a tour to promote alternative energy.

But critics say Bush's plan fails to ensure a sustained investment in energy research. After an increase in fiscal 2007, budget projections for 2008 and beyond show a decline in energy funding.

"The budget was a disappointment. Industry isn't going to respond unless it sees a sustained funding commitment," said Ana Unruh Cohen, associate director at the Center for American Progress, a progressive think tank whose financial backers include Herbert and Marion Sandler of Oakland's Golden West Financial Corp. "All this did was get us back to the level of funding from five years ago."

Unruh Cohen said Bush's sudden reversal on oil signals at the very least a change in rhetoric for an administration that has opposed additional funding for energy research and conservation programs while maintaining policies aimed at strengthening the oil industry.

"You know the problem has reached a critical point when a former oil man says we need to start powering our cars on ethanol," she said. "That got a lot of people to stand up and take notice."

Renewable energy accounts for 7 percent of total U.S. energy consumption, nuclear energy contributes roughly 10 percent and fossil fuels dole out roughly 80 percent, according to the U.S. Department of Energy.

The share of renewables is much larger in California, which has set a goal to generate 20 percent of its electricity from renewable energy sources by 2017.

Solar, geothermal, wind and biomass accounted for about 10 percent of California's energy consumption in 2004. Hydropower added another 15 percent.

Federal government projections show only a slight increase in renewable energy use in the United States through the year 2030, while oil imports continue to rise and global demand rises. According to conservative estimates, growth in China and India will spur a 50 percent rise in demand for oil in the next two decades.

Meanwhile, the United States will face additional economic challenges as worldwide competition heats up to bring alternative energy technology to the mainstream marketplace. The country already trails Germany, Japan and Denmark in commercializing renewables such as solar and wind power - technology pioneered by the United States.

Solar power systems and hybrid cars are priced more competitively in Japan because natural gas and gasoline are more expensive. And roughly half the solar panels used in the United States are imported from Germany.

"It looks like alternative energy technology will be more expensive for a long time," said Kei Koizumi, lead researcher at the American Association for the Advancement of Science. "Even if oil prices keep going higher, the alternatives won't be competitive for a while yet."

Koizumi said significant changes in policy and investment structure are needed if the United States intends to lead the world in the emerging energy economy.

"Most of our current policy decisions are made to better utilize fossil fuels, rather than develop energy technology," he said.

Still, energy officials have for some time asserted that investing in energy research is risky because there's no clear leader or consumer favorite. Another drawback has been that research on individual technologies is splintered.

"A lot of people are saying, 'Why should we spend money on a new idea if we're not certain it's going to be incorporated," said Pradeep Haldar, director of the Energy and Environmental Technology Applications Center at the State University of New York, Albany. "But there are strategies that need to be pursued, and the government needs to take a role in those strategies.

"First of all," he added, "the government could certainly do more to fund energy technology waiting in the wings ... that's waiting to happen. But at the very least it should deregulate industry at a faster pace to bring some of these new technologies to the forefront."

California's unsuccessful effort to deregulate the utility industry appears to have caused some setbacks in the development of alternative energy.

San Francisco-based utility Pacific Gas & Electric Co. stopped direct investments in energy research after legislation directed utility companies to focus on delivering energy and not generating it. Now the California Energy Commission collects money from utility ratepayers to fund an energy R&D program that next year will grow to $150 million.

As an energy researcher, Berkeley's Kammen admits he has an ax to grind about energy funding that has petered out during the past 25 years. But he says acting now is crucial.

"Other countries are getting religion on this, while we're not moving with any apparent urgency to develop alternatives," Kammen said.

Sen. Dianne Feinstein, D-Calif., says the government has been intentionally lax in setting new standards for vehicle mileage efficiency and emissions for the 136 million cars on U.S. roads.

"We have the technology today to increase our fuel economy standards by 30 percent. This would decrease the demand for gasoline, thereby reducing its cost," she said in a statement.

Recently, big oil companies also joined the odd mix of partners now acknowledging the problems of over-reliance on fossil fuels. Several of the largest oil companies have announced - both in large print and tacitly - that the world is entering an era of diverse and competitive energy markets.

Only Exxon Mobil Corp., the largest oil company, still unabashedly claims to be strictly an oil company.

San Ramon-based Chevron Corp., the second-largest oil producer, says it has invested more than $1 billion in renewable energy research since 2000. The company is also running an aggressive ad campaign to let customers know they have seen the end of "easy oil."

Chevron is investing heavily to bring new global energy supplies to the market," said a Chevron spokesman.

But looking at the whole set of numbers makes it clear that Chevron isn't necessarily trying to be the next big renewable energy company. The corporation, which reported a $14 billion profit in 2005, also plans to spend almost $15 billion next year alone on new technology to extract oil from deposits that were previously inaccessible.

The government, too, spends a sizable chunk of its energy R&D budget on oil extraction technology. Only five years ago, the federal budget for fossil fuel research was larger than the spending for renewables.

Wind energy is growing in California, and in 2004 produced enough electricity to power a city the size of San Francisco. Three California wind farms - Altamont Pass, Tehachapi near Bakersfield and San Gorgonio east of Los Angeles - produced 30 percent of the world's wind-generated electricity.

According to the Electric Power Research Institute of Palo Alto, wind energy costs are a quarter of what they were only a few years ago because of technological advancements.

California is also home to The Geysers, an expanse of land near Sonoma County that amounts to the largest geothermal fields in the world. It produces enough electricity for 1 million homes and replaces the equivalent of 1 million gallons of oil a day.

But, overall, the rising star on the energy horizon seems to be solar technology, industry experts say.

More solar companies have sprouted up in California to meet an increase in consumer demand since state energy regulators approved $2.8 billion for solar rebates for the next 10 years, said an executive at Berkeley-based PowerLight Corp.

But the solar trend is no longer isolated in California, said Tom Leydon, head of East Coast operations for PowerLight.

"There's a shift going on to the extent we've never seen before," he said. "Solar stocks are flying right now and so is the venture capital for startups."

Money spent 10 years ago to advance solar technology would have brought today's prices down to a level at which it would have been more competitive on the market.

"Had we maintained the level of the Carter presidency, we'd be far more advanced than we are today," he said.