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Nov 8, 2011

Debate: Powering the Future vs. Propping up the Past


In a recent New York Times Letter to the Editor, Bernard Weinstein argued that if the Obama administration is serious about energy security, it should approve the Keystone XL pipeline, open up more federal lands, and embrace the shale gas revolution and its potential for providing a clean and inexpensive fuel source for power generation.

This kicked off an online debate where experts weighed in on whether new approaches to drilling give the U.S. necessary time to develop sustainable energy sources, or keep Americans addicted to fossil fuels by keeping them cheap—and eroding the energy security argument.

Where does Rocky Mountain Institute stand?

First, there's no disputing the fact that total U.S. government subsidies to fossil fuels have dwarfed those provided to renewable energy over the past several decades. According to the Environmental Law Institute, subsidies to fossil fuels totaled approximately $72 billion from 2002-2008, while subsidies for renewable energy sources, including corn ethanol, totaled $29 billion. The long history of government subsidies and other forms of support provided to the nuclear, coal, oil, and natural gas has aided those now mature industries in reaching their current shares in electricity production. It's time to level the playing field.

Second, incentives for renewables are temporary—aimed at supporting the transition to a cleaner energy economy—not permanent, like those for fossil fuels and nuclear have apparently become. Given the ongoing improvements in cost and performance of wind and solar generation, these technologies are rapidly becoming competitive even without subsidies and will soon transform the electricity sector.

According to the Lawrence Berkeley National Lab, from 1998 through 2010, capacity-weighted average installed costs of solar PV in the US declined 43% in real 2010 dollars, from $11.00 per watt in 1998 to $6.20 per watt in 2010. As these technologies mature, the U.S. is competing for position in a global clean energy market that is already worth an estimated $240 billion annually and growing rapidly. The faster U.S. companies scale up, the more competitive they will be. Last year, China offered $30 billion in financing to its solar companies alone. Other governments around the world are offering a variety of supports to stimulate their domestic clean energy sectors.

Third, renewables are increasingly cost competitive with the alternatives even without taking into consideration the sizable externality costs that air pollution from fossil fuel-based electricity generation impose costs on the U.S. economy. These have been conservatively estimated to be $63 billion annually, with more than $53 billion in damages from coal generation alone (see Muller, Mendelsohn, and Nordhaus, American Economic Review, August 2011). Muller et al. estimate the gross external damages from coal- and oil-fired electricity generation to be 3.6 cents per kilowatt-hour, respectively.

Finally, Weinstein's suggestion that piping oil from the tar sands of Canada via the Keystone XL pipeline is a solution to our national energy security is a red herring, especially in the context of electricity. Not only would it perpetuate our addiction to oil for transportation, but it also does nothing to power our electric vehicles of the future or our existing electricity system, which uses less than 2% oil. Our options now are to invest in the future or continue to prop up the past. It's an easy choice.

Authored by James Newcomb and Virginia Lacy

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