The People of America's Oil and Natural Gas Indusry

"On Track" to Lower Renewable Energy Costs?

Kyle Isakower

Kyle Isakower
Posted August 26, 2010

This week, the White House released a report on stimulus spending which, in part, highlights spending for renewable energy projects such as electric powered vehicles, improved battery technology and renewable energy technologies as examples of successful projects funded by the American Recovery and Reinvestment Act.

"The Recovery Act: Transforming the American Economy Through Innovation" claims that spending has put the United States "on track" to:

  • Double domestic renewable energy generation capacity by 2012;
  • Cut solar power costs in half by 2015; and
  • Cut electric vehicle battery costs by half by 2013.

But a closer look at the report tells a different story. While renewable generation capacity is indeed growing, there are no real technological advancements that have been achieved to date that back up renewable energy cost reduction claims--only examples of companies that have grown due to large government grants.

For example, the report touts the success of two companies that produce a plug-in cargo truck and the batteries to power it. However, discussion regarding cost cutting of those batteries is based solely on projections from the Department of Energy (DOE) and assumed economies of scale. The report does not identify any necessary technological advancements to dramatically reduce costs.

The report also covers solar cell technology projects and states:

"Together, these deployment and research and development programs are working towards the goal of bringing down the cost of solar by half over the next five years, from roughly $0.20/kWh to $0.10/kWh for solar electricity generated at residences. If breakthroughs in technology can bring costs down to $0.06/kWh by 2030, solar power will be cheaper than retail electricity from the grid, even without government incentives."

Of course, just investing in solar technology does not mean you are succeeding in lowering costs.

The oil and natural gas industry understands the need for all energy resources to meet future demand, and that includes renewable and alternative energy. Our industry's investments in renewables accounted for nearly one-fourth of the money invested by all U.S.-based private industry and the federal government over the past nine years. More than $6.7 billion supported development of energy sources such as wind, biofuels and solar power.

But the U.S. government shouldn't pick winners and losers among the various forms of energy. While it is wise for the United States to invest in low-carbon technology research and development, we cannot depend upon sources that are neither fully developed nor ready to compete in the energy marketplace.

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Update on August 26, 2010: AP Writer Frederic Frommer agrees that the stimulus assessments are "overly optimistic." Read his article on ABCNews.com.

ABOUT THE AUTHOR

Kyle Isakower is vice president of regulatory and economic policy at the American Petroleum Institute. With 26 years experience, he is the go-to guy for issues regarding energy and environmental policy and oversees the development of API standards and economic analyses. In his past lives, Kyle has worked on issues related to waste management and remediation, NAAQS and air toxics—and led efforts promote the industry's energy efficiency efforts. Transplanted to Washington from north Jersey over 20 years ago, he remains faithful to the New York Giants, and works diligently to ensure his wife and two children do so as well.