Rising fossil fuel prices boost prospects for renewable energy

Wednesday, October 27th 2004, 9:03 am
By: News On 6

SAN FRANCISCO (AP) _ With oil futures soaring above $55 a barrel and natural gas doubling in price in the last two years, renewable energy is looking a lot better to many _ not just on environmental merits, but on price.

Wind, solar, geothermal and other green power sources have long been championed by people worried about smog and global warming, but until recently they were too costly to compete. Now, the surging cost of fossil fuels is changing the energy market.

``Rising fossil fuel prices are making renewable energy more competitive in the power market,'' said Steve Taub, an alternative energy analyst at Cambridge Energy Research Associates.

Renewable energy can't offer much relief to drivers and companies seeing their profits evaporate because of skyrocketing oil prices, because viable green alternatives to gasoline are hard to find. Biofuels such as ethanol and biodiesel aren't widely available, and hydrogen-powered cars aren't expected to hit the market for years.

But in the electricity market, green power, especially wind, is already competing with traditional sources. At today's average wholesale prices, wind costs 4.2 cents per kilowatt hour, compared with 4 cents for coal, 6.8 cents for natural gas, 9.1 cents for oil and 10 cents for nuclear power, according to Kyle Datta, managing director at the Rocky Mountain Institute, a research group focused on eco-friendly business.

Experts estimate that at today's consumption rates, known global supplies of oil and natural gas would be depleted within decades. But prices are expected to rise significantly long before supplies run out, making those fuels too expensive to use at current levels.

``They're never going to run out, but the ability to match supply to demand may already have run out, especially for oil,'' said Stephen Leeb, president of Leeb Capital Management and co-author of ``The Oil Factor,'' which predicts that oil could hit $100 a barrel by 2010.

In the short term, fossil fuel prices are being driven up by war, political instability, natural disasters and other variables. The long-term outlook is clearer _ global supplies are dwindling as demand soars, particularly in China and India, where automobiles are multiplying and economies are growing at breakneck speed.

``We should treat the prices as a warning that we need to act to promote energy efficiency and renewable energy,'' said Ralph Cavanagh, an energy expert at the Natural Resources Defense Council.

Sixteen states, including California, New York and Texas, have adopted ``renewable portfolio standards'' that require utilities to buy a certain share of their electricity from renewable sources.

Some major oil companies, particularly BP PLC, are investing to develop alternative fuels such as hydrogen, wind and solar. BP Solar, a BP subsidiary, has grown about 30 percent annually, boosted by government incentives that make solar competitive in sunny states such as California, said spokeswoman Sarah Howell.

``BP invests in it because we see it as a long-term business that will grow ever stronger,'' she said.

Less than 3 percent of U.S. electricity now comes from renewables such as wind, solar, geothermal, wood and waste, but that share is expected to increase as the price of fossil fuel rises.

For now, advocates are pleased that pocketbook concerns are generating renewed interest in green power.

``It brings attention to the need to diversify America's energy portfolio,'' said George Douglas, spokesman for the National Renewable Energy Laboratory in Golden, Colo. ``It raises people's awareness of the cost of energy and where energy comes from.''