IRA FLATOW, host:
Turning now to the latest round in the ongoing debate among energy experts. Can renewable energy sources like wind and solar and water, can they make a real dent in fulfilling our growing energy demand without making a huge dent in our wallets? Right now about 6 percent of the energy we use comes from renewables.
A plan called 25 by 25 - we talked about it here a few months ago - that plan as its goal to supply 25 percent of our energy from renewable sources by the year 2025. And critics of this plan warn that renewables are just too expensive to compete with entrenched and cheaper fossil fuels. And they say that meeting this goal will mean more expensive energy for all of us.
But a new study by the Rand Corporation put that claim to the test and found that under certain conditions, bringing more renewables into our energy mix wont' spell economic doom.
Michael Tillman is a senior economist and director of the Environment, Energy and Economic Development Program at the Rand Corporation in Arlington, Virginia. He joins us today from Rand. Welcome to the program.
Mr. MICHAEL TILLMAN (Senior Economist and Director, Rand Corporation): Thank you. It's a real pleasure to be on with you.
FLATOW: Thank you. What are these certain conditions that will make these competitive?
Mr. TILLMAN: The basic conditions that we look at - and I should say the Rand study looked at a lot of situations in which renewable energy improved relative to non-renewable in its cost, and a lot where it didn't improve as quickly. So we looked at a very wide range of possibilities so that we could cover the bases.
If we can have renewable technologies improve, relative to non-renewable in terms of cost at the rate we've seen over the past 20 years, roughly 20 percent or more; and if we can have fossil fuel prices that stay high enough that there is in fact room in the market for these resources; then we are able to find that penetration of renewables can occur without increasing overall energy costs.
Now, the individual renewables may still be more expensive. In fact, we find that in many cases the alcohol fuel that's used to displace gasoline and the renewable wind or biomass - you know, plant matter that used to make electricity - these individual sources are more expensive. But because they reduce the demand for coal, and gas, and oil, people that are still consuming these resources would pay a lot less.
So nationally, the cost can be about a wash. But depending on what kind of energy you use and how much, you may find that your energy bill grows or shrinks.
FLATOW: Does this require market forces to control the future, or do we have actually to set an agenda for this to happen and use ample tax breaks, whatever influences we can?
Mr. TOMAN: The Rand study was policy-neutral on the sense that we didn't assume or analyze any specific measures. We started with this goal and we're backwards to see what the cost implications would be. Because there are many situations in this analysis in which the actual renewable resources are more expensive than their fossil fuel alternatives, these results stated that actually reached this goal some sort of policy would be needed and the kind of policy then would be something that we need to be argued about and studied further.
FLATOW: I would - you're assuming that we are going to be making breakthroughs to make this happen or do you just consider that breakthroughs do happen as a natural course and progress goes in a straight line.
Mr. TOMAN: Well, progress is assumed to more or less march forward incrementally more or like the straight line that you mentioned. There are though a couple of important technical assumptions that we should underscore for the sake of giving the listeners a complete picture, particularly in the area of alcohol fuels - ethanol that used to replace gasoline.
Right now, we produce a fair amount of that but it's all produced from corn and other agricultural crops. And the ability to produce this is inherently limited by the amount of land we've got and the value of the other uses of these crops. So the Rand study is assuming that technology is currently underdevelopment for making alcohol out of trees and shrubs and other plant matter of that type.
These technologies are underdevelopment today and we assumed that they become commercially feasible by the time the study term finishes, which is 2025. Doesn't mean that they're necessarily priced competitive, but we assume that they can be build and operated at a commercial scale.
FLATOW: Does energy conservation fit in to this plan?
Mr. TOMAN: Absolutely. As I mentioned before, a lot of the cost savings that we can get at the national level here, do not arise because we're using less expensive renewables instead of non-renewables is because we can make the price of non-renewable energy lower by reducing its demand.
So we would expect to see the same direction, if not the same magnitude of effects if we, for example, could improve the energy efficiency of buildings or of automobiles so that we would also be reducing demand for domestic or imported non-renewable energy.
FLATOW: Let's go back to your main conclusion - and you talked about this a little bit - that we can reach this goal of 25 percent renewables by 2025 without increasing overall energy cost. What would the cost to the individual consumer be? Because that's what we hear about on the campaign trails all the time, you know, it's your wallet that's going to be hit on it.
Mr. TOMAN: Well, and that's, of course, where the votes lies as well as the individual household budget. We find, for example, that electricity prices might be increased on the order of 15 percent, which means that if you're paying about $1,000 a year for electricity, of course, that depends on where you live and how much you used, you might be paying another $150 a year for electricity.
On the other hand, if you are driving a gasoline vehicle still in this scenario, gasoline prices might fall on the order of 5 percent. So if you're spending $3,000 a year then you would basically be getting back that $150 from your electric bill in terms of a lower price at the pump.
So that kind of consumer would sort of break-even but consumers that used different mixes of energy would get different results.
FLATOW: Do we have to depend on the energy producing company, the oil company, the utility companies to be active parts of this goal or do they come along and just follow economics?
Mr. TOMAN: Well, because we started with the assumption that the goal would be met by somebody and then worked backwards to get the cost. Who actually would be involved in producing these fuels is something that the analysis doesn't speak to directly. We know already in the electric power sector, that a lot of small electricity producers using a variety of different technologies -including renewables - are producing or could be producing in the future, producing with wind or other renewable energy.
We could see more of them coming into play if we had larger requirements for renewables in the power sector and they would simply connect up to the national grid and sell their electricity to the big utility companies that distribute it.
The alcohol is produced by large producers today, that work with farmers and use the agricultural crops that make the alcohol. In the future, these other sources of alcohol could be produced by a number of smaller firms located in different places, depending on where the input material is located - near forest, near sawmills - wherever we can get the product.
FLATOW: Uh hm. Do you see that the energy, the electric distribution grid has to be changed for this to work?
Mr. TOMAN: We assumed that there would be some limits on the ability of this new renewable energy to get moved around, because even now, we find that there are occasions in which the existing grid is constrained in its ability to transmit power from place to place.
When we have more decentralized, small sources of electricity - like wind generators or small boilers using trees and scrubs to make electric power -there would certainly be a need, I believe, to expand at least somewhat, the ability to connect these sources up to the grid. Because right now, the grid is really designed namely to connect large sources.
FLATOW: It looks - because from my impression, and we do lots of programs about wind, for example - it's almost like there are - every state has decided to take this on in itself. There are communities that are building, you know, hundreds of megawatts of power. We have states that are creating their own electrical systems, as oppose to being a large integrated grid these days.
Mr. TOMAN: Certainly there is a lot of movement. You see it in college campuses, communities, as you mentioned. There's a lot of this activity going on. But unfortunately, in most applications, large use of wind power is still not economic.
Direct energy cost - it's roughly competitive or even a little better than natural gas, but the big problem is that the wind doesn't blow all the time in most places. So you still have to deal with backup power to cover you when the wind is not available, and by the time you take that into account, it's still is a bit more expensive than fossil energy.
Where we see it in larger use, it's normally because states have mandated that their utility companies have a certain percentage of their power from renewable sources.
FLATOW: Talking about the 2025 project on TALK OF THE NATION Science Friday from NPR News. I'm Ira Flatow with Michael Toman of the Rand Corporation. Reducing fossil fuel use, of course, an increasing renewables will resolve in the significant reduction in carbon dioxide emissions, won't it?
Mr. TOMAN: Yes, it will. By cutting back on our use of coal, especially in the power sector because it has the most CO2 when it's burned. Also oil and natural gas. We estimate, in the sort of middle of the road case that we looked at, we could reduce emissions of CO2 in the U.S. by about 15 percent out in 2025.
That doesn't sound like a real large number. But another way to look at it is that it would take up about two-thirds of the increase in emissions that might occur between now and 2025. So this level of substitution could be a significant contribution toward, at least, slowing the growth of emissions in this country.
FLATOW: Let's go to Chuck in San Francisco. Hi, Chuck.
CHUCK (Caller): Hi. I'm wondering if your study took into account the things like trade deficit, where we buy - where if we were to develop technologies that could be produced in this country it would create jobs and we wouldn't be sending as much money overseas for old tech and for fossil fuels - and it would there by benefit us economically.
FLATOW: Yeah, will this create jobs?
Mr. TOMAN: Well, the Rand study really only looked at the electricity and fuels parts of the economy, just the energy sector, itself. The caller's question about the larger ability of these investments to reduced trade deficits and help the economy is something that gets debated very often when we're looking at issues related to oil imports and other energy questions. We did not touch on that in this work. We focused directly on the issues of direct energy costs.
FLATOW: Did - is it possible from your study to tell if we are actually on a road to 2025? The way we're heading now.
Mr. TOMAN: At this point, there has been really only modest increases in renewable energy use in the last few years. We are seeing only in the last two years, of course, significant increases in oil prices. And if fossil energy prices stay high as we see them now, we would certainly expect to see the mix of energy adjusting over the longer term.
Because coal is very plentiful, and except for greenhouse gases it can be used pretty cleanly these days, there is less likely to be a big movement toward an alternative in the power sector than there might be in the vehicle sector -where we are already seeing much more fuel efficient hybrids, for example, being sold. And certainly there is the possibility in the future, if the costs come down, of a market transition toward other sources besides gasoline.
FLATOW: Uh hm but -
Mr. TOMAN: But we're really only getting started with this now, and you don't see a significant movement in that direction at this stage.
FLATOW: Is it going to take political leadership here?
Mr. TOMAN: Well, because our results indicate that we probably cannot expect these technologies to transition directly into the market, just on the basis of their relative costs - you know, head to head with their alternatives - it would require some form of policy to first make the decision that we wanted to achieve this goal, and then to figure out how to go about doing it.
So we would need leadership, first to weigh the pros and cons of doing this, and then to have, I think, a pretty complicated discussion about the ways that we would go about it.
FLATOW: I want to thank you, Michael, for taking time to talk with us.
Mr. TOMAN: It's been a great pleasure very much.
FLATOW: Michael Toman, senior economist and director of the environment energy and economic development program at the Rand Corporation in Arlington, Virginia.
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I'm Ira Flatow in New York.
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