At least since the oil spill off the coast of Santa Barbara, California in 1969, the energy price upheavals of the 1970s, and the Three Mile Island meltdown of 1979, the choice of technologies to meet U.S. energy demand has appeared prominently on the agenda of U.S. public opinion and policy. Concerns about the environment, the economy, equity, monopoly power, and the role of the public sector have been manifest in the public debate. One outcome has been public policy and public-sector support, albeit sometimes faltering support, for the development of renewable energy technologies.

Nearly 30 years into this public discussion, the reality is that renewable technologies have failed to emerge as a prominent component of the U.S. energy infrastructure. This has created the perception that renewables have not met the goals and claims of proponents. The implication is that after several decades of support without success, it is time to pull the plug on renewables.3

This study does not address the merits of this claim nor its implication for public policy; instead it focuses on the premise of the argument — that renewable technologies have not met the goals and claims of their proponents. We evaluate the performance of renewable technologies for electricity generation measured against stated timetables that helped shape public policy goals, and we also evaluate these technologies against projections and trends in conventional electric power generation. The renewable energy technologies we investigated are biomass, geothermal, solar photovoltaics, solar thermal, and wind.

Our findings refute the premise that renewable technologies have failed to meet public policy goals. To summarize briefly, we confirm that penetration into the market has fallen far short of projections. However, the costs of these technologies generally have fallen in accordance with the projections of their proponents, sometimes exceeding the projected decline. This is remarkable, given that renewable technologies have not significantly penetrated the market, nor have they attracted large-scale investment and production that can contribute to technological development or economies of scale in production, as many analysts anticipated when forming their cost projections.

Our analysis indicates that the small market share of renewable technologies appears to have more to do with changes outside their development than with their own technological performance. Over roughly three decades, regulatory reform has swept the energy industry. Prominent policy changes such as the deregulation of natural gas and oil coupled with declining technical costs of production have made these conventional energy fuels less expensive. An increasingly competitive world petroleum market has led to a decline and stabilization in the price of oil, such that currently the real price of oil is at its lowest since 1973.4 Deregulation of the railroads led to dramatic cost reductions for coal use in electricity generation. The Public Utility Regulatory Policies Act (PURPA) of 1978 opened the door for nonutility generation of electricity for resale, and the Energy Policy Act of 1992 paved the way for competitive wholesale generation. These changes and other technological developments have produced a dramatic decline in the price of fossil-fueled electricity generation. In addition, public policy and technological changes have led to a dramatic improvement in the environmental performance of these technologies (especially for newly constructed facilities).

The ultimate impacts of these changes in the regulation, technology, and market structure of fossil fuels have been mostly favorable for electricity consumers; they have also been frustratingly disappointing for the fate of renewable technologies, which have had to compete in this changing environment. Hence renewables may be seen as a relative loser — perhaps the innocent victim — amidst the widespread success of a wide array of public policies aimed at energy markets.

We conclude that many significant expectations and public policy goals regarding development of renewable technologies for electricity generation have been achieved. Any argument that public policy support for renewable technologies should be ended because “past efforts have been unsuccessful” is based on a faulty premise. These findings should be of interest in the policy debate about the possible future role of renewable energy technologies, and about whether public policy can contribute effectively to the direction and pace of technological change.

Although we reject the negative, we cannot make an unambiguously positive assertion. That is, we do not attempt to attribute the successful achievement of projected technological development and cost declines to a specific government policy or any other factor. We do not make a direct case for continued government support of these technologies. Nonetheless, the successful achievement of cost-related goals provides some reason for optimism with respect to the role of renewable technologies and of public policy in meeting future challenges such as reducing greenhouse gas emissions.

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