Renewable energy may have won the hearts and souls of forward-thinking Americans, but it is losing miserably the battle to dominate the national energy system. Exciting opportunities and lucrative niches notwithstanding, renewable energy represents a pitiable fraction of the energy produced, delivered and consumed in this country. Few of those hoping to make their fortune in the renewable energy game have done so; few of those who look to renewables to hedge against possible environmental disaster consider themselves reassured. Why, we might ask, has renewable energy done so poorly?

Or has it?

In the following paper, a research team from Resources for the Future suggest that while renewable energy tech-nologies have failed to meet many early projections of market penetration, they surpassed most cost goals. The answer to the riddle is that the target has moved: the cost of generating energy from competing sources has dropped farther and faster. More subtly, we have altered our notion of “the market.” That is, analysts twenty-five years ago often asked what fraction of a monolithic, monopolistic market for electricity might be supplied by renewables. Analysts today see numerous markets, in some of which renewables do quite well. There are markets for distributed power, and for green power, for example, in which renewables are the resource to beat.

The past two decades of public- and private-sector renewable energy development assumed that the technologies could be improved. This paper illustrates the validity of that assumption, and suggests that energy technologies have been held back by the shifting context in which they compete. Given that validation, the analysis suggests that public and corporate policy makers must do two things.

First, they must reconsider the initial motives behind renewable energy development, and ask if any of those drivers now seem irrelevant. For instance, is the need for energy independence any less pressing? Do environmental issues seem any less threatening? Is the threat of foreign domination of domestic technology sectors any less? We believe that these motives are as compelling today as they ever were.

Second, policy makers and business leaders must ask why the target has moved. The answer, we believe, involves admirable industry and innovation in the private sector fossil and nuclear power industries — with significant assistance from government subsidies, tax breaks, and other assistance.

Of course, the renewable energy industries have received government support, but not nearly as much as the industries against which they compete. As the RFF team notes, Department of Energy spending on research, development and demonstration for fossil fuels was almost ten times greater than that for renewables during the Bush Administration. This does not even include subsidies to well-entrenched practices, such as special tax treatment for oil exploration and production, and lax environmental standards for old coal plants.

So we come to a neat conclusion: to satisfy both renewable energy advocates and fiscally conservative economists, subsidies for fossil must be eliminated, and government policy rearranged so that it encourages behavior in the public interest. Then, the battle between energy alternatives will depend only on technical and managerial advancements — areas where renewables have so far excelled.

Dr. Adam Serchuk, Research Director
Roby Roberts, Executive Director
Virinder Singh, Research Associate
Bernard Moore, Research Associate