The Myth of Fossil Fuels, Alternative Fuels and Renewable Energies - click to enlarge

This article is adapted from the Manhattan Institute's report Energy & the Environment: Myths & Facts, 2nd Edition, by Drew Thornley (April 2009), available online at www.manhattan-institute.org/energymyths/myth2.htm.

Speculation about dwindling oil supplies and concern about the increasingly detrimental effects of climate change have pushed renewable energies to the forefront of U.S. energy-policy plans. As a result, the United States may derive a larger share of its energy and electricity from renewables, such as wind power, in the years ahead. However, the rise of renewables will not be as rapid as many believe, and fossil fuels and uranium[1] will continue to supply the bulk of our energy and electricity in the near term. It's worth looking at the current and projected future contributions from renewable energy sources — as well as the widespread public misconceptions about them.

[The United States] is home to significant reserves of fossil fuels. Putting aside the issue of whether domestic energy resources are currently available for extraction — and not counting the abundant natural resources available to the U.S. in the global marketplace — the Energy Information Administration's most recent statistics reveal that, as of the end of 2007, the U.S. possessed more than 21.3 billion barrels of proved oil reserves,[2] more than 237.7 trillion cubic feet of dry natural gas, and more than 9.1 billion barrels of natural gas liquids.[3] Even more abundant than our oil and natural gas reserves is our stock of coal. As of January 1, 2008, our demonstrated reserve base (DRB)[4] contained 489 billion short tons of coal. However, because of property-rights issues, land-use conflicts, and physical and environmental restrictions, the EIA estimates that only half of the DRB may be available or accessible for mining (262 billion short tons, as of January 1, 2008).[5] Finally, though not a fossil fuel, uranium — the primary fuel used to produce nuclear energy — is abundant in the United States. As of December 31, 2003,[6] given forward costs of $30, $50, and $100 per pound, U.S. uranium reserves totaled 265 million pounds, 890 million pounds, and 1,414 million pounds, respectively.[7] Should renewables not advance as rapidly as many expect or hope, the nation's fossil-fuel and uranium reserves should alleviate some concern about our overall electricity and fuel supply.

Given our abundance of fossil fuels and uranium, their dominance in our nation's electricity supply — they collectively accounted for just over 91 percent of U.S. electricity generation in 2007 — is not surprising. The EIA projects that these fuels will still account for 85 percent of our total electric generation in 2030.[8] Moreover, though petroleum generated only 1.6 percent of our electricity in 2007,[9] it accounted for 96 percent of our nation's transportation fuel.[10]

U.S. Electric Power Industry Net Generation, 2007 - click to enlarge

For many, however, the amount of such reserves and their collective contribution to our energy supply have no bearing on whether, or how quickly, we should transition to renewable sources of energy. Shouldn't we be moving toward renewables anyway, in order to become energy independent? Ironically, because renewables are not commercially viable technologies, the goal of energy independence is at odds with reducing our use of conventional fuels. Unless we are willing to cut our energy use drastically, cutting back on imported fuel means that our consumption of domestic fossil fuels and uranium must increase. Moreover, even if everyone agreed that we should replace such fuels with renewables, significant economic and technological barriers stand in the way of a quick and easy transition.

Almost half (49.4 percent) of [individuals polled by the Manhattan Institute] believed that renewable sources of energy — hydroelectric, geothermal, wind, solar, and biomass — are on track to replace fossil fuels in the near future. While the possibility of a rapid increase in the contribution of renewables cannot be ruled out entirely, current growth trends do not put us on a track to replace fossil fuels anytime soon.

Renewable energy sources met about 7 percent of our total energy needs in 2007. Of this 7 percent, biomass energy contributed 53 percent, hydroelectric energy contributed 36 percent, wind energy and geothermal energy contributed 5 percent each, and solar energy contributed 1 percent.[11] Renewable energies accounted for 8.3 percent of the nation's electricity generation in 2007,[12] down from 9 percent in 2003[13] — though the EIA projects the share to increase in the years ahead. The largest share of renewable-generated electricity in 2007 came from hydroelectric energy (71 percent), followed by biomass (16 percent), wind (9 percent), geothermal (4 percent), and solar (0.2 percent).[14]

Given renewable energies' current costs and technological limitations, as well as the limitations of an electricity grid and fuel-pipeline system designed for traditional power sources and fuels, renewables are not expected to be major players in our fuel-supply mix in the near term. The EIA projects that renewables — including hydroelectric power — will account for 14 percent of total U.S. electricity generation in 2030.[15] (Wind energy generated 0.77 percent of U.S. electricity in 2007[16] and is projected to generate 2.5 percent of U.S. electricity in 2030.)[17] This translates to an average annual growth rate of 3.2 percent, the largest increase of any fuel type.[18] The EIA says that this growth will be "fueled by the rapid expansion of non-hydro renewable generation technologies that qualify to meet State mandates for renewable energy production."[19]

An oft-repeated refrain is that renewable energies, in addition to being cleaner, are cheaper than their conventional fuel counterparts. Thus, it is not surprising that a majority (53.7 percent) of [individuals polled] indicated that it is cheaper to generate electricity from renewable fuels like wind or the sun than it is to produce electricity from fossil fuels, like coal or natural gas. However, there is a difference between the cost of renewable fuels and the cost of producing energy from such fuels.

Subsidies and Support to Electric Production by Selected Primary Energy Sources
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Though wind and solar rays are indeed free, wind energy and solar energy are costly, compared with the costs of conventional power generation. Several factors make renewables more expensive, including high costs of materials and skilled labor, added operations costs to electric grids that were not built for intermittent resources, and lack of adequate transmission lines to carry power from remote areas (where the wind and the sun are most plentiful) to densely populated demand centers. In addition, large federal subsidies and state renewable energy mandates shift many costs of renewable energy production from generators to electric ratepayers, disguising the true costs of these technologies.

In addition, subsidies for wind and solar energy — which together generated less than 1 percent of our nation's electricity supply in 2007 — are significantly more generous than subsidies for conventional power generation, considering the amount of electricity generated by each source.[20] In 2007, wind energy received $724 million in federal subsidies, valued at $23.37 per megawatt hour (MWh) of wind-generated electricity, while solar energy took in $174 million, at a subsidy-per-MWh value of $24.34. By contrast, coal received a subsidy of 44 cents per MWh, natural gas and petroleum liquids received 25 cents each, hydroelectric energy took in 67 cents, and nuclear power grabbed $1.59.[21] Without these generous taxpayer-funded subsidies, renewable energies would not be competitive with conventional energy sources.

Like renewable energies, hybrid cars and alternative-fuel vehicles (AFVs), including electric cars, have become more prominent in fuel-policy discussions, and they are more prevalent on U.S. roads than ever.[22] Almost two-thirds (62.7 percent) of respondents believed that such vehicles will constitute a large portion of all U.S. automobiles in ten years-but again, projections are less optimistic.

From 2003 to 2006, AFV use increased by an annual average of just over 6.27 percent[23]-but, with 250,851,833 registered vehicles in the U.S. in 2006,[24] AFVs made up just one-quarter of 1 percent of all registered vehicles in 2006. And, according to J. D. Power & Associates, sales of hybrid cars — which run on either gasoline or diesel and electricity generated onboard — will account for just 7 percent of the car market in 2015, up from 2.2 percent in 2007.[25]

As our energy economy increasingly relies on electricity, it is important to assess whether electric cars and plug-in electric hybrids (PHEVs), which are powered completely and partially, respectively, by batteries charged by electric grids, are ultimately more environmentally friendly than hybrid cars or even vehicles that run on conventional fuels. Opinions vary. "Odds are those batteries won't be recharged with solar or wind energy," writes John Voelcker in Spectrum, the flagship publication of IEEE, formerly known as the Institute of Electrical and Electronics Engineers, Inc.[26] "In most places, grid power is for many decades going to come from the burning of fossil fuels, which generate their own emissions."[27] In other words, if coal plants supply the electric grid with the bulk of the power needed to charge electric cars, will overall greenhouse-gas (GHG) emissions increase? Voelcker writes, "The moral of the story: If you're concerned about the carbon footprint of your vehicle travel, definitely buy a plug-in — if you live in Norway, Brazil, France, or other areas with largely carbon-free electricity. Otherwise, have a look at your local grid — and think twice if you live in a place with lots of old coal-fired power plants. For you, a conventional hybrid may be kinder to the planet."[28]

On the other hand, many studies reveal that replacing conventional vehicles and hybrids with electric cars and PHEVs will lead to an overall reduction in GHG emissions. The American Council for an Energy-Efficient Economy writes that PHEVs "will reduce both their fuel consumption and their emissions of various pollutants relative to current vehicles, including non-plug-in hybrid-electric vehicles" and that "the advantage of plug-ins over hybrids is large in areas where electricity is generated with low-carbon fuels, and much more modest elsewhere."[29] Using three scenarios for the level of PHEV market penetration and three scenarios for electric-sector carbon-dioxide intensity, the Electric Power Research Institute and the National Resource Defense Council produced nine possible outcomes for PHEVs' effects on overall GHG emissions. Their study concluded that annual and cumulative GHG emissions would decline significantly under each outcome and that each region of the country would see reductions in GHG emissions.[30]

As politicians and policymakers continue to worry about climate change, foreign oil dependence, and the availability of domestic energy resources, renewable energies and alternative fuels will potentially play larger roles in meeting our country's energy needs. However, because of the high costs of renewable energies and alternative transportation fuels relative to their conventional counterparts and because of technological limitations and transmission-infrastructure inadequacies, conventional power sources and transportation fuels will remain the dominant suppliers of our nation's energy for years to come.


[1] Uranium is the fuel most commonly used by nuclear power facilities. See EIA, "Nuclear Fuel-Uranium," http://www.eia.doe.gov/kids/energyfacts/sources/non-renewable/nuclear.html#Nuclear%20Fuel.

[2] See EIA, "Table 1. Total U.S. Proved Reserves of Crude Oil, Dry Natural Gas, and Natural Gas Liquids, 1997-2007," http://www.eia.doe.gov/oil_gas/natural_gas/data_publications/crude_oil_natural_gas_reserves/cr.html.
Proved reserves of 2007 were 345 million barrels (or 2 percent) more than proved reserves of 2006. As defined by the EIA, proved reserves are "estimated quantities that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions" (EIA, "World Proved Reserves of Oil and Natural Gas, Most Recent Estimates," August 27, 2008, http://www.eia.doe.gov/emeu/international/reserves.html).

[3] See EIA, "Table 1. Total U.S. Proved Reserves of Crude Oil, Dry Natural Gas, and Natural Gas Liquids, 1997-2007," supra, n. 18.

[4] The demonstrated reserve base is composed of coal resources that have been identified to specified levels of accuracy and may support economic mining under current technologies. See EIA, "Coal Reserves Current and Back Issues," http://www.eia.doe.gov/cneaf/coal/reserves/reserves.html.

[5] See ibid.

[6] The 2003 uranium-reserves assessment is the EIA's most recent assessment. See EIA, "U.S. Uranium Reserves Estimates," June 2004, http://www.eia.doe.gov/cneaf/nuclear/page/reserves/ures.html.

[7] See EIA, "U.S. Uranium Reserves by Forward-Cost," June 2004, http://www.eia.doe.gov/cneaf/nuclear/page/reserves/urescost.html: "Uranium reserves that could be recovered as a by-product of phosphate and copper mining are not included in these reserves. Reserves values in forward-cost categories are cumulative; that is, the quantity at each level of forward cost includes all reserves at the lower costs."

[8] EIA, "Table A8. Electricity Supply, Disposition, Prices, and Emissions," Annual Energy Outlook 2009, http://www.eia.doe.gov/oiaf/aeo/pdf/appa.pdf#page=17.

[9] See EIA, "Figure ES 1. US Electric Power Industry Net Generation, 2007," http://www.eia.doe.gov/cneaf/electricity/epa/figes1.html.

[10] See EIA, "Petroleum Products: Consumption," supra, n. 9.

[11] EIA, "How Much Renewable Energy Do We Use?," http://tonto.eia.doe.gov/energy_in_brief/renewable_energy.cfm.

[12] See EIA, "Figure ES 1. U.S. Electric Power Industry Net Generation, 2007," supra, n. 25.

[13] See EIA, "Electric Power Annual 2003" (Figure ES 2), http://tonto.eia.doe.gov/FTPROOT/electricity/034803.pdf.

[14] EIA, "Total Renewable Net Generation by Energy Source and State," May 2008, http://www.eia.doe.gov/cneaf/alternate/page/renew_ energy_consump/table6.html.

[15] EIA, "Table A8. Electricity Supply, Disposition, Prices, and Emissions," supra, n. 24.

[16] EIA, "Net Generation by Other Renewables: Total (All Sectors)," http://www.eia.doe.gov/cneaf/electricity/epm/table1_1_a.html.

[17] EIA, "Year-by-Year Reference Case Tables (2006-2030)" (Tables 8 and 16), http://www.eia.doe.gov/oiaf/aeo/aeoref_tab.html.

[18] EIA, "Table A8. Electricity Supply, Disposition, Prices, and Emissions," supra, n. 24.

[19] EIA, "How Much Renewable Energy Do We Use?," supra, n. 27. "However, EIA projects renewable energy's share of total worldwide electricity generation will decrease slightly: from 18 percent of generation in 2005 to 15 percent in 2030. Although worldwide renewable energy is expected to increase, it will be outpaced by growth in other electricity generation sources" (EIA, International Energy Outlook 2008 [Tables H7 and H12], June 2008). According to the EIA, "World electricity generation nearly doubles in the IEO2008 reference case from 2005 to 2030. In 2030, generation in the non-OECD countries is projected to exceed generation in the OECD countries by 46 percent. Over the next 25 years, the world will become increasingly dependent on electricity to meet its energy needs. Electricity is expected to remain the fastest-growing form of end-use energy worldwide through 2030, as it has been over the past several decades. Nearly one-half of the projected increase in energy consumption worldwide from 2005 to 2030 is attributed to electricity generation in the IEO2008 reference case. Since 1990, growth in net generation has outpaced the growth in total energy consumption (2.9 percent per year and 1.9 percent per year, respectively), and generation is expected to increase at an average annual rate of 2.6 percent through 2030 as the growth in demand for electricity continues to outpace growth in total energy use (Figure 52)" (EIA, International Energy Outlook 2008 [Chapter 5-Electricity], June 2008, http://www.eia.doe.gov/oiaf/ieo/electricity.html).

[20] See Gilbert E. Metcalf, "Taxing Energy in the United States: Which Fuels Does the Tax Code Favor?," Manhattan Institute, January 2009, http://www.manhattan-institute.org/html/eper_04.htm.

[21] See EIA, "How Much Does the Federal Government Spend on Energy-Specific Subsidies and Support?," http://tonto.eia.doe.gov/energy_in_brief/energy_subsidies.cfm. Robert J. Michaels, professor of economics at California State University, Fullerton, writes, "According to the U.S. Energy Information Administration, wind's costs per kilowatt-hour hit bottom in 2002 and have since increased by 60 percent. In 2004, the levelized cost of a coal-fired kilowatt hour was 3.53 cents, compared to 4.31 cents for nuclear, 5.w47 for gas and 5.7 for wind. According to a study by Gilbert Metcalf of Tufts University for the National Bureau of Economic Research, removing subsidies to nuclear and wind power takes the former to 5.94 cents and the latter to 6.64" (Robert J. Michaels, "Hot Air and Wind," National Review Online, December 20, 2007, http://article.nationalreview.com/?q=MTlhN2I4ZDhmZTg2N2NmM2EzNmExYTEwNWRjNzU3Mzk).

[22] Hybrid cars are powered by electricity and either gasoline or diesel. Alternative-fuel vehicles include electric cars and cars that can run on natural gas or an E85 blend (85 percent ethanol / 15 percent gasoline). Hybrids are not considered AFVs, according to the Department of Energy. See EIA, "Table V1. Estimated Number of Alternative Fueled Vehicles in Use in the United States, by Fuel Type, 2003-2006," May 2008, http://www.eia.doe.gov/cneaf/alternate/page/atftables/afvtransfuel_II.html#inuse.

[23] EIA estimates the following number of AFVs in use in the U.S. from 2003 through 2006: 533,999 (2003); 565,492 (2004); 592,125 (2005); 634,562 (2006). See EIA, "Table V1. Estimated Number of Alternative Fueled Vehicles in Use in the United States, by Fuel Type, 2003-2006," supra, n. 38. "In 1997, some vehicle manufacturers began including E85-fueling capability in certain model lines of vehicles. For 2006, the EIA estimates that the number of E-85 vehicles that are capable of operating on E85, gasoline, or both, is about 6 million. Many of these alternative-fueled vehicles (AFVs) are sold and used as traditional gasoline-powered vehicles. In this table, AFVs in use include only those E85 vehicles believed to be used as AFVs. These are primarily fleet-operated vehicles" (ibid.).

[24] See Bureau of Transportation Statistics, "Table 1-11: Number of U.S. Aircraft, Vehicles, Vessels, and Other Conveyances," http://www.bts.gov/publications/national_transportation_statistics/html/table_01_11.html.

[25] See "J. D. Power Sees Three-Fold Growth for Hybrids by 2015," HybridCars.com, April 8, 2008, .

[26] John Voelcker, "How Green Is My Plug-In?," IEEE Spectrum, March 2009, http://spectrum.ieee.org/mar09/7928. "A non-profit organization, IEEE is the world's leading professional association for the advancement of technology" ("About IEEE," http://www.ieee.org/web/aboutus/home/ index.html).

[27] Voelcker, "How Green Is My Plug-In?."

[28] Ibid.

[29] James Kliesch and Therese Langer, "Plug-In Hybrids: An Environmental and Economic Performance Outlook," American Council for an Energy-Efficient Economy, September 2006, http://www.aceee.org/store/proddetail.cfm?CFID=1941952&CFTOKEN=35186425&ItemID=418&CategoryID=7.

[30] See "Environmental Assessment of Plug-In Hybrid Electric Vehicles, Volume 1: Nationwide Greenhouse Gas Emissions," Electric Power Research Institute and National Resource Defense Council, July 2007, http://mydocs.epri.com/docs/public/000000000001015325.pdf.