Renewable Fuels May Provide 25% of U.S. Energy by 2025
Nov 13, 2006

Wall Street Journal, Print Edition
JOHN J. FIALKA

WASHINGTON -- A new Rand Corp. study showing the falling costs of ethanol, wind power and other forms of renewable energy predicts such sources could furnish as much as 25% of the U.S.'s conventional energy by 2025 at little or no additional expense.
A second renewable-energy report soon to be released by the National Academy of Sciences suggests wood chips may become a plentiful source of ethanol and electricity for industrial nations because their forested areas are expanding, led by the U.S. and China.
Because use of renewable fuels to replace oil and cut emissions of carbon dioxide is an area on which Congress's coming Democratic leadership and the Bush administration agree, the studies are likely to hasten efforts to increase production incentives next year, either in a new energy bill or a farm bill. (See related articles.)
"We hope it will help policy planners rethink the context," said Reid Detchon, executive director of the Energy Future Coalition, a foundation-funded bipartisan group. The coalition sponsored the study by Rand, a nonprofit research group known primarily for defense studies.
The Rand study concludes that because prices for gasoline, natural gas and coal are likely to remain high, their cost advantage over renewables will erode, furthered by the hope that ethanol from farm wastes will be available by 2020.
Renewable fuels now produce only 6% of the nation's energy, and about half of that comes from hydroelectric dams. The study assumes renewable-energy costs will keep dropping at the rate of recent years. It says raising the use of renewables to 25% of all U.S. energy consumed would reduce U.S. reliance on oil by about 20% or the equivalent of the imports from Saudi Arabia and Venezuela. The study says the expected growth of energy-related emissions of carbon dioxide, thought to be artificially warming the atmosphere, would be cut by two-thirds over the next 19 years.
Rand researchers modeled more than 1,500 economic scenarios and found that in most cases, increasing the use of renewable fuels -- which don't enlarge the atmosphere's carbon-dioxide buildup -- would be cheaper than federal regulations forcing the reduction of carbon-dioxide emissions, about a third of which come from vehicles.
The study notes there has been "little systematic analysis" of the costs of renewable fuels. Much of the debate has consisted of optimistic projections by environmental groups and doubts expressed by some academic skeptics, who say that making ethanol from corn consumes nearly as much energy as it produces and could raise food prices. Ed Murphy, a group director for the American Petroleum Institute, said policy that assumes there will be substantial improvement in ethanol technology "could be foolish and costly."
The Rand study's cost estimates assume progress will continue on making ethanol from farm wastes, wood chips and other forms of biomass that are much cheaper and more plentiful than corn. Given the interest in so-called cellulosic ethanol, more than 100 companies from the agricultural, chemical and biotechnology sectors will begin a three-day meeting here today.
The study on the growth of forests says forests in 22 of the 50 countries with the largest wooded areas are growing. Destruction of forests in tropical nations, however, continues, with Brazil and Indonesia experiencing the greatest losses.
Write to John J. Fialka at john.fialka@wsj.com