Energy prices, efficiency and renewables

Energy prices, efficiency and renewables

By Robert & Sonia Vogl

Energy prices, efficiency and renewables

by Robert & Sonia Vogl

When we were graduate students, one of our professors had served as an environmental policy advisor in the Johnson administration. He led a team assessing the environmental impact of drilling for oil off the Santa Barbara coast in California. They knew drilling in fractured rock was risky but recommended drilling anyway, as the president needed the revenue for his “guns and butter policies.”

The inevitable oil spill occurred during the Nixon administration and helped mobilize political support for passage of environmental reforms enacted on Nixon’s watch. When oil supplies from the Middle East were withheld in the 1970s, government programs stimulated investments in efficiency and various forms of renewable energy.

These programs were dramatically cut back in the l980s when Saudi Arabia flooded the market with oil. They drove the price of oil down to less than $10 a barrel from a high of around $40.

Since the l980s, the United States increased its oil dependence and remains vulnerable to dramatic price swings and interruptions in supply. Our oil dependency is intensified by a variety of government subsidies and the failure of gasoline prices to accurately reflect the costs borne by individuals from air pollution, environmental deterioration and our military presence in the Middle East.

Several studies have estimated that the full cost of gasoline is in the range of $6 to $12 per gallon, depending on how many externalized costs are included. A gradual increase in gas prices or fuel efficiency would internalize more of these costs and lessen our dependence on imported oil.

Some countries such as England, Germany and Japan are cutting their subsidies for fossil fuels and increasing their subsidies for efficiency, renewable energy, and mass transit. They believe wind, solar, biomass and fuel cells are the wave of the future and represent good business opportunities.

The reinstalled production tax credits in the United States make wind competitive with coal at $.05 per kilowatt hour and natural gas at $.04 per kilowatt hour. The tax credits make it very likely that several wind farms will be operational in Illinois by the end of this year. Since wind itself is free, it is a power source immune to wide swings in energy prices. Wind alone could meet the current world electrical demand.

Producing electricity from the sun still costs around $.30 per kilowatt hour, but it offers the advantage of being most productive in summer when utilities are strained to meet air conditioning loads. It can also be readily integrated into buildings themselves.

Other solar energy choices are more cost effective, including heating, hot water and biomass fuels.

Efficiency remains the least expensive and most reliable energy source considering our wasteful practices. Some studies indicated it is possible to cut electrical consumption over 30 percent by substituting efficiency for supply. Last year, Californians were able to cut their electrical consumption l4 percent in six months by using it efficiently.

Fortunately, in Illinois the Department of Commerce and Community Affairs has several programs to help cut the cost of efficiency and renewable energy to the consumer. Their web site is:

Additionally, Commonwealth Edison has a program to encourage customers to connect their renewable energy sources to the grid.

These programs can help you and your community begin the transition to a clean, dependable energy future.

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