So you think energy is expensive?

Empty fuel gaugeIf you’re like most people in the known universe, the global economic crisis has reached your doorstep in one way or another.  For many years, energy prices have been a bone of contention here in the United States.

  • We are a culture that has known nothing but cheap gasoline for our cars and given that there are 2,615,870 miles of paved roads in America, there’s certainly an on-going hunger for more gas.  Couple that with the fact that of the more than 255 million registered passenger vehicles across the 50 states, over 101 million of them are of the often thirsty SUV and pick-up truck variety and you can see why Americans are getting increasingly rankled when $4 per gallon of unleaded is the norm.
  • On the home energy front things people are feeling the pinch as well.  Whether your heat comes from natural gas or heating oil (or electricity in some cases), most people are dreading the growing utility bill that shows up in the mail once a month.
  • Electricity (49.8% coal, 20.9% natural gas or petroleum, 19.9% nuclear, 6.5% hydroelectric, 2.3% renewable - in case you were wondering) for the most part has avoided the steep run-up in price that other utilities have delivered unto the American people, but that too keeps creeping upward.

Price of energy around the worldUnfortunately I have some bad news and I hope you’re sitting down.

  • First of all, compared to the rest of the world the cost of energy we enjoy in the United States is relatively cheap.  Have a look at the infographic above – the price of energy in the U.S. is for the most part less than half of what people in Europe are experiencing.
  • Secondly (and this is certain to upset some readers), some of the cost of producing and delivering energy comes in the form of subsidies that come from tax payers.  To add insult to injury, fossil fuel-based subsidies are nearly ten times higher than those for renewable sources.
  • Last – and perhaps most disturbing of all given the long-discussed need for robust domestic renewable energy program – the United States is not leading the world in renewable energy investment (in absolute or relative figures).  In fact, the U.S. is not second on the list either, we are third.

A recent study by the United Nations Environment Programme (UNEP) and the Frankfurt School of Finance & Management entitled “Global Trends in Renewable Energy Investment 2011” discovered that worldwide investment in renewable energy jumped by 32% in 2010, to an astounding $211 billion.  Of that figure, China led the pack with $49.8 billion in 2010 – a 28% increase over 2009.

There’s little doubt that these numbers will change in 2011 for the European countries given the financial crisis that is hitting the region currently but when I look at the investment figures for the U.S. relative to China, it is hard not to be concerned by what I’m seeing.  I try to avoid politics at every opportunity and instead favor a logical, common sense approach to solving complex problems.  In this case one might argue that the robust financial subsidies being delivered for fossil fuels should be tapered off over the next three to five years and the investment be reallocated – dollar for dollar – to renewable energy.  Yes, this will be painful (we’d pay for the tax subsidies and the unsubsidized gas, assuming that was passed on to the consumers) but at some point we owe it to ourselves and future generations to begin a significant shift away from what we know is a finite resource and it doesn’t really matter if we’ll be out of oil in 50 years or 500 years – it must be done.

As a side note, do some research on “peak oil” if you want to have some sleepless nights.  No one really knows how much is science fiction versus fact right now but everyone should be well-versed on this topic.

Personally speaking, my first choice would be solar since for most of the United States there is an abundant supply of sunlight and it can be harvested and used in the same spot and elements of the infrastructure already exist (i.e., in most places we have roofs that can support solar panels).  It also helps the already significant move afoot to electric vehicles (EV) that will ultimately help deliver us from international oil dependence, but I digress.  Technological innovation and manufacturing scale are the two major barriers that are keeping the solar cost per kilowatt from being competitive with existing retail electricity prices.  If there’s anything the flat panel television industry can teach us, when enough focus and investment is put toward solving the innovation and manufacturing challenges some really amazing things can happen.  In 1997 Philips introduced a 42″ plasma TV that sold for $14,999 (including delivery and in-home installation) and now roughly 15 years later a significantly better product (i.e., 1080p high definition, HDMI, etc.) can be purchased for $500 or about 3.3% of the original price.  Oh and did I mention that there are already over 100,000 relatively high-paying jobs in solar-related industries in the U.S.?  Growing this industry won’t solve the job crisis alone but bringing that employment figure closer to 500,000 would have a cascading benefit to other industries as well (i.e., retail, dining, consumer electronics, grocery, etc.) as people begin to have a little more money in their pockets.

I don’t know about you but I’m ready to start producing some of my own power even if it just offsets the increased demand from my future EVs and helps wean the country off of our addiction to oil.  There is a terrific and often incorrectly attributed Chinese proverb that sounds a bit like “[it is] better to light a candle than curse the darkness” and it often comes to mind when I see politicians, environmentalists, and industrialists throw up their hands regarding our current and future energy policies.

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