Economic Interests Keep Drive for Renewable Energy Stuck in Neutral

When it comes to world energy consumption, it is as if time has stood still for the last decade.

People still rely mostly on fossil fuels to light their homes and run their cars, despite the environmental problems that flow from burning coal, oil and natural gas. At
the same time, renewable energy sources, like the sun and the wind, still glimmer as the great alternatives — clean, abundant and on the brink of mass production
in a future that always seems around the corner yet perpetually out of reach.

By NEELA BANERJEE New York Times

Renewable energy sources, not including hydroelectric power, account for just 1 percent of the world’s supply; fossil fuels provide about 85 percent, energy
experts say. "The energy `system’ shows a substantial degree of inertia," said Joel Darmstadter, a senior fellow with Resources for the Future, a Washington
environmental and economics research group.

The continued reliance on fossil fuels will be one of the most confounding issues officials face when they gather in Johannesburg next week to discuss ways of
developing economies without degrading the environment. One reason is that the main consequence of burning fossil fuels is an atmospheric buildup of carbon
dioxide, the main heat-trapping gas linked to global warming. Yet global warming was scratched from the agenda of the summit meeting, largely at the insistence of
the United States and oil-exporting nations.

The longstanding barriers to the shift from fossil fuels to renewables persist, and manufacturers and developers of the latter can only chip away at them. Solar and
wind power are more expensive than fossil fuels, and even though their prices have fallen over the last decade, the average prices of coal, oil and natural gas have
also stayed relatively low. Environmental groups say one reason these fuels remain cheap is that their price does not reflect the environmental damage they cause
or the costs of defending supply lines.

Technological advances have damped the cost of renewable power sources, but technology has also kept down the cost of using fossil fuels and, in some
instances, reduced their harmful effects on the environment.

"Even if there are rapid developments in renewables, by 2020 there is only a slim chance that they will be anything more than 5 to 10 percent of the world’s energy
supply," said John Mogford, group vice president of renewables and alternatives at BP, the world’s third-largest oil company.

The comforts and advantages energy affords, from the illumination of schools to the refrigeration of vaccines, can clearly spur prosperity. But as societies flourish,
they demand more energy. Most of the world’s fuel is consumed by the rich, industrialized nations. Based on annual per capita energy consumption, the United
States is near the top of the list with 354 million British thermal units and Western Europe with 170 million, whereas India uses 12 million, a report by Mr.
Darmstadter says.

That gap may narrow. By 2050, the world may be using 15 times as much energy as it did in 1950, said Phil Watts, the chairman of Royal Dutch/Shell. But most
of that increased consumption will probably come from developing countries, he predicted.

Perhaps as much as many environmentalists, the oil companies are eager to find alternatives to fossil fuels because they understand that over the next century they
will see their supply dwindling. There are enough proven reserves for oil to last another 37 years or so; natural gas, another 61 years; and coal, 211 more years,
according to the Edison Electric Institute, a trade group. Those supplies suggest that fossil fuels are still cheap and plentiful. But a push toward renewable energy,
Mr. Mogford and others said, will not be set off by the end of oil, but by governments concerned about other issues, like climate change.

The major oil companies are to varying degrees researching and manufacturing renewable energy sources. The three biggest companies are divided on the effects
of their products on global warming. ExxonMobil questions the science; BP and Royal Dutch/ Shell mostly accept it. But all are researching fuel cells and hydrogen
as energy sources, although the economic feasibility of that technology remains years away.

In the meantime, BP and Shell are investing in solar and wind power, BP being the world’s largest maker of the photovoltaic cells needed for solar power and
Shell among the biggest developers of wind farms. Each is involved in outfitting remote villages in developing countries, far from the grid, with solar power systems.

The forays are ultimately driven by the bottom line. The oil companies are acutely aware of political and consumer winds. As people demanded fuels that were
cheap but burned more cleanly, for instance, oil companies began to prospect for more natural gas and produce it, making it a major part of their businesses. Sales
for solar energy systems have been growing by 20 percent to 40 percent a year in the last decade. Shell’s wind business has grown exponentially, to 238
megawatts of projects from only 4 megawatts two years ago.

"Our customers want energy, and they don’t necessarily care if that’s from oil, gas, coal or renewables," said Robert Kleiburg, vice president of strategy and
planning for Shell renewables. "So as an energy company, if we are active on the various technologies around, we stand a better chance of strategically `being
there’ when those technologies take off."

Solar power, while cheaper than before, still costs about 20 cents a kilowatt- hour. Coal, by contrast, costs about 2 cents. Solar systems are expensive to build.
BP makes enough solar equipment annually to produce about 70 megawatts of energy, an amount that even the company concedes is tiny. And that is the output
of seven plants worldwide employing 1,500 people.

Research into a new technology called thin film photovoltaics could cut costs substantially for the whole industry, but mass production of that is not yet imminent.

Wind power has become competitive, but few people want the towering windmills of wind parks nearby, and the wind itself does not always blow.

Still, utilities in the United States and elsewhere are trying to incorporate a bit of wind into their energy mix. TXU, a major electricity company based in Dallas, has
teamed with a developer building a wind farm to buy 240 megawatts of electricity, enough to keep the air-conditioners running in about 192,000 homes for a day.

TXU would take all the energy the wind farm generated at any given time, reducing the output from its natural-gas-fired plants and cutting emissions.

"The greatest advantage is that when the wind is blowing, you don’t have to burn that extra ton of fuel," said Tom Rose, vice president of public policy at TXU.
The other advantage, he noted, is that the price of wind power remains constant over the years.

The 624 total megawatts of renewable energy that TXU will have when the new wind farm begins operating in 2003 is still a fraction of the 22,000 megawatts the
company delivers at peak times. But TXU hopes to increase the proportion gradually. Customers, Mr. Rose said, are starting to demand it, telling the utility in a
poll four years ago that they were willing to pay more to use renewables and help the environment. TXU estimates that the wind energy costs about 5 cents a
kilowatt-hour.

Hobart and William Smith Colleges in central New York, which focus on the liberal arts, have made that choice. They plan to use wind power for a new "green"
building on campus. That move will increase electricity costs for the structure almost 22 percent.

So far, the decision is in the realm of personal virtue, a way for the colleges to show their commitment to the environment and to explore the trade-offs between
cheap power and a cleaner environment. "The prices of renewables still have to fall significantly for their use to become widespread, especially as long as oil and
natural gas are relatively cheap," said Dr. Thomas Drennen, a professor of economics and director of environmental studies at the colleges.

For renewables to thrive, governments have to step in, experts agree. The federal government, a huge purchaser of electricity, could buy more power from
renewable sources, said Dr. James J. MacKenzie of the World Resources Institute, an environmental and economics research firm.

Ideally, Dr. MacKenzie and other environmentalists argued, countries will impose carbon charges on power generated by fossil fuels, reflecting the environmental
damage they cause. But in the United States, Dr. MacKenzie said, "no one will go near that with a 10-foot pole."

Energy companies contend that rather than punishing consumers for using certain fuels, countries should reward them for turning to others. In Japan, Mr. Mogford
of BP said, the government has given incentives and tax breaks for building solar-powered buildings.

"We can only lower the costs so much," he said. "Until policy makers change societal priorities, renewables will develop at quite a slow pace."

Copyright 2002 The New York Times Company