The new administration faces any number of sizable challenges. One thing President Obama proposes is to spend $150 billion "over the next ten years to catalyze private efforts to build a clean energy future." That money is supposed to help create 5 million new jobs.
The new administration also proposes to increase the amount of electricity that comes from renewable sources from 10% in 2012 to 25% by 2025. Another laudable goal.
Looking at the second goal first, the US currently generates about 9% of its electricity from renewable sources. That’s if you count hydroelectric as a renewable source. If you don’t, renewable sources account for only about 2% of US power generation. Going from 2% to 10% in just four years does not seem likely.
The other goal also demands a closer look. Investing $150 billion in clean energy is a great idea, but how much does that really improve the US energy picture? And where should the money go: wind, biofuel, solar?
An argument could be made that more critical than any new source of generation is the development and upgrading of the country’s electrical transmission and distribution grid. There are about 200,000 miles of power lines in the US. Much of the grid is nearing 50 years of use and is located nowhere near where solar and wind power can be most efficiently used to generate power.
For example, the windiest places in the lower 48 states are the Dakotas. To build transmission lines from North and South Dakota to New York City would cost about $13 billion. The investment would eventually be recovered in cost savings, but the up-front money needs to come from somewhere.
And that’s just one project. Bringing solar- or wind-generated power to high population centers in the US will cost far more than $150 billion. To make matters more troublesome, projections for new generation in the US exceed additions to the grid by more than four times.
How much is all this going to cost? Just to patch the flaws in the grid that caused the 2003 blackouts would have cost $100 billion. In the same year, the International Energy Agency estimated that it would cost the European Union about $650 billion to upgrade Europe’s grid.
As for the US, in November 2008 the Brattle Group released a report prepared for the Edison Foundation estimating the cost of upgrading the US grid at $880 billion. That’s even more than the required investment to generate enough new electricity to meet demand between 2010 and 2030. Added together, new generation and an upgraded grid could easily cost north of $1.5 trillion.
The Obama administration’s plan to catalyze investment in alternative energy with $150 billion succeeds only if there is massive additional investment in infrastructure. Without a significant upgrade to the power grid, clean generation won’t have the impact everyone hopes for.
Paul Ausick
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