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RAND: Renewable Resources Could Produce 25% of Total US Electricity and Fuels by 2025
13 November 2006
Renewable resources could produce 25% of the combined demand for electricity and motor vehicle fuels in the United States by 2025 at little or no additional cost if fossil fuel prices remain high enough and the cost of producing renewable energy continues falling in accord with historical trends, according to a RAND Corporation study issued today.
Renewable sources currently provide about 6% of all the energy used in the United States.
RAND found that meeting the 25% renewable energy target for electricity and motor fuels together would not increase total national energy spending if renewable energy production costs decline by at least 20% between now and 2025 (which is consistent with recent experience), unless long-term oil prices fall significantly below the range currently projected by the Energy Information Administration.
The study evaluates the goal known as 25x’25 (earlier post). This refers to having 25 percent of the energy used for electricity and motor vehicle fuel in the United States supplied by renewable energy sources by the year 2025.
The Energy Future Coalition, a nonprofit organization, asked RAND to assess the economic and other impacts of meeting the 25x’25 goal. The RAND study considered technological and economic factors that would affect the costs of renewable energy as well as non-renewable fossil fuels.
When talking about the impact of increasing use of renewable energy sources in our energy future, it’s important to be clear about the assumptions being made about future energy prices and technological developments, not just for renewables but also for competing fossil energy sources.—Michael Toman, Director of RAND’s Environment, Energy, and Economic Development Program
The study—Impacts on US Energy Expenditures of Increasing Renewable Energy Use—also found that meeting the 25x’25 goal results in significant greenhouse gas emissions reductions amounting to 1 billion tons of carbon dioxide in 2025, or 15% of projected US emissions. In addition, an estimated 2.5 million barrels of oil consumption (10% of projected consumption) would be displaced, according to the study.
A 25% renewable future could, according to the study, reduce oil prices by 4%, natural gas prices by 6%, and coal prices by 16%. If renewable technology improves by 50% relative to nonrenewables, the maximum degree of improvement simulated by RAND, then net energy costs are nearly $30 billion lower in a 25x’25 future.
Previous studies have relied on a handful of scenarios to capture uncertainties in the US Department of Energy’s projections of future energy prices and changes in the costs of various technologies.
The RAND study examined 1,500 cases of varying energy price and technology cost conditions for renewable and nonrenewable resources. The RAND team developed a model based on the National Energy Modeling System created by the US Energy Information Administration.
RAND researchers did not assess the impact of renewable energy used directly by industry in buildings currently using natural gas, in off-road vehicles used for construction and recreation, or in railroad and jet fuel.
RAND researchers assumed that implementation of increased renewable energy use would be carried out at a national level in the least costly manner, versus a more piecemeal approach. Among the important uncertainties considered is the cost to ramp up use of new renewable energy technologies.
(A hat-tip to Allen!)
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