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It's Oil/Gas Prices, Stupid: Key to Renewables' Use, Report Says

As much as a quarter of the nation's energy can come from renewable resources by 2025, if fossil fuel prices continue on their trend of the past few years, and it will not cost power consumers any more for the cleaner supplies, according to a Rand Corp. technical report released Monday by the Washington, DC-based nonprofit Energy Future Coalition. Modeling 1,500 different simulations, the report concluded that what it called "a range of plausible futures" could produce "expanded use of renewables at acceptable costs."

Rand's simulations also concluded that the United States may well be able to make "significant reductions" in greenhouse gas (GHG) emissions without significant effects on energy expenditures, along with having "favorable impacts on other pollutants." The report offers the possibility that greater GHG emission reductions may be achievable through the stepped up use of renewables than can be achieved through increased regulation.

The scenarios in the study, "Impacts on U.S. Energy Expenditures of Increasing Renewable Energy Use," go far beyond the power generation sector, applying 25% renewables to all energy consumed in the nation, including transportation, which is expected to be heavily impacted by increased use of ethanol from agricultural crop waste. While the percentage differences examined in energy costs were relatively small, in dollar terms, Rand noted swings up to $60 billion among the different simulations.

"One of the critical uncertainties in these cost projects is the impact that renewables will have on energy markets once they switch from a low level of penetration to a high level," Rand's report said. "Two of the key factors driving differences in energy expenditures are the cost of developing renewable energy as we increase penetration and the savings from displacing conventional fuels."

If renewable costs stay relatively stable as the penetration increases and conventional fuel markets stay tight, Rand concluded that moving to 25% renewable reliance would not impose undue added costs, and in fact, may make energy overall less costly. However, Rand noted that there "is no way to know" if this future or its reverse will develop. The report suggested policymakers should keep close track of these costs as renewables near higher levels of penetration.

The work for the nonprofit coalition, which is a nonpartisan alliance funded by 15 major foundations, such as the Turner, Annenberg and Hewlett Foundations, identified potential critical points and ranges where changes in the prices of oil, gas, coal or renewable technologies are found to result in a reduction or increase in energy costs. "It is interesting to note that in our computer runs of the renewables goal, more scenarios have lower energy expenditures in 2015 than in 2025," Rand said.

Energy Future Coalition officials told news media they hope this report can help policy planners "rethink" the context for greatly increasing the portion of energy coming from renewables over the next 20 years.

Noting the report is not seeking to identify ideal futures, or to pick the inevitable "winners and losers," Rand said the report's aim was narrower: "to project the impact of a significant expansion of renewable energy in the next two decades on energy expenditures across a host of realistic alternatives."

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