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Growth of US Renewable Energy and Government Policy

Renewable energy development requires strong government incentivesRenewable sources of power production are growing, but they are very far from being able to meet America’s energy needs. The US spends roughly $1 trillion each year, or 10% of gross domestic product, on the fuel needed to power its economy. An Environment America report, called The High Cost of Fossil Fuels, predicts that by 2030, the US could spend as much as $1.7 trillion a year for coal and oil. The report estimates that between 2010 and 2030, the US will spend $23 trillion on coal and oil.

Renewable sources of power are capable of meeting America’s energy needs. Even though enough sunlight hits the Earth in a single hour to fuel the human population for a year, harnessing that power is a major endeavor. According to nonprofit research institute SRI International, to replace the world’s demand for oil with renewable energy, it would take roughly 4.2 billion solar rooftops, 300 million wind turbines, 2,500 nuclear power plants or 200 Three Gorges Dams.

To maximize renewable energy, each geographical region needs to leverage its own strengths. For example, in Texas, wind power predominates,  southern California has ideal conditions for solar energy while Hawaii and Alaska have substantial geothermal resources. (In Hawaii, the Puna Geothermal power plant provides roughly 30% of the Big Island’s power).

The Interstate Renewable Energy Council (IREC) is a leading source of information on renewable energy policy. Recently, IREC published DSIRE`s Top 10 in ’10 list of the US states that have the best renewable energy policies. Here are some of the best states and the reasons why they have been selected.

California raised the cap on net metering under Assembly Bill 510. Colorado boosted its renewable energy standard for investor-owned utilities to 30 percent from 20 percent, by 2020. Colorado is also developing community-based solar installations (solar gardens). Hawaii is creating a feed-in tariff program. Massachusetts added a solar “carveout” to its renewable energy standard, giving the state a target of nearly 400 megawatts (MW) of solar generating capacity. New Jersey becomes the first US state to establish a 1,100 MW mandatory target for offshore wind. West Virginia is boosting net metering caps for commercial and industrial customers, to 500 kilowatts (kW) and 2 MW, respectively.

While some states are enacting policies conducive to renewable energies, other state policies are undermining its growth. Oregon cut its Business Energy Tax Credit program, Florida let a number of its solar power and renewable energy incentive programs expire and Ohio suspended funding for solar projects under its Advanced Energy Fund, due to unprecedented demand.

The latest Monthly Energy Review released by the US Energy Information Administration (EIA) shows that renewable energy sources provided roughly 11 percent of primary energy production for the first nine months of 2010. The EIA report states that renewable energy sources contributed 10.9 percent of domestic energy production through the end of September, up 5.7 percent over the same period in 2009.

According to the EIA report, for the first nine months of 2010, biomass or biofuel accounted for 51.95 percent of America’s Renewable energy, hydropower accounted for 31.50 percent, wind power accounted for 10.52 percent, geothermal 4.65 percent and solar 1.38 percent.

Comparing those statistics with the same period of 2009 shows that US primary energy production rose 2 percent in the first nine months of 2010. With the exception of hydro, all forms of renewable energy grew in 2010. While hydro declined by 5.2 percent, solar energy production expanded 2.4 percent, biomass grew by 10 percent and wind energy grew 26.7 percent. Overall, non-hydro renewable sources grew 11.5 percent.

Although energy efficiency will be the main green growth sector in the coming years, wind energy and solar power will likely see meteoric growth. Overall, the clean energy market will continue to grow in 2011. According to forecasts by Kachan & Co., a US consulting firm that specializes in green technologies, renewable sources of energy will contribute to the ongoing recovery in 2011 and the ongoing recovery will contribute to the growth of renewables.

While concerns about the environment and the effects of climate change are driving the growth of renewables, they are secondary concerns. The primary factor driving the growth of renewables in 2011 is the ongoing recovery of the global economy. The recovery increases demand for oil and this increases the price of a barrel of crude, which in turn makes renewables more cost competitive.

Despite the ongoing growth of renewable energy, in the US, fossil fuels still account for more than three quarters of primary energy production. If the US is to succeed in replacing oil with renewable sources of energy, government policies must provide incentives.

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Richard Matthews is a consultant, eco-entrepreneur, sustainable investor and writer. He is the owner of THE GREEN MARKET, one of the Web’s most comprehensive resources on the business of the environment. He is also the author of numerous articles on sustainable positioning, green investing, enviro-politics and eco-economics.

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