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Fortnightly Magazine - November 1 1995

because the economics make sense. Changes in industry structure, which could transform the electric power industry to a commodity market, will affect utility investment. If an investment adversely affects utility competitiveness because it is geared toward longer-term challenges, the investment may not take place. Without such investment, climate change goals may fall by the wayside.

Many observers question the economic viability of some of the policies designed to encourage energy efficiency. DOE is not advocating a cookie-cutter approach to force efficiency in the new market. We believe new models must be developed to ensure that energy efficiency remains a priority for the utility industry during the transition to more competitive markets.

Renewables Serve Our Long-term Interests

The enactment of PURPA in 1978 encouraged development of renewable energy. Since then, approximately 12,000 megawatts of nonhydroelectric renewables have been brought on line. Several states, particularly California, have encouraged the development and deployment of renewable resources. Some have experimented with different mechanisms to push renewables into the marketplace. Over time, advances in research and development have driven down the costs of various renewable technologies, allowing them to compete with more conventional power generation (see chart). At the same time, renewable capacity has continued to grow. By 2005, renewable capacity in the United States is projected to increase to 260 megawatts (Mw) (photovoltaics); 12,500 Mw (biomass/municipal solid waste); 3,440 Mw (geothermal); and 4,180 Mw (wind).

The federal government supports the continued deployment of renewable resources primarily for economic, export, environmental, and energy-diversity purposes.

I have had the good fortune to accompany Energy Secretary Hazel O'Leary on several presidential missions on trade and sustainable energy development to India, China, Pakistan, and South Africa. The Secretary witnessed the signing of energy deals valued at $19.2 billion (em a full 15 percent ($2.7 billion) involving renewables.

For every $1 billion in exports, 20,000 jobs are created. In India alone, Prime Minister Rao has committed to install 2,000 Mw of renewable energy by 2000. China prominently featured renewable energy in its Agenda 21 (em a plan developed to achieve the objectives established by the Rio treaty. These two nations alone will account for 35 percent of incremental electricity demand between 1993 and 2010, requiring $450 billion in capital. Thus, the potential market for renewables is great. And because research and development has driven down their cost, renewable technologies will have an opportunity to compete against conventional technologies in inter-national markets.

Renewable resources deployed in India, China, or any of the developing countries also offer global environmental benefits. Non-emitting technology produces no CO2 or criteria air pollutants. Deployment of renewable technologies also provides local benefits. Since renewables do not emit any pollutants, meeting incremental electric capacity requirements with such technologies will help keep the local environment clean. It is essential that U.S. firms compete in these markets.

From the standpoint of energy diversity, the development of innovative technologies expands the nation's flexibility to respond to changes in energy markets. As we have learned many times, our nation is better off when we have more options to respond to changes in energy