From battery-powered cars to solar panels, alternative energy has made enormous strides during the past decade. But a string of unconnected successes has barely put a dent in the U.S. oil economy.
While there’s no easy road ahead for green energy, experts say, some solutions exist in scalable technologies with government support — a combination that's so far eluded America’s energy complex.
“We need a holistic approach to energy analysis,” says Doug Arent, head of strategic energy analysis for the National Renewable Energy Laboratory, based in Golden, Colo. “It’s not just one technology versus another."
Second-generation biofuels and concentrated solar power generation could become cost competitive in a few years, according to a Boston Consulting Group report. Still, it's not a question of which alternative fuel will replace crude oil, but which renewable sources will help reduce America’s reliance on it.
“The bottom line: Conventional energy sources will remain the lion’s share of the world’s energy mix for at least the next couple of decades,” concludes the Boston Group report.
How quickly stakeholders can reach consensus on that energy model will determine how fast existing and new technologies can work togetheras the world faces the prospect ofdwindling oil reserves. In that scenario, oil extraction ends and supplies collapse.
“There’s an almost irrational opposition on the part of many conservatives towards the electrification of the automobile, alternative energy sources — and many of these things are being laid at the foot of the Obama administration,” said former General Motors vice chairman Robert Lutz on CNBC's "Squawk Box."
Statements like that from a former Big Three auto executive suggest attitudes about energy may be changing. Other cleaner-burning fossil fuels are extending into more industries.
Jim Hackett, chief executive of Anadarko Petroleum, says American energy independence can be achieved through natural gas and increased domestic oil production.
While efforts to drill offshore and in the Alaska Arctic Wildlife Reserve have stalled, hydraulic rock-fracturing technology, also known as fracking, has allowed tapping of major reserves in North Dakota.
The same technology is changing the natural gas industry, with some experts estimating the U.S. now holds a century's worth of reserves. With so much inventory, natural gas is gaining momentum as a transportation fuel as prices have dropped below the $2 MBTU levels from the $5 range.
“You’ve got an opportunity to use it [natural gas] in the transportation sector to displace oil,” said CEO Hackett on CNBC’s “Squawk Box.”
Flex-fuel vehicles — those that run on a variety of fuels, including natural gas, ethanol and gasoline — already are a reality. Metro bus fleets across the country are powered by natural gas, as are a growing number of light trucks, because they fit the central refueling station model. What's impractical is widespread passenger car use.
To solve the dilemma of which comes first — the infrastructure to spark demand, or the demand to trigger the build out — Hackett says highway infrastructure could be built for several billion dollars through private equity and a little fiscal stimulus.
“All of this can be done in the space of three years with any kind of real effort and policy commitment,” Hackett told CNBC.
Biofuels, Solar Power Advances
Biofuel development is also advancing. Unlike first-generation applications, new biofuel can be derived from algae; and there is now a range of energy crop feedstocks that can be grown on marginally productive land and don't compete with food-oriented grains and beans.
More homeowners, meanwhile, are adopting small-scale solar, as prices fall with increased competition.
But alternative resources collectively are only part of a larger solution that includes Big Oil. “We need to as an industry, and as a country and as a world, find more oil resources. We just have to,” Hackett said on CNBC.
He added that crude oil prices are likely to be above $100 a barrel for the next four to five years, which should encourage Washington to create favorable domestic production policies.
Policy change, though, is never easy. Congressional Democrats recently joined Republicans in backing the controversial Keystone pipeline project that would transport crude oil from North Dakota and the Canadian oil sands to the U.S.
President Barack Obama’s opposition — partly based on environmental concerns — is drawing more criticism, as retail gasoline prices tick above $4 per gallon and unemployment remains high in many states.
Role of Government Policy
Where’s the Policy-Driven Demand?
Whether it’s more drilling or renewables, U.S. energy policy rarely changes meaningfully without mandates.
Consider fuel economy standards for cars and trucks.
It took the 1970s oil shock for Congress to finally push U.S. automakers to comply with fuel efficiency standards. In 2009, the Obama administration raised the federal Corporate Average Fuel Economy, or CAFÉ, standards to a combined average of 27.3 miles a gallon for new cars and trucks for the 2011 model year. The modest 2-mpg increase was the first in passenger standards since 1985.
Renewable energy sources also have made gains in electric power generation, but, again, only because of government intervention.
Lacking federal action, 29 states — plus the District of Columbia and Puerto Rico — require utilities to deliver specified minimum amounts of electricity from renewables including wind and solar power. California has adopted the most stringent standard, requiring 33 percent of its electricity from renewable sources by 2020.
But select mandates that aren't part of a cohesive national energy strategy won't get America to energy independence.
Lutz says it’s a mistake to think of alternative energy as a liberal climate-change issue. A diversified energy strategy is crucial to our national security, the former GM executive said on CNBC's “Squawk Box.”
Lutz and Frederick Smith, chairman of FedEx, are members of the Securing America's Future Energy or SAFE council. They want to raise U.S. oil and gas production, electrify short-haul and light-duty transportation, move toward natural gas for heavy-duty vehicles, institute fuel-efficiency standards and promote biofuels.
“This is not about liberal programs and changing society,” said Lutz. “This is about energy conservation and national security by getting us off of the imported oil.”