On the Money

Renewable energy set to 'far exceed' current levels: Moniz

Is alternative energy for real?

Oil, coal and natural gas have powered the U.S. energy demand for generations. Yet now that the U.N. Climate Change Conference appears to have set a landmark agreement, can clean energy replace carbon-intensive sources going forward?

On Saturday, officials from 195 countries in Paris unveiled what France's Foreign Minister called an 'historic' agreement to curb carbon emissions. The deal—a culmination of 2 weeks of marathon talks—still requires the approval of delegates from around the world. In an interview with CNBC this week, one top U.S. official hailed the talks as a major achievement.

"We recognize fossil fuels will continue to be a part of the portfolio for quite a long time," U.S. Energy Secretary Ernest Moniz told CNBC's "On the Money" in an interview. Moniz, who was in Paris recently for climate talks, said he is seeing progress and a "strong commitment" to reduce carbon emissions.

"Almost every country in the world...declared their targets to cut down on (greenhouse gas) emissions, pretty substantially."

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Moniz, who has served as President Barack Obama's energy secretary since May 2013, said the U.S. pledged to cut emissions by "27 percent below 2005 levels by the 2025 deadline. He added that there were "comparable targets from most of the big emitters."

Fossil fuels supply constitutes about 80 percent of the energy Americans consume. Meanwhile, alternative energy sources, including wind and solar power, currently generate about 10 percent.

A former physics professor and director of MIT's Energy Initiative, Moniz thinks those figures are poised to "far exceed" those levels soon.

"Wind energy has gone up by several fold just in the last five to six years," Moniz said, "and now (wind) provides about 4.5 percent of our electricity. You add that with solar, we're talking 5 percent."

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According to the U.S. Energy Information Administration, solar capacity is expected to increase 123 percent by between 2014 and 2016, and wind power is forecast to grow 27 percent over the same two-year period.

Still, in the world's largest energy consumer, just 12 states account for about 80 percent of the wind power generated, according to EIA data, Texas is far and away the leader with 36 million megawatt hours of electricity in 2013. That was followed by Iowa with less than half that amount, 15 million MWh.

With those modest numbers, how realistic is the hope that in America a significant portion of energy will come from renewable sources of power?

A key problem, some observers note, is that alternative energy has generally been more expensive to produce than energy from fossil fuels. Meanwhile, renewable energy is not always available, since weather conditions can dilute the efficiency of solar and wind power.

Additionally, according to EIA data, renewable energy is still heavily subsidized by the federal government. Between 2010 and 2013, federal subsidies on electricity-related renewable energy rose from $8.6 billion to $13.2 billion. In 2013, solar power received $5.3 billion while wind power subsidies amounted to $5.9 billion.

Secretary of Energy Ernest Moniz discusses the preliminary nuclear deal with Iran on April 6, 2015.
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Yet renewable advocates state alternative energy costs are becoming more competitive with their cheaper fossil fuel counterparts. That dynamic, according to Moniz, will help boost renewable energy growth.

"Cost reductions will make these technologies more widely competitive. We're seeing it now, but it will grow even further," he added.

Moniz cites wind project developers who already have "signed contracts with utilities to deliver electricity as low as 2 cents per kilowatt hour," he said. "So it's very competitive in the right places today. And the geography is only going to spread as we go forward with new technology."

Another outcome out of the Paris talks that Moniz mentioned to CNBC was "Mission Innovation." He called the plan to increase future global energy investment a "highlight" of the conference.

Moniz said, Obama and "the leaders of 19 other countries" pledged to "double our energy technology [research and development], increase the innovation pipeline, and provide more" investment opportunities, he said.

Moniz told CNBC renewable energy will be a bigger part of "developing a more extensive smart grid" in the years to come. "This is all happening now," he said, and "there's a lot more we can do as we capture modern information technology."

"On the Money" airs on CNBC Saturday at 5:30 a.m. ET, or check listings for air times in local markets.