Alternative Energy Sources Industry Trends

Use of Renewable Sources

Increased Focus on Reducing Oil Imports

Issues concerning safety (nuclear); long-term cost (petroleum and natural gas); and greenhouse gases (coal) are complicating and making more expensive the approval process for new power plants. Federal and state legislatures are actively encouraging development of electric power from wind, solar, geothermal, and hydro sources. A number of states have set capacity targets for the amount of power produced using renewable sources.

The government has set a goal to reduce dependence on Middle East oil 75 percent by 2025, of which developing alternative transportation fuels is key. Political instability in the Middle East continues to make reducing oil imports a national priority.

New Technologies for Coal-Fired Plants

Growth of Production Capacity

Coal is the most plentiful and cheapest fossil fuel in the US and has a relatively stable price. Considerable research is being conducted into developing “clean” burning coal plants. One latest method under development captures and liquefies the carbon dioxide from burning coal and sells it to oil companies to recharge oil wells.

About 100 ethanol plants nationwide have the capacity to produce nearly 3.7 billion gallons annually, and 17 additional plants are under construction. In the US, 26 large commercial-scale biodiesel plants operate, producing an estimated 150 million gallons annually. That number is expected to increase to over 3 billion gallons annually by 2008, as 70 new plants come online. Local economic development is often a driver for new plants, along with increased expected demand.

Renewed Interest in Nuclear Plants

Number of Flex-Fuel Vehicles Increasing

New nuclear plants are being considered in the US for the first time in 20 years - since Long Island Lighting Company spent over $5 billion on the Shoreham nuclear plant that never received operating approval. France produces 79 percent of its electrical power from nuclear plants, and plants worldwide have operated without major problems since the Three Mile Island (1979) and Chernobyl (1986) incidents. In the past 20 years, plant designs and control mechanisms have become more sophisticated. A number of utilities plan to propose new facilities, but the length and complexity of the permitting process remains a challenge.

US auto manufacturers have been taking advantage of a 1988 law that allows only gas consumption to be counted in miles-per-gallon ratings for vehicles equipped to use high concentrations of ethanol. These “flex-fuel” vehicles went mostly unnoticed until fuel prices rose and public interest in alternative fuels picked up. US manufacturers sensed a positive marketing opportunity and have begun touting the advantages of flex-fuel vehicles. About 6 million vehicles are equipped to use E85 fuels and all US manufacturers plan to increase flex-fuel production. Toyota and Honda will also produce flex-fuel vehicles.

Deregulation

More Retail Stations Offer Ethanol

Nearly half the states have passed some form of electric power deregulation. Regulators believe that a deregulated, highly competitive marketplace will result in more efficient power generation and lower prices. Achieving lower prices has proved difficult because of high entry barriers and lack of market experience. After the supply and pricing problems in California during 2001, deregulation is still proceeding, but more slowly.

While less than 1 percent of US gas stations sell E85, the number is increasing rapidly. The number of stations selling E85 quadrupled from January 2004 to January 2006 and is expected to nearly double in 2006. Growth has been spurred by support from auto manufacturers and government regulations.