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The U.S. is falling far behind its rivals in developing alternative energy sources

May 23, 2004|Paul Roberts | Paul Roberts writes about the energy industry for Harper's Magazine and other national publications. He is the author of "The End of Oil: On the Edge of a Perilous New World."

SEATTLE — For anyone trying to imagine where America will be getting its energy in two decades, news that Ford's new line of hybrid vehicles will feature a key component of Toyota's hybrid technology was depressing.

Not that Japanese automotive technology is anything to sniff at. When it comes to making gas-electric hybrids that actually sell, Toyota and Honda are the market leaders -- meaning Ford will probably have its hybrid on the market much faster than if it developed a complete hybrid system in-house. But that's the rub.

By outsourcing some of its technology needs to Toyota, Ford has demonstrated yet again how the United States, ostensibly the most technologically advanced nation in history, is losing a key opportunity not only to shape the next energy economy, but perhaps to effectively compete in that economy as well. And given the troubled state of our oil-based energy system, with its growing political, environmental and supply issues, the failure to be an aggressive player in the new energy economy could pose serious long-term problems -- especially for countries as energy-hungry as the United States.

It hasn't always been this way. For nearly a century, U.S. innovations dominated not just the energy business but related businesses, especially automobiles.

Back several decades, when the Arab embargo and the price spikes of the 1970s made the oil economy appear obsolescent, Americans dominated the search for alternatives, such as solar and wind power, in the hopes of cutting U.S. oil imports.

Government agencies lavished funding on research into solar technologies. Congress granted tax breaks to citizens and companies that bought solar equipment, and it required utilities to buy any excess electricity generated by solar systems or wind farms. America seemed on the verge of an energy revolution. Industry too was on board. Exxon, Arco and Mobil invested heavily in solar technology -- not to put it out of business, as some conspiracy theorists believe, or because they thought that solar was intrinsically better than oil, but simply for insurance: If solar did become cost-competitive, Big Oil hoped to control that market as well.

By the mid-1980s, however, the U.S. solar boom had gone bust. Oil prices had fallen dramatically, removing a key incentive for non-oil technologies. Costs for alternatives, such as solar, were still too high to compete with traditional energy sources, such as oil or coal. But the deeper problem was simply that government support had vanished. Even as the Reagan administration moved aggressively to rejuvenate American oil, gas and coal production, providing tax breaks and subsidies worth billions of dollars, the White House was openly hostile to alternative energy. The administration cut R&D funding, and in a grand, symbolic gesture ripped out the solar panels that had been installed on the White House roof by Reagan's Democratic predecessor, Jimmy Carter.

Yet even as America rediscovered fossil fuels, quite another strategy was unfolding elsewhere: Both Germany and Japan began aggressively pushing research in solar, wind and other alternatives. Just as important, both countries have moved to build new markets for alternative technologies -- for instance, by subsidizing homeowner purchases of solar panels or helping farmers who want to install wind turbines. By creating more demand, these programs have increased the number of solar cells or wind turbines being manufactured, which is driving down the unit costs -- ideally, to the point where alternatives can compete directly with conventional energy.

The results are encouraging. Joachim Luther, director of Germany's Fraunhofer Institute for Solar Energy Systems, a leading solar research center in the world, is upbeat. He says that if current trends in research continue, by as early as 2008 solar energy could be competing, without government subsidies, against coal or gas in sunny regions, such as the Mediterranean, the Middle East and the American Southwest. To be sure, solar will never replace fossil fuels outright. Solar panels take up a lot of space, and their manufacture has its own environmental downsides. Yet solar is growing fast -- at 21% a year, or about as fast as cellphones in their early years -- and with continued government support and targeted research, this technology could make up a significant portion of the energy mix in the future, thus helping to reduce some of the environmental, political and economic liabilities of our current fossil fuel-dominated system.

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