A wealth of shale oil will enable Americans to become king of oil producers by 2020, but that does not spell doom for renewable energy. The new report projecting U.S. oil dominance also envisions renewable energy supplying almost a third of the world's electricity in the same scenario by 2035.
The rapid expansion of solar and wind power — along with the steady growth of hydroelectric power — will help renewable energy sources come close to matching coal as the main source of the world's electricity by 2035, according to the International Energy Agency's (IEA) World Energy Outlook 2012 report. Such growth relies upon cheaper technology costs, carbon pricing schemes, rising fossil fuel prices and renewable energy subsidies.
"Nearly 100 gigawatts of renewable energy was installed last year worth more than $250 billion of investment," said Doug Arent, executive director of the Joint Institute for Strategic Energy Analysis at the National Renewable Energy Laboratory in Golden, Colo. "That is almost 50 percent of all new power generation." (A gigawatt can power approximately one million homes.)
All the projections take place in the IEA report's "New Policies" scenario that assumes countries will abide by existing government policy commitments related to the global energy market. Overall, global energy demand is expected to grow more than 33 percent by 2035.
Rising with fossil fuel prices
The biggest boost for renewable energy comes from an expected rise in government subsidies from $88 billion globally in 2011 to almost $240 billion in 2035. That still falls well below subsidies for fossil fuels that amounted to $523 billion in 2011 — six times more than subsidies for renewable energy in the same year.
U.S. drilling of "liquids-rich" shale formations could allow it to achieve oil self-sufficiency by 2020 and help achieve almost complete energy self-sufficiency by 2035. But renewable energy sources will also become more price-competitive as the growing energy demand from China and India drive up the price of oil and other fossil fuels.
Renewable energy will have a good chance of expanding as long as oil prices remain high, said Will Rogers, the Bacevich Fellow at the Center for a New American Security in Washington, D.C. Both he and Arent consider the IEA report projections to be consistent with past projections of renewable energy's future, under the various scenario assumptions.
The natural gas challenge
One possible threat to renewable energy comes from natural gas rather than oil. The abundant U.S. supply of shale gas has driven down natural gas prices and made electricity prices cheaper — leading to a tougher sell for more expensive power sources.
"The one thing I worry about with the natural gas prices so low in the U.S. is that cheap electricity is making it more difficult for utilities that run nuclear power plants or solar farms," Rogers told TechNewsDaily.
It's still too early to tell whether the huge supply of U.S. natural gas will slow down renewable energy's expansion, Rogers cautioned. But he pointed to how the natural gas boom and cheaper electricity prices have already caused one casualty in the nuclear industry — the Dominion energy company shut down a nuclear reactor in Wisconsin after failing to find a buyer for the power station in October.
Still, renewable energy has a big advantage because solar and wind power can be built on a broad scale ranging from a few photovoltaic panels or wind turbines to entire solar or wind farms. That flexibility could enable renewable energy to not only survive, but also thrive in a world where fossil fuel power generation may require large amounts of capital and has future fuel price risks. Nuclear power also has huge upfront costs.
"A nuclear power plant is a large, chunky investment," Arent said. "It takes a lot of capital and commitment to build a nuclear plant versus the incremental investments in renewable power."