Will Alternative Energy Ever Go Mainstream?

The problem in evaluating various forms of power is that two critical elements of the debate -- the true costs of production and the efficiency of the energy source -- are often ignored, or wind up buried beneath "statistics" designed to sway the heart instead of the brain. In many cases, an ignorant public and a highly divided political system simply demonize what they barely understand. Let's try to ignore the talking heads for a while and look at the numbers at ground level.

A pressing need
Renewable energy's support is often based on hope and hype, promising freedom from polluting hydrocarbons and the nasty terrorist-harboring petrostates that control them. But that hope ignores the reality, which is that we need to power our many devices quickly, cheaply, and consistently, and we need to do it right now. Alternative energy is not yet up to the task, and so hydrocarbon alternatives remain (for now) on the fringes, as the U.S. Energy Information Administration's data show:

Power Source

2010 U.S. Power Consumption (million bbl. oil equivalent)

Percentage of U.S. Power Consumption

Coal 3,439 21.7%
Oil and gas 10,012 63.2%
Nuclear 1,394 8.8%
Biomass/biofuels 381 2.4%
Geothermal 35 0.2%
Hydro 414 2.6%
Solar 18 0.1%
Wind 153 1.0%
Total 15,846 100%

Source: U.S. Energy Information Administration.

The biofuel category seems respectably sized until one realizes that it includes anything based on bio-stuff, including trash-burning power plants and the corn ethanol foisted on you at the pump. Wind and solar have a long way to go.

You say you want a revolution
None of that should matter if alternative energy can one day rise to the challenge and beat hydrocarbons at their own game. I've written before about why solar energy isn't doomed, but it has a long way to go. All of our alternative energy options do. Journalist Robert Bryce's number-crunching in Power Hungry offers laymen an easy-to-understand view of the energy reality. What he found convinced him that when it comes to efficiency, the best option might be the one the world is currently most afraid of.

Power Source

Area Required to Generate 2,700 Megawatts

Power Density

South Texas Nuclear Project Plant 18.75 square miles 300 hp/acre (56 watts/sq. meter)
Average U.S. natural gas well 19.6 square miles 287.5 hp/acre (53 watts/sq. meter)
Oil stripper well (10 bbl./day) 39 square miles 148.5 hp/acre (27 watts/sq. meter)
Solar (photovoltaic) 156 square miles 36 hp/acre (6.7 watts/ sq. meter)
Wind 869 square miles 6.4 hp/acre (1.2 watts/sq. meter)
Biomass-fueled power plant 2,606 square miles 2.1 hp/acre (0.4 watts/sq. meter)
Corn ethanol 21,267 square miles 0.25 hp/acre (0.05 watts/sq. meter)

Source: Robert Bryce, Power Hungry.

Major oil and gas drilling installations, such as Chevron's Petronius offshore platform, can easily roar past nuclear in terms of potential power density. Such platforms, though, are wholly dependent on striking a massive gusher beneath the surface. It's clear that nuclear power requires the smallest footprint out of the available hydrocarbon alternatives. Nuclear even bests many oil producers for efficiency. SandRidge Energy (NYSE: SD  ) operates over 3,000 oil wells in the Permian Basin, but each is individually less than half as efficient as a nuclear plant.

Despite this evidence, we're not likely to see much new nuclear construction for a few years. The world's hysterical overreaction to the Fukushima disaster made that clear. A nuclear-energy winter doesn't necessarily harm Exelon (NYSE: EXC  ) and other nuke-reliant utilities, but uranium miners are likely to be left in the cold until the world comes to its senses.

Green rogue's gallery
The flight from nuclear power is hastening "energy sprawl," a phrase coined by the Nature Conservancy in reference to the much larger physical footprints needed to generate renewable power. The issue could become so acute by 2030 that an area the size of Minnesota would be required for domestic energy production.

The worst offenders, as you might expect, are corn ethanol and other biofuels. Corn ethanol has gotten major support from oil refiners Valero Energy (NYSE: VLO  ) and Marathon Oil (NYSE: MRO  ) , which both own ethanol plants. But the political tide finally seems to be turning, as Congress let a $0.45-per-gallon ethanol subsidy lapse in the final days of 2011.

Niche biofuel producers seem to have bigger problems. Range Fuels, a "forest wastes" producer supported by the Bush administration's Department of Energy, went belly-up this year. Gevo (Nasdaq: GEVO  ) , a similarly styled bio-refiner receiving similar levels of government support, is finding its strategy difficult to implement and has shifted to corn-based production.

Incomplete solutions
Wind and solar have more than one way to increase energy sprawl. Bryce points out that the size of an installation is only part of the problem:

Some 40,000 miles of new lines will be needed by the wind sector alone. If we assume that each of these transmission lines requires a 100-foot-wide swath of right-of-way ... then those 40,000 miles of transmission lines will cover about 750 square miles of territory, which is about half the size of the state of Rhode Island.

Another problem is intermittency -- energy sources that can't always be "on" when you need them. Any excess power generated by wind and solar has to be quickly sold (if possible), as there's no technology available that offers efficient industrial-strength long-term energy storage. Nanotechnology might one day break down that wall, but tomorrow's energy storage solutions have been on the horizon for ages.

What investors can do now
If you want to put your money in clean energy, you should invest in what gives the most bang for the buck. After all, says Nature Conservancy scientist Robert McDonald, "saving energy saves land." Petroleum's still the most efficient form of energy to invest in right now, and its price is unlikely to drop any time soon. Find out how you can take advantage of this booming market with the Motley Fool's free report on three companies striking gushers with $100-per-barrel oil prices. Don't get left behind -- reserve your free copy day.

Fool contributor Alex Planes holds no financial position in any company mentioned here. Add him on Google+ or follow him on Twitter for more news and insights. Motley Fool newsletter services have recommended buying shares of Chevron, and Exelon. Motley Fool newsletter services have recommended creating a write covered strangle position in Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (18) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 05, 2012, at 5:00 PM, MarkGoldes wrote:

    See Cheap Green, Moving Beyond Oil, Running on Water and Black Swans on the Aesop Institute website to get a different perspective on energy breakthrough technologies.

    The Introduction to that website will make clear that nuclear power now has the potential to become a worldwide nightmare.

    A very possible severe solar storm can collapse critical power grids for years.

    Nuclear plants without grid power for a month are meltdown candidates. There are 433 of them and more on the way...

  • Report this Comment On January 05, 2012, at 5:57 PM, SqueakyWheel76 wrote:

    News or Noise

    I am just curious is this supposed to be news or opinion?

    You say you want a revolution (who said that?)

    Two phrases you should never see in any news article. “The world's hysterical overreaction” and “Until the world comes to its senses”

  • Report this Comment On January 05, 2012, at 6:08 PM, FoolishVintner wrote:

    You started off the article with a reference to "the true cost of production," and completely ignored this issue in a rather softball analysis of petroleum energy! Oil is only efficient if you choose to ignore all of the associated (yet directly correlated) costs that get foisted onto consumers and taxpayers in myriad ways - environmental damage, public health, exploration write-offs and other subsidies, the Strategic Petroleum Reserve and other infrastructure investments, and that's not even considering the trillions of dollars out of the public coffers that has gone towards making the Middle East safe for the oil companies (if you think we would have gone to Iraq if their main export was pistachios, your status as a fool is worse than "motley!").

    The fact that we may not pay some of these costs *at the pump* doesn't mean they aren't part of the "true cost of production."

  • Report this Comment On January 05, 2012, at 6:53 PM, dennyinusa wrote:

    FoolishVintner Thank You.

    You hit the nail on the head with comments about the true cost of oil and gas energies, yet few people or politicians will acknowledge this.

    Finally the military admits the real reason we have troops in the Middle East. To insure that oil distribution will not be interfered with.

    Here are some quotes from the military actually saying why the navy is in Middle-East and deployed throughout the world.

    This is not just an important issue for security and stability in the region, but is an economic lifeline for countries in the Gulf, to include Iran," Pentagon press secretary George Little said. "Interference with the transit or passage of vessels through the Strait of Hormuz will not be tolerated."

    Separately, Bahrain-based U.S. Navy 5th Fleet spokeswoman Lt. Rebecca Rebarich said the Navy is "always ready to counter malevolent actions to ensure freedom of navigation."

    It is all about keeping shipping lanes opening and protecting cargo ships from pirates. It is unbelievable these multinational companies ship our jobs overseas for cheap labor and then they have the gall to ask the American taxpayer to pay to protect their products from being hijacked on the trip back to USA.

    Many other countries also need this oil, again why are they not at least paying the USA to keep shipping lanes open. Oil and gas companies make a lot of money because they have many tax breaks and subsidies. A 100 year old industry should not need this much help. They have socialized the costs, but profits are private.

    We need to remove our troops. Let the oil companies pay to keep the shipping lanes open. That way people will find out what the true cost of a barrel of oil actually costs. This is just another handout to the oil and gas companies. If you add military costs, cleanup cost and environment damage to the cost of oil, gas and coal, people would understand the least expensive energies are renewable.

  • Report this Comment On January 05, 2012, at 8:22 PM, ershler wrote:

    Alex,

    I assume in your second chart the land area required for nuclear only includes the land required for the plant and not to mine or refine the fuel while corn ethanol includes the plant plus the land required to grow the fuel.

  • Report this Comment On January 05, 2012, at 8:49 PM, MrGRJ wrote:

    I can't understand why people take this view on energy per land area for wind. There are plenty of examples of windmills operating in the middle of productive farm fields, so the area they take is the area of the mast.

    In such a case you could have a 5MW windmill in a radius of about 20m, so about 4000W/m^2.

    On such a measure it's the highest energy density source!

  • Report this Comment On January 05, 2012, at 9:08 PM, LLIHOTZ wrote:

    Because wind and solar cannot be the sole sources of energy doesn't mean they are not a smart thing to do. Solar takes up no more residential space since its on your roof. Many cities and business can take advantage of their flat roof to install it too. The availability of solar leases cuts the price tag by 1/2 - 2/3 (~$3000/MW for US made state of the art and $1000/MW for Chinese) and you get full maintenance for 20 years after which they will beg you to keep it if you don't renew the lease. In NJ, the utilities pay you (SRECs) for 15 years to count your solar system as part of their renewable energy resources plus your electricity is free after you pay for your system (~5 years). In 2011, NJ now has more solar systems than CA in just a couple of years of incentives. Just think if everyone who had a home/business with a roof that got enough sunlight did this, it would really help alleviate the overloaded grid system. Remember the blackout that ran from NYC up to Canada and New England?

    Many of my friends in upstate NY farm country leased their land for wind turbines since each only takes up about 10 ft x 10 ft and the cows can still graze.

    Seems like using as many clean ways that are feasible would help a lot. We'd better do everything we can.

    Nuclear should be shut down first--I can't believe they installed them on earthquake faults, even in NYC! I wonder if what you call as cheap neglects the potential for human and environmental damage and disaster. I am a biologist and chemist, and I have always maintained that if you cannot stop/neutralize something that might hurt you, you shouldn't use it. Japan's miscalculations have caused 30 years of radiation aftermath and the people paid with their lives and homes. We have been lucky, only lucky that it has not happened to us yet to that extent. It took too many catastrophes before people figured it out, but I knew as a teenager in the 70s that it was not worth it. Who wouldn't rather use renewable rather than nuclear energy?

    I'd like to understand why hydrogen isn't considered more strongly. It is used in cars all over Iceland and the by-product is water. There are generators that make hydrogen on the spot, so they do not have to use fossil fuels to make it like they did previously. I know that infrastructure would have to be added to fuel up, but is this much different than what is needed for other methods? What is deterring this technology?

    One last thought-the first cars ran on ethanol. Farmers made it by extracting the carbohydrates from crops like corn, then fed the leftovers to the cows. It is much better for them since carbs are not good for them either! So they got a two-fer. Why isn't this being done? Are they scrapping the leftovers after extracting the carbs for the ethanol? They act as if it is an either/or.

  • Report this Comment On January 05, 2012, at 9:17 PM, TMFBiggles wrote:

    @ FoolishVinter -

    The aim of this article was not to zoom in on the politics of energy, just the efficiency of our energy options. A truly detailed analysis of these "true costs," as you put them, will always be subject to political pressure and political rebuttal. I don't think it's possible to get an unbiased view of these hidden costs.

    @ dennyinusa -

    The direct subsidies offered to the oil and gas industry are covered in my article, linked from "true costs of production" at the top. You'll find that I agree that the oil and gas industry does not need subsidies.

    @ ershler -

    The land area given in the second chart references the total land area of the power plant, but I do not believe it accounts for the mine (at least as Bryce put it, since it's directly from his book). However, I've taken the liberty of ferreting out a Google Earth view of one of the world's largest uranium mines, Olympic Dam in Australia:

    http://maps.google.com/maps?ll=-30.444444,136.866667&spn...

    From the looks of it, the total visible area of the mine site may be perhaps 5 square miles in area, and I'm being generous there. If you add the mining site in, it does not shift the calculus by very much. On the other hand, adding the corn ethanol plant would similarly only change the land area by a small amount.

    @ MrGRJ -

    Can you provide me a quick example of these cornfield turbines?

    - Alex

  • Report this Comment On January 05, 2012, at 9:21 PM, TMFBiggles wrote:

    @ LLIHOTZ -

    I'm not saying that we should scrap wind and solar, just that we should look seriously at how well they can meet the world's needs right now.

    As for your ethanol question, please take a look at the article following this one, which has more detail on the viability of biofuel:

    http://www.fool.com/investing/general/2012/01/05/the-future-...

  • Report this Comment On January 05, 2012, at 10:49 PM, williamcmarsh wrote:

    Hi,

    As others have mentioned, solar power can be generated on roof tops and parking lots close to where it is needed, and since this is dual use, it mitigates the land use problem.

    Harvesting solar close to where it is used also takes a load off the transmission infrastructure.

    A company called Chromasun is field testing a hybrid photovoltic/solar thermal panel that they say is 75% effective. Put them on a roof top and use electricity from the PV to displace power from the grid and the heat for heating/cooling.

  • Report this Comment On January 05, 2012, at 11:42 PM, Kiffit wrote:

    Hydrocarbons just aren't 'efficient' if burning them causes irreversible adverse climate change that amongst other things will melt icecaps, raise sea levels and drown many of today's coastal cities.

    Either Alex doesn't believe the climate science or he isn't taking any notice of it.

    The other thing that he hasn't noticed is that at the moment, by far the biggest bang for the energy buck is saving it by reducing energy costs and discouraging people from using it in the first place.

    Like the early automobiles, non hydrocarbon energy production is likely to be a bit hit and miss in the reliability, power and stayability stakes, for a while. The problems are not insurmountable and electricity grids can cope with at least 20% renewables, as things presently stand. Intermittance is not the problem Alex suggests, especially over an inter-regionally connected grids whose management structure is armed with a good weather forecasting system.

    Had anyone been listening to climate change warnings back in the 1970s, alternative technologies would have been mature and highly efficient producers by now. As it stands, we are having to do some hasty catch ups with things like battery storage, that should have been given some hefty investment boosts 50 years ago, had anyone been interested and hydrocarbon companies not been so efficient and ruthless in buying up and throwing away promising technology that did not fit their vision of the world.

    Alex is right about one thing, which is that commercial grade battery storage is about 5 years away from market, although molten salt heat storage is a good beginning

  • Report this Comment On January 06, 2012, at 12:06 AM, TMFBiggles wrote:

    @ Kiffit -

    I'm not ignoring climate change at all. But this article series was not meant to cover climate change. As investors, it's important to not only look at the technologies that might change the world in the future, but also to examine the reality of the present and use both to inform your decisions.

    In the present, the market's placed a lower cost on hydrocarbon energy. Regardless of externalities, oil, coal, and natural gas cost less to the consumer than solar, wind, and biofuels. Ignoring that fact is as big a mistake as ignoring climate science and external costs. You have to acknowledge both, and this series was an attempt to acknowledge why energy costs are what they are. And energy costs being what they are presents a major barrier to wider alternative energy adoption in the near term, at least in my opinion.

    - Alex

  • Report this Comment On January 06, 2012, at 9:58 AM, 44guyton wrote:

    Are you sure the "power consumption" data by fuel type is correct? The Department of Energy (DOE) has detailed data on electricity generation data over several years and the numbers aren't even close.

    Oil as a total percentage of fuel used to generate electricity in the United States is less than 1% AND has been declining.

  • Report this Comment On January 06, 2012, at 10:48 AM, TMFBiggles wrote:

    @ 44guyton -

    Numbers here represent total power consumption, and vehicle oil use is a major part of that power consumption. This was never intended to be an exploration of electricity alone.

  • Report this Comment On January 06, 2012, at 3:07 PM, ershler wrote:

    @TMFBiggles,

    Look at the picture on the right side of the screen.

    http://en.wikipedia.org/wiki/Wind_power_in_Iowa

    @LLIHOTZ,

    The byproduct is called distillers grain, they do use it, and it is superior to corn for animal feed because of its higher protein content.

  • Report this Comment On January 07, 2012, at 1:21 PM, DCWD40 wrote:

    I can't believe this, "Petroleum's still the most efficient form of energy to invest in right now, and its price is unlikely to drop any time soon." Hawaii has an oil-based economy and it is doing everything it can to move away from this source because of cost.

    Natural gas is in abundance. Its price is way down because of oversupply. Why isn't this the short-terms best opportunity?

  • Report this Comment On January 08, 2012, at 2:34 PM, TMFBiggles wrote:

    @ ershler -

    Thank you.

    @ DCWD40 -

    "Right now" are the two key words. If companies are making more money selling oil than they are selling natural gas, then at present it makes for a better investment. Does it make more sense "right now" to invest in a resource that can barely keep up with demand and is thus priced dearly, or a resource that, as you said, is oversupplied and cheap?

    Hawaii may well transition away from oil, but it is only one island. What about China, India, Brazil, etc.?

    - Alex

  • Report this Comment On January 19, 2012, at 11:02 AM, thidmark wrote:

    We're in Iraq largely because Americans go apes--t when they have to pay $4 at the pump.

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