This article is part of our Innovation in America series, in which Foolish writers highlight examples of innovation going on today and what they see coming in the future.
"The electric age ... established a global network that has much the character of our central nervous system."
-- Herbert Marshall McLuhan
Without fossil fuels (oil, coal, and natural gas), the world as we know it simply wouldn't exist. Some of life's most essential products are manufactured using petroleum. In fact, the Texas Alliance of Energy Producers [link opens PDF] lists 486 uses for petroleum.
Perhaps the most important use of these fossil fuels is as an electricity-generating fuel. Without electricity, nearly all aspects of production would grind to a halt.
The unfortunate fact about fossil fuels, however, is that they are a finite resource. Oil, coal, and natural gas reserves will not last forever, so actions need to be taken now not to eliminate them from our lives, but to slowly and steadily reduce our reliance on these fuels and work toward renewable, cleaner, energy sources for future generations.
Where we've been
Before we can really dive into what today's electric utilities are doing to increase our use of renewable energy sources, we need to understand better where we've come from.
Source: U.S. Energy Information Administration. * = preliminary figures.
What's truly amazing about these figures is that just six decades ago we were utilizing renewable energy sources for a good amount of our electrical generation. However, renewable energy usage has only crept moderately higher over the past 30 years and has been made up primarily of hydroelectric power.
It's also worth noting that natural gas usage didn't really take off until the mid-1990s, when newer technologies capable of locating and retrieving the fuel became available.
But the biggest takeaway here is the continued reliance the U.S. economy will have on coal and nuclear energy.
Source: U.S. Energy Information Administration, Other = petroleum, solar, biomass, geothermal, and other gases; author's calculations.
Coal accounted for 45% of all electricity generation in 2010 while the 104 nuclear plants added 20%. This means that the importance of Exelon (NYSE: EXC), the nation's largest generator of electricity and largest nuclear operator, isn't going to diminish anytime soon. Nuclear is a clean energy source, but is unfortunately much more expensive to operate and maintain than many other fuel sources at the moment.
While these energy sources will undoubtedly continue to play a huge role in electrical generation for years to come, their dominance is beginning to wane and a path is being paved for new technologies and renewable energy sources to lead America for future generations. Let's take a closer look at what electric utilities are doing right now to keep energy costs low and to protect the environment.
Where we're heading
Renewable energy comes in various forms: hydroelectric, geothermal, biomass, wind, and solar thermal/photovoltaic. Let's examine each one, and highlight some companies on the leading edge of making America better.
- Hydroelectric: Responsible for 60.5% of all renewable electricity generation in 2010, hydroelectric power has been a renewable mainstay for decades. California's PG&E (NYSE: PCG) is the largest investor-owned hydroelectric utility in the U.S., producing 11,652 million kWh of electricity in 2011 from its system of dams and hydro plants. Hydroelectric power requires little maintenance, but a finite amount of land and water sources creates a growth problem for the future.
- Geothermal: What better energy to harness than the heat from our very own Earth! With geothermal electrical generation still in its infancy, using the Earth's heat as a fuel source seems extremely sustainable and the plants emit few harmful gases, unlike coal-producing plants. Calpine (NYSE: CPN) currently owns the lion's share of production capacity at The Geysers in California, the nation's largest geothermal plant. The one stark disadvantage to geothermal power is that it tends to be viable only in certain regions of the country.
- Biomass: Just think, the next time you buy an order of fries at McDonald's, the oil used to cook your fries and the container your fries came in could be used to power your home. Two key contributors, Waste Management (NYSE: WM) and Hawaiian Electric Industries, are on the cutting edge of using biomass products to decrease costs and increase efficiency. Waste Management is using waste, as well as methane production from that waste, to produce electricity to power 1 million homes. Hawaiian Electric is one of a select few utilities currently running a plant completely on biofuels.
- Wind: The great aspect about wind power is that it's a feasible energy almost anywhere and it's a zero-emission energy source. When I think of wind, I'm immediately drawn to Duke Energy (NYSE: DUK), which has invested $2.5 billion in the past five years to create wind farms capable of generating in excess of 1,000 MW of production. If the noise generated by wind turbines can be lessened and output gradually improved with the introduction of better technology, wind power has a chance to outpace all renewable sources, in my opinion.
- Solar thermal and photovoltaic: If there were ever a renewable area of growth, then solar thermal and photovoltaic production is it. Responsible for only 1.3 billion kWh of the 4,210 billion kWh generated in 2010, most notable solar thermal and photovoltaic projects are being undertaken in Germany. However, with solar panels costs plummeting, and solar efficiency and scalability considerably higher than traditional coal plants, sun-rich areas of the country may begin utilizing this clean energy source. PG&E has made small investments in solar thermal power in California, but expect a boom in this industry in the coming decades.
Baby steps
The path toward ridding ourselves of our reliance on fossil fuels is going to be slow and not without hiccups. However, a clear direction has been laid by the aforementioned companies to provide clean, renewable sources of energy for future generations that will boost efficiency, reduce consumer costs, and, best of all, reduce our carbon footprint on the planet.
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Read more about innovation today and its future in America; head back to the series intro for links to the entire series.
