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GOOD QUESTION

My power company is raising rates and blaming soaring coal and natural gas prices. But given all the new wind farms and solar projects I read about, shouldn't electricity rates be falling?
Wind and solar power are growing at a rapid pace in the United States. Wind-generated electricity grew 45 percent between 2005 and 2006 and 21 percent between 2006 and 2007, Energy Department officials said. Solar-power generation grew 19 percent between 2006 and 2007. The photovoltaic, or PV, solar-panel industry has grown by an average of 25 percent a year in the past 10 years, according to the Solar Energy Industries Association.

"However, this rapid growth is from a very small base," the association notes on its Web site. "PV still accounts for a small percentage of electricity generation worldwide."

Indeed, there lies the problem with wind and solar power: Even at breakneck growth rates, renewable energy sources will account for only 12.6 percent of U.S. electricity generation by 2030, up from 9.5 percent in 2006, according to the Energy Department. Worldwide, renewable energy's share of electricity generation will actually fall to 16 percent in 2030 from 19 percent in 2004, the department said.

Solar and wind power aren't even the leading sources of renewable energy. Hydroelectricity plants - power-producing dams - account for 75 percent of all renewable power generation, vastly overshadowing wind at 7 percent and solar at 0.1 percent. All renewable power sources are growing, but so are fossil-fuel power sources.

"Although worldwide renewable energy is expected to increase, it will be outpaced by growth in other electricity generation sources," the Energy Department said in a recent report.

Coal will remain the nation's preferred source of electricity for the foreseeable future, the department projects, actually rising to represent 54 percent of electricity generation by 2030 from 50 percent now. The natural gas share will fall from 19 percent to 14 percent in the same period.

Coal is growing as an electricity generation source because it is abundant and easy to turn into power. Even at prices that have more than doubled since the beginning of 2007 to nearly $116 per ton, it is cheaper to burn coal to generate steam to turn turbines than to use virtually any other method of generation.

"Renewable energy plants are generally more expensive to build and to operate than coal and natural gas plants," Energy Department officials said.

Also, renewable energy sources, such as dams, wind farms and solar arrays, tend to be located far from populated areas, requiring the construction of expensive transmission lines to get the electricity to where it's needed.

Coal prices are rising because of growing demand and supply disruptions overseas. Natural gas prices are also on the upswing because of concerns about supplies, which are below last year's levels, and declining production in the Gulf of Mexico, analysts at Oppenheimer & Co. Inc. said. Many power companies are passing these higher fuel costs directly through to consumers.

"The cost of most fuels used in generating electricity has risen significantly since the beginning of the year," the Energy Department said in a report that predicted electricity prices will rise by 3.7 percent this year and 3.6 percent next year.

Many analysts expect prices to rise more than that. Global Insight, an energy research firm, thinks rising coal costs will boost electricity rates by 5.7 percent nationally this year, while Barry Bannister, an analyst at Stifel Nicolaus, says electric rates could jump as much as 69 percent by 2015. One way consumers can benefit directly from renewable energy is to build their own mini-plants.

Many states offer incentives for the purchase of solar panels that can dramatically lower their cost. Still, such systems typically require large up-front expenditures and, while cutting power costs significantly, don't pay for themselves for years.

- Associated Press

Published 07/02/08, Copyright © 2008 Maryland Gazette,
Glen Burnie, Md.