The Wall Street Journal reports that a Rand Corp. study shows that if the the falling costs of ethanol, wind power and other forms of renewable energy continue to fall, as they have historically, such sources could supply as much as 25% of the U.S.'s conventional energy by 2025 at little or no additional expense.
This is certainly good news if costs continue to drop as they forecast, the problem they didn't mention is whether the manufacturing infrastructure can expand that rapidly.
The Rand study concludes that because prices for gasoline, natural gas and coal are likely to remain high, their cost advantage over renewables will erode, furthered by the hope that ethanol from farm wastes will be available by 2020.
I would agree that fossil fuel costs will remain high and that would allow cellulosic ethanol to be, not only competitive, but lower in cost than fossil fuels.
Renewable fuels now produce only 6% of the nation's energy, and about half of that comes from hydroelectric dams. The study assumes renewable-energy costs will keep dropping at the rate of recent years. It says raising the use of renewables to 25% of all U.S. energy consumed would reduce U.S. reliance on oil by about 20% or the equivalent of the imports from Saudi Arabia and Venezuela.
The goal of using renewable fuels is three fold 1) to reduce our reliance on imports 2) to hedge against higher prices of fossil fuels and 3) to replace declining supplies of fossil fuels.
Resource: Renewable Fuels May Provide 25% of U.S. Energy by 2025, John Fialka, Wall Street Journal, November 13, 2006