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Renewable energy makes almost everyone feel good. It suggests a future where oil spill disasters and coal mining accidents could be avoided. For Oregon, it paints a picture of a new green economy fueled by wind projects, solar panels and the companies that manufacture parts for these systems. For the country, it offers reduced dependence on fossil fuels – especially from foreign oil. For the world, it promises less greenhouse emissions.

However, beneath that feel-good picture are some inconvenient truths about this country’s energy policy, particularly in regard to reliability and cost.

Approximately 84 percent of the energy used by Americans comes from fossil fuels – petroleum, natural gas and coal. In 2009, 45 percent of the country’s electricity came from coal plants, 23 percent came from natural gas and about 20 percent came from nuclear power plants. Hydroelectric power (mostly dams) accounted for about 7 percent.

What about the poster children for the renewable energy industry: wind and solar? Nationwide, wind accounts for about 1 percent and solar accounts for no more than about 1/10th of 1 percent.

In Oregon, hydroelectric power dominates at about 57 percent. Natural gas follows at slightly less than 30 percent, coal is at less than 7 percent and wind is at about 4 percent. Solar is significantly less than 1 percent.

Now, it is true that renewable energy is growing. Tax credits, government subsidies, feed-in-tariffs (required premium prices for renewable energy) and state renewable portfolio standards are making impacts. The Energy Information Administration projects that the strongest growth in fuel use over the next 25 years will be in renewables. Nevertheless, even with current public policies supporting renewable energy, projections suggest that by 2035 the U.S. will consume three-quarters of its electricity from fossil fuels.

As of 2009, 65 percent of the electricity used in this country came from coal and nuclear plants. Anyone who thinks we can quickly wean ourselves from these sources is casting about in the dark.

The relative cost of renewable energy versus fossil fuels is a thorny topic. One big question is the cost of producing coal-fired electricity. The answer depends upon one’s perspective. Coal companies look at capital investment, maintenance and fuel costs. Based on those measures alone, coal-fired energy is cheap; only hydroelectric power, with its free fuel source, is cheaper.

But environmentalists argue that one must also look at the indirect costs of coal-fired energy: strip mining, carbon emissions and coal ash spills. Once these indirect costs are captured – through either direct carbon taxes or cap-and-trade regulation – the relative cost advantages of fossil fuels over renewables shrinks.

Some people claim that the cost of wind-generated power is cheaper than gas-fired generation; others claim wind is as much as 50 percent more costly than power generated from fossil fuels. One of the reasons for this discrepancy is the need for utilities that rely on wind power to build backup plants fired by natural gas to meet electricity needs when winds aren’t blowing. This is known as the cost to “integrate” wind into the resource mix. It is an arcane area, with experts in the wind industry and fossil fuel proponents reaching very different positions.

Another complicating factor is that prices for coal and natural gas experience cyclical market swings. Forecasting becomes tricky for coal and natural gas prices for the life of a power plant (20 to 30 years). Presently, forecasts for natural gas prices are declining, a sign that the relative cost of renewables is rising.

Whatever the relative cost of renewables, the impact of regulating carbon output and introducing more renewable energy will be the same: higher electricity prices for consumers. That pain is not shared equally. The poor spend a higher portion of their income on electricity than the rich. Studies show that low-income consumers spend 20 percent or more of their after-tax incomes on energy costs. Many of these low-income consumers are elderly people, and adjusting the thermostat in extreme (hot or cold) weather is not a safe option for them.

The problem with renewable energy is that no one has been willing to face the tough questions. How will we manage a long, slow transition to renewable energy? What costs are we willing to pay, and by whom, to increase the use of renewable energy? Until we answer those questions we will not be on a secure path to a green energy future.

David White, a partner at Tonkon Torp LLP, is co-chairman of the firm’s energy practice group. Contact him at 503-802-2168 or [email protected].