As oil rises, cleaner energy surges

With the price of oil hovering above $55 per barrel, demand is rising for a wide array of alternative energies - from wind turbines to cars fueled by corn oil.

While such devices and fuels always capture attention during spikes in oil prices, the alternative-energy movement is moving well beyond the novelty phase. It is becoming more ingrained in the nation's power grid and in middle-class homes as technologies improve. Consumer demand has Toyota predicting the sale of 100,000 of its Prius hybrid cars in the United States next year.

Even solar panels and windmills, often associated with the Jimmy Carter cardigan sweater days, are showing up in more suburban neighborhoods and other unexpected places. For example:

• A Louisiana entrepreneur wants to put windmills atop old oil and gas rigs in the Gulf of Mexico and send the power ashore.

• For the first time nationally, Home Depot will be selling solar devices alongside its plumb bobs and Behr paint.

• Gasoline marketers in Denver, Seattle, and other cities are blending ethanol into their gasoline - not for environmental reasons, but because it's now cheaper than some oil-based additives.

Although alternative fuels still make up a small fraction of US energy supplies, they are growing at a 30 percent rate compared with 4 percent for oil and 6 percent for natural gas. The projects are especially popular among states with governors opening up new wind farms and farm-belt ethanol refineries. But it's not just a political fad. The cost of many of the alternative fuels is approaching that of oil and natural gas. That competitiveness, combined with congressional renewal of a key tax credit, has business signing contracts to build everything from new wind farms in Iowa to solar farms on top of FedEx terminals.

"This is a period of high fossil-fuel costs and low-interest rates, which gives renewable energy an advantage unlike it's had over the last 20 to 25 years," says George Sterzinger, executive director of the Renewable Energy Policy Project in Washington. "With aggressive development and a reduction in the amount of LNG either through taxes or portfolio standards, by 2020 renewable power could easily be 15 percent of the electric energy produced."

Energy experts say, however, the US will still lag behind Europe, which has plans to produce 10 percent of its power from alternative sources by 2010 and 20 percent by 2020. Denmark, which sits on the windy North Sea, probably leads the world with 20 percent of its electricity currently coming from wind farms. By next year, that will increase to almost 30 percent.

Both Germany and Japan are snapping up much of the world's supply of solar panels. Japan's solar use is growing three times as fast as that of the US and Germany's twice as fast. "In Germany, they are literally paving farmlands, blocks of land as large as 10 city blocks, with solar panels," says Mike Eckhart, president of the American Council on Renewable Energy in Washington.

In fact, demand is strong for the panels. Rhone Resch, executive director of the Solar Energy Industries Association, estimates individuals who want to buy solar panels might have to wait as long as three months to get them.

Canadians are also taking notice of the potential for wind power. For instance, earlier this month, Hydro-Quebec, the giant utility in Canada, announced plans to buy up to 1,000 megawatts of electricity - enough to heat 200,000 homes - from eight windmill projects in the province. Hydroelectricity will balance the wind-produced electricity, which is not constant, once projects are on line between 2006 and 2012.

Some of the shifting is the result of the volatility of oil and gas prices, says Steve Zwolinski, chief executive officer of GE Energy's wind energy division. "What's changed is energy security and fossil fuel volatility," says Mr. Zwolinski. However, he adds, "This is not just a knee-jerk reaction to a short-term price change, but it's people looking at energy reserves and environmental balance and the need for emerging economies to supply their growing cities."

Even oil companies are jumping on board, using ethanol to augment gasoline supplies. Today, ethanol, which uses 12 percent of the nation's corn crop, is blended in 30 percent of the nation's fuel. Demand for ethanol is so robust, 12 new plants are under construction and many more are searching for financing to join the 83 already in operation. "It's not just a Midwest fuel anymore," says Bob Dinneen, president of the Renewable Fuels Association in Washington.

In fact, in New York State terminals are blending at a 10 percent level, double what's required for environmental standards. "The reason is it is more cost effective than other petroleum enhancers," says Mr. Dinneen.

Some corporations are also joining in the march to renewables. This week, FedEx announced it would add solar cells to its Oakland Airport facility. The company expects the cells to provide 80 percent of its peak load requirements, says Ryan Furby, a company spokesman. This week, the company also rolled out more hybrid vehicles that use a combination of diesel engines and lithium batteries, increasing fuel efficiency by 50 percent and reducing greenhouse gas emissions.

The government is joining in, too. This week, the US Postal Service announced it would add solar panels to one of its facilities in Sacramento, Calif. The company will combine the solar panels with an energy-management program that includes new lighting and improved compressors for its heating and cooling system. "They will lower their power consumption by 33 percent," says Jim Davis, president of Chevron Energy Solutions, which has the contract to work with the postal service.

Chevron will work with the postal service on seven more facilities in Northern California. Eventually, the program will be implemented across the entire USPS system, says Mr. Davis.

Some consumers, who have been reluctant to shift to renewables, are now doing so as well. Green Mountain Energy, which offers consumers the opportunity to shift to nonpetroleum fuels, always thought its product would appeal to environmentalists. Now the company says it's soccer moms who are buying their product.

"They want a safer future for their kids and kind of view it as a way to do their part," says Tim Smith, a vice president of the Austin, Texas, green-energy company.