Is It True that Alternative Energy Is Too Expensive?

George Washington's picture


Many people assume that alternative energy is simply too expensive,
and not competitive with oil and other conventional means of energy.

some alternative writers allege that the big oil companies have
artificially increased alternative energy prices by buying up promising
alternative energy technologies - for example supposedly helping to kill
first-generation electric cars by buying
up promising battery patents so they couldn't be used in electric
- we don't even need to go down that rabbit hole.

a 2008 report for Congress by the Congressional Research Service
entitled "Renewable Energy R&D Funding History: A Comparison with
Funding for Nuclear Energy, Fossil Energy, and Energy Efficiency
R&D" notes:

the 30-year period from the Department of Energy's inception at the
beginning of fiscal Year (FY) 1978 through FY2007, federal spending for
renewable energy R&D amounted to about 16% of the energy R&D
total, compared with 15% for energy efficiency, 25% for fossil, and 41%
for nuclear. For the 60-year period from 1948 through 2007, nearly 11%
went to renewables, compared with 9% for efficiency, 25% for fossil, and
54% for nuclear.

In other words, renewable energy research
and development received a small fraction of the R&D funding for
nuclear and fossil fuels. This has skewed the market, making
conventional energy sources cheaper and alternative sources more

In addition, when the externalities
of environmental, military and terrorism costs are taken into account,
conventional energy production is much more expensive than most people

For example, as I wrote
yesterday, the government has decided that deepwater oil drilling in
the Gulf and other fragile and hard-to-drill regions - and securing oil
in Iraq and other foreign regions - are in our national security and
national energy policy interests (remember that Alan
, John
, George
W. Bush
, Sarah
, a high-level
National Security Council officer
and others all say that the Iraq
war was really about oil).

Nobel prize winning economist
Joseph Stiglitz says that the Iraq war alone will cost $3-5
trillion dollars

And economist Anita Dancs writes:

Each year, our
military devotes substantial resources to securing access to and
safeguarding the transportation of oil and other energy sources. I
estimate that we will pay $90 billion this year to secure oil. If
spending on the Iraq War is included, the total rises to $166 billion.

In addition, experts say that the Iraq war has increased
the threat of terrorism. See this,
this, this
and this.

bottom line is that if alternative energy R&D was funded at the
same level as conventional energy, and when the externalities of
environmental, military and terrorism costs are taken into account, it
is not clear that alternative energy is really substantially more
expensive than conventional energy. At the very least, if the playing
field were leveled, alternative energy could become cost competitive in
the relatively near-term future.