Alternative energy going more mainstream

NEW YORK (CNNMoney.com) -- The United States could get a quarter of its energy from renewable sources by the year 2025 at little or no additional cost if oil prices stay high and the cost of renewable energy keeps falling, a study by Rand Corp. said Monday.

Currently, renewable fuels such as ethanol, solar, water and wind power, account for about 6 percent of the country's energy usage, according to Rand, a nonprofit research group.

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"Renewable technologies are not as far off the money at this point," said Rand energy economist Mike Toman. "None of this would wreck the economy."

The study came in response to proposals to boost the amount of renewable energy to 25 percent of total energy consumption by 2025, a goal generally supported by both the Bush administration and Democrats in Congress.

While many politicians, and now Rand Corp., believe reaching that goal is possible, the view is in stark contrast to oil companies, notably ExxonMobil.

Exxon (Charts) predicts renewables will only account for few percentage points of total energy usage by 2030 and cites that as a reason why it hasn't invested more heavily in the sector.

Other oil companies, like BP (Charts), Royal Dutch Shell (Charts) and ConocoPhillips (Charts), seem more open to renewable technologies, though their actual spending on them is difficult to determine.

Although 6 percent of U.S. energy comes from renewable sources, nearly half of that comes from large-scale hydroelectric projects that have little growth potential going forward.

Most of the rest of comes from ethanol and other so-called biomass fuels, while wind and solar each make up a fraction of a percent, according to the Energy Information Administration.

Rand said the costs of renewables needs to fall by 20 percent between now and 2025 for its prediction to be accurate - a decline that would be in line with historical trends.

And Toman said the price of oil would have to remain high, above $45 a barrel, for the growth it projects for renewables.

He said the study assumed that cellulosic ethanol - ethanol made from any plant matter like wood chips or switchgrass and not just the food-bearing plants - would be economical in the near future.

Currently the enzymes used to break down the plant fibers to make cellulosic ethanol are too expensive for that technology to be competitive.

Toman said the study assumed biodiesel and ethanol would partially replace fossil fuels in the transportation sector in the short term, with other technologies like hydrogen coming after 2025.

He said wind, biomass and limited solar would partially replace fossil fuels in generating electricity.

Toman noted that the infrastructure to bring fuels like ethanol to market will be expensive.

But he said diversifying away from oil would help lower its price, thereby offsetting the infrastructure costs and resulting in little or no net drag on the economy.

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