The Green Energy Economy: What It Will Take to Get There

Everyone agrees it's time to get serious about renewable energy, but the barriers go beyond technology.

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Nowhere is this more obvious than with the transmission grid, a sprawling jumble of wires and mechanical connections dating back 50, 80, even 100 years in some places. Today, the grid is divided into more than 140 "balancing areas" to help manage the distribution of power. But some are so localized that they can't communicate with their next-door neighbors. As a result, extra power in one region is often wasted rather than being sent to a place that needs it.

So if wind power, solar power, and plug-in electric vehicles are to be big players in the country's energy future, as many hope, this antiquated system for delivering electricity will have to change. The grid must be retooled, and new high-capacity power lines are needed to carry wind-generated electricity from the Midwest to the East and West coasts. To get those high-power lines approved, Bode and other advocates say, the federal government needs more authority to override nasty squabbles between states, environmentalists, and other interest groups that have typi-cally stalled such efforts. The federal government, the thinking goes, already has the authority to build natural gas pipelines across state lines, and electricity should be no different. That sentiment seems to be gaining ground even among regulators who once opposed it, although there are many issues still to be worked out. As Chu says, "If we just take the view that we are going to cram something down someone's throat, this is not a constructive way of doing business."

Infrastructure is only one part of the battle to make national energy problems a national issue. Another is technology. Even though wind power technology is relatively mature—it was the country's largest provider of clean electricity last year—most other renewable sources still need work. Improvements to photovoltaic cells could reduce solar power costs significantly. New drilling technologies could help geothermal spread across a larger geographic range. Advancements in biofuels, in particular to the enzymes needed to break down grasses and woods to produce ethanol, would have a major impact. Meanwhile, fossil fuels face their own technological challenges. If coal is to stay around for a while, it'll most likely be because of still-developing methods to capture carbon dioxide emissions before they enter the atmosphere.

Groundwork. Scientific breakthroughs don't come cheap. The economic stimulus package set aside $21.5 billion for scientific research, signaling that Washington is taking a much more active role in basic energy issues after years of declining budgets at national labs. But this is just the groundwork. The most powerful force to remake the energy America uses could be government policies: climate change legislation, which would set a price on carbon dioxide emissions, and a national renewable-electricity standard, which would require the United States to get a certain portion of its electricity from renewable energy. Both rules could have far-reaching impacts, forcing industries to massively reconsider their operations, giving financial investors confidence to pump money into wind farms, solar fields, and other industries, and convincing the coal industry that it's worth investing billions in technology to reduce emissions.

The consequences of climate change legislation, in fact, are expected to be so great that companies typically opposed to government regulation are asking Congress to go ahead and act just so that they can have some certainty about where to put their money.

What Washington won't do—not in theory, anyway—is pick specific winners. "The market will decide what the mix will be," says Matt Rogers, a former director at McKinsey & Co. and now one of Chu's top advisers. "It will be interesting to see what the market brings forward." Of course, in reality, Congress's record is one of subsidizing some industries but not others. Even within the biofuel world, corn-based ethanol is heavily supported, but some others, such as biofuel made from algae, receive almost no backing.