High U.S. fuel costs put focus

High U.S. fuel costs put focus on renewable energy

May 27, 2004 - Reuters Power News
Author(s): Reuters

By Gelu Sulugiuc NEW YORK, May 27 (Reuters) -

With fuel prices at record levels, U.S. consumers are once again turning their attention to more efficient cars, companies are investing in renewable energy and government programs are encouraging conservation.

The trend mimics the 1970s, when record high oil prices led Americans to trade in their gas guzzlers for smaller foreign cars -- but this time the move is more high-tech. The biggest advances in the renewable fuels revolution are hybrid cars, hydrogen fuel and solar and wind power. "With gasoline prices reaching beyond $2 per gallon... hybrid vehicles are catching more consumers' attention," Prudential analyst Michael Bruynesteyn said. Gas-electric hybrids accounted for only 0.26 percent of the 16.7 million cars and trucks sold last year in the United States. But sales have increased 36 percent so far this year, according to research firm RL Polk & Co., and Japan's Toyota Motor Corp. decided to ship 47,000 of its Prius hybrids to the United States, up from the 36,000 originally planned for 2004.

Conventional cars waste energy during braking, while a hybrid uses that energy to charge the battery. Electric motors kick in seamlessly at slower speeds, providing mileage of up to 55 miles per gallon. "Hybrid and hydrogen-powered vehicle could be game changers," Ford Motor Co. Chairman and Chief Executive Bill Ford said last week. "It's a way to differentiate ourselves in an industry that offers little in the way of differentiation, except styling." Ford is launching a hybrid version of its Escape SUV later this year.

HYDROGEN Another sustainable and clean fuel with great potential is hydrogen. It is used in fuel cell cars -- electric vehicles powered by combining hydrogen from a fuel source and oxygen from the air. They are efficient, producing only water as a waste product. But making hydrogen itself can be polluting, while storage and distribution are still expensive and limited. Oil major BP Plc is trying to build on its experience with fossil fuels as it produces and distributes hydrogen. BP runs various programs worldwide, from supplying hydrogen-powered public transit buses in Europe to building hydrogen refueling sites in Singapore and the United States for experimental fleets of fuel cell passenger cars.

"We need to explore how we are going to get hydrogen where it needs to go," said Sarah Howell, a BP spokeswoman. "We'd like to put (hydrogen) refueling in places where we already have retail sites, because we have the brand recognition." In one of the programs, Ford will place up to 30 hydrogen-powered Focus cars in Sacramento, Orlando and Detroit by next year and BP will build refueling stations for them. DaimlerChrysler and BP will test fuel cell vehicles in various U.S. markets as part of a five-year project partially funded by the U.S. Department of Energy to gain real-world experience with fuel cell cars, create fueling infrastructure and educate the public about the technology.

GOVERNMENT SUPPORT Fuel cell vehicles are still a long way from becoming a common sight on American streets. Reducing overall demand for transport and promoting public transportation could have a more immediate impact on fuel consumption and pollution. But most American cities have woefully inadequate public transit systems that are difficult and expensive to improve. Many states have focused on conserving energy and promoting green power. New York State is spending $170 million a year on the New York State Energy Research and Development Authority. It runs programs that replace wasteful appliances, make buildings more energy-efficient and reduce electricity consumption at peak load times.

On a smaller scale, it promotes renewables like wind, solar, kinetic and biomass energy. It hired five marketing companies to find customers that are willing to pay more for renewable energy. "If government is going to get out of the subsidy business for wind power, you've got to find customers who are willing to pay, at least right now, a little bit more for wind," said Joe Visalli, NYSERDA director of research and development. One renewable energy source that government subsidies helped develop is solar power. BP is heavily involved in markets with government incentives such as Germany, Britain and California.

In California, it has more than 25 percent of the residential market for solar energy. "It works there because they have a high electricity price and a greener consciousness," Howell said. And it could work elsewhere if politicians calling for more government support for renewable energy have their way. "We have unnecessarily endeavored to treat the symptoms and not the core problem for far too long," said Senator Robert C. Byrd (D-W.Va.) in a speech to the Senate last week. "A serious energy efficiency program, bolstered by the promotion of renewable energy and other clean home-grown energy sources, provides a compass point for a U.S. energy strategy."