Washington (Platts)--21Aug2007

US renewable energy consumption increased 7% from 2005 to 2006, at a time
when total US energy use declined 1%, according to report from the US Energy
Information Administration. 

     The increase was largely the result of greater reliance on biofuels for
transportation and wind for electricity production, the report, released
Tuesday, said.

     Renewable energy's market share stood at nearly 7% in 2006, slightly
higher than the prior year's level, with more than 6.8 quadrillion Btu
consumed, the report, which is based on preliminary statistics, said. And
consistent with historical patterns, the electric power sector used most of
the renewable energy at 56% of consumption.

     While conventional  hydroelectric power had the largest absolute annual
change, at 186 TBtu, this represented only a 7% increase, the report said.
Biofuels use rose by 164 TBtu, or 28%, and wind increased by 80 TBtu, or 45%.

     Ethanol production increased 25%, from 3.9 billion gallons in 2005 to 4.9
billion gallons in 2006, it said. Among the factors for the growth were
continued replacement of methyl tertiary butyl ether (MTBE) by ethanol as a
gasoline additive, and strong world oil demand and higher crude oil prices,
which raised the price of gasoline and thus the demand for ethanol as a
substitute, it added.

     Other factors included federal tax laws that provide incentives for
biofuels, such as a tax credit of 51 cents for each gallon of ethanol blended
into gasoline, and the Energy Policy Act of 2005, which mandates annual
renewable fuel use in gasoline of 7.5 billion gallons by 2012.  Ethanol
accounted for nearly 4% of US gasoline production in 2006, the study said. 

     "While this had a significant impact on the energy sector, the impact on
the agricultural sector may have been greater," the study said. The US
Department of Agriculture estimates that 14% of corn use in the 2005/2006 crop
year went for production of ethanol, up from 11% in the 2004/2005 crop year
and 6% in 1999/2000. Moreover, corn prices hit nearly $4 per bushel in 2006,
the highest price seen in the last 20 years and much higher than the average
price of $2.40 seen over that period. 

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