Our view: Renewable energy

Just as investors need to diversify their portfolios, utilities and communities need to diversify their sources of energy supply.

Lehr's advice helps answer critics who say renewable energy makes sense only when it pencils out compared with fossil fuels. As Lehr noted, it's impossible to predict what fuel prices will be, and energy sources like solar and wind power have a zero fuel cost, so it's not an apples-to-apples comparison. Fossil fuel alternatives might look superior today, but turn out far worse in the future.

In Lehr's view, even if alternative energy investments don't pencil out in the short run, they can be considered as insurance, or hedging, against higher fuel prices. That's a prudent and justifiable thing to do when you rely so heavily on a commodity whose price is so volatile.

Renewable energy doesn't have to come from a single, huge centralized project. In her Monday evening keynote address, Colorado renewable energy advocate Hunter Lovins noted that Southern California Edison replaced a canceled coal plant with rooftop solar units installed around the region.

Lovins also said the city of Berkeley, Calif., sold bonds so it could make loans to homeowners who want to install their own renewable energy source. Homeowners pay back the loan via their city tax assessments. In effect, Berkeley created a special tax assessment "district" for renewable energy.

Dr. Dan Arvizu, director of the national renewable energy lab in Colorado, told the Anchorage conference the U.S. is missing out on a huge business opportunity. "Renewable energy is a $150 billion a year industry today," he said, "but it's not in the U.S. It's in other countries." Why?

"It's driven by public policies in other countries. ... It's not a matter of technical potential. It's a matter of national will and investment."

He scoffed at predictions that renewable energy will maybe provide 10 percent of the nation's energy by mid-century. "If that is our target," he said, "why bother?"

That prediction is based on old-world economic models, Arvizu said. "It's like driving a car looking through the rear view mirror."

His lab is building a research center for 1,000 people in Golden, Colo., that will produce as much energy as it uses. The "net zero energy" building will use only half as much energy as a typical building built to current codes. It will have 1.2 megawatts of photovoltaic electric power supply and a heating plant that runs on renewable fuels.

At the conference, Anchorage won plaudits for converting its street lights to high-efficiency, long-lasting LED units. The upfront costs yield a good return by saving money on electricity and maintenance, since the lights last years longer.

Visiting experts told the Anchorage conference that President Obama is moving in the right direction, with big investments in energy efficiency and renewable sources in the stimulus bill.

Next up in Washington is the hugely controversial question of setting emission caps or using carbon taxes to reduce greenhouse gas pollution. Doing so would push renewable energy further, faster.

But as Ron Lehr warned the audience, "You can't expect Washington to do the right thing very often," he said. "They do stumble onto it occasionally."

BOTTOM LINE: With highly volatile fuel prices, renewable energy investments can be a good form of insurance.