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Fortune Magazine Backs Renewable Energy

New York, New York - August 12, 2004 [SolarAccess.com] With oil capacity stretched thin and supply fraught with uncertainty, the U.S. is more vulnerable than it was 30 years ago, when the oil crisis first traumatized the nation. That was the message from Fortune magazine which addresses the issue in a special cover story that looks at a number of ways -- from government initiatives to new technologies -- that America can begin to free itself from the grip of oil.

"The goal," says senior writer Nick Varchaver, "is a real-world plan that won't derail the economy and has a strong chance of political success."

The cost of the plan is modest, about $7 billion to $9 billion per year, much of which can be offset by eliminating current subsidies and giveaways.

"Will it be enough to kick our longtime oil addiction?," asks Varchaver. "Of course not. Even a far more radical plan is not going to solve this problem in ten years. Progress will be incremental and will take decades. But with the hole we have to climb out of getting deeper every day we wait, this plan at least promises what we need right now--a good start."

Fortune's plan consists of four approaches:

  1. Improving fuel economy. Hybrids offer the best near-term opportunity to save large amounts of gasoline. Hybrid buyers should be given a tax credit, for which Congress could find the money by eliminating several subsidies for the oil and gas industries, whose profits don't seem to justify government handouts. Congress should also drop the exemption that allows SUVs to be considered light trucks instead of passenger vehicles.

  2. More spending on alternative fuels. Fortune estimates that a $3.5-billion-a-year investment in two key areas (each with different time lines for success) could lead to a 20% drop in our current oil usage. The majority of the money would be spent on a long-term but crucial goal: developing hydrogen technology for cars and electricity generation. The remainder of the investment would be in developing the biomass fuel called cellulosic ethanol, which can be blended into gasoline with minimal modifications to current engines and gas stations.

  3. Redoubled commitment to efficiency. Proponents of efficiency argue that we can enjoy our current lifestyle but use much less power in the process. The key is to focus on efficiency rather than conservation. Even without government rules, companies and individuals can save huge amounts with little cost or effort.

  4. Getting serious about solar and wind. Renewable-energy technology is improving by leaps and bounds, more so than alternative fuels. Wind and solar aren't the sole solution to the oil problem, but they're certainly part of it. Many experts believe that wind and solar could eventually shoulder 20% of the electricity burden. Fortune believes that 10% is a more realistic target for the next 20 years. Either way, the government will have to show more support.

Some companies are already taking innovative leadership roles in these areas, reports Varchaver, and it would be ideal to rely solely on market mechanisms. But for Fortune's plan to work, the government will have to do its part; when it comes to transformation on this scale, Washington needs to jump-start the process. Still, In Fortune's plan, government intervention would be modest, and the proposed spending is small compared to the costs for America's oil-based lifestyle that are currently underwritten via tax bills.

"That 20 percent might sound like a modest figure," concludes Varchaver. "But that percentage turns out to be more than the portion of our imports that come from the Persian Gulf. If we do nothing, you can be sure Americans will pay more than just the price at the pump."

The story appears in the August 23 issue of FORTUNE, on newsstands August 16 and at the magazine's Web site listed below.

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