THE BLOG
09/15/2014 08:57 am ET Updated Nov 15, 2014

Clean Energy and the Path to U.S. Energy Independence

As tensions in the Middle East rise, and show every likelihood of continuing for a long time, the U.S. needs to step up its efforts to achieve energy independence and take advantage of every possible source of energy. Historically, the U.S. has been able to rely on Arab nations to meet about 30 percent of its oil needs, but the unpredictable political landscape in the Middle East could restrict that supply at any time.

While the formerly popular theory of 'peak oil', which postulates that domestic supplies of U.S. oil reached their peak in 2005 and will falter in the future has been widely discredited, it still contains some truth. Even if oil production is not declining, energy consumption is rising rapidly, which is the other side of the coin. At the same time, regulations that prevent oil companies from drilling in resource-rich areas like the Arctic Natural Wildlife Refuge put even more pressure on supply.

On the back of this situation, natural gas has risen in importance. It provides a seemingly endless supply of energy for everything from heating to electricity. Currently, natural gas accounts for 27 percent of electricity generation stateside, driven by low natural gas prices, and is projected to rise to 30 percent by 2040. In addition, the U.S. currently has 2.2 trillion cubic feet of natural gas, which is enough to last for 92 years, according to the U.S. Energy Information Administration.

However, these statistics are based on demand remaining static at today's levels. They fail to factor in the possibility of higher consumption or an oil supply deficit, both of which would lead to the faster use of natural gas and create a supply/demand imbalance in that sector as well.

This would, of course, be good for domestic oil and natural gas producers, who would be selling at capacity and at higher prices. But it also means that other sources of energy will be required to supplement oil and natural gas -- at least in the medium term -- for the U.S. to be energy independent.

One possibility is biofuels such as ethanol and biodiesel, which are obtained from plant tissues and are renewable. However, these fuels generate much less energy than crude oil and are difficult to refine. Researchers are working on methods to counter these factors but are still very early in that process.

The other options are traditional sources such as coal which will continue to provide a steady percentage of our energy needs. However, even if the environmental concerns surrounding coal don't actually hamper production, they could still provide an impetus for the generation of clean energy through solar, hydroelectric, wind, geothermal, and hydrogen fuel cell technologies -- supported by studies on climate change such as a recent one from the World Meteorological Organization.

Today, clean energy accounts for only 8 percent of electricity generation and 11 percent of total energy production in the U.S. The reason for this is the high expense of producing clean energy relative to the output, and consequently pricing. In addition, investment in low carbon technologies fails to yield sufficient savings to make it cost effective for the power sector and industrial consumers, leading to a slower migration to energy efficient technologies. Making this scenario even more complicated are the mixed signals from policymakers over the years on carbon pricing, which underpins the economics in this arena.

This can all change, however, at the 21st United Nations Framework Convention on Climate Change Conference, set to take place in Paris in 2015. The UNFCCC is expected to set a global protocol for the reduction of CO2 emissions, to be enacted in 2020. The clarity from such a protocol is expected to set the market for carbon at a level sufficiently high to justify investments in environmentally friendly technologies, which would then give both producers and consumers of clean energy better visibility on their investments.

The clean energy sector in the U.S. still has a long way to go. Unlike Europe and China, where the adoption of such technologies is progressing rapidly, American producers have yet to reach the critical mass required to bring down prices, and consumers still lack a real incentive -- other than a desire to reduce greenhouse gas emissions - or even options to switch to such sources of energy.

This will gradually change as the industry matures but will require the U.S. to prioritize energy independence and to keep in mind that rising energy demand may necessitate the use of a variety of sources, both traditional and new, at the same time.

This article also appeared in FORTUNE.com

Sanjay Sanghoee is an author and commentator. Follow him @sanghoee.