Compare the costs and benefits of investing in an industrialized economy to the cost and benefits of investing in a developing economy from the standpoint of a Multinational Enterprises.

Before the 1980s, the only widely used renewable electricity technology was hydropower. Hydropower is still the most significant source of renewable energy, producing 20 percent of the world's electricity and 10 percent of that of the United States. The 1973 oil crisis awoke the country to its vulnerability through dependence on foreign oil. Subsequent changes in federal policy spurred the development of renewable technologies other than hydro.

In 1978, Congress passed the Public Utility Regulatory Policies Act (PURPA), which required utilities to purchase electricity from renewable generators and from co generators (which produce combined heat and power, usually using natural gas) when it was less expensive than electric utilities could generate themselves. (Gramlich, Edward M 1990)

Some states, especially California and those in the Northeast, required utilities to sign contracts for renewable whenever electricity from those sources was expected to be cheaper over the long term than electricity from traditional sources.

United States

United States

© Guerito 2005

These states saw the largest renewable development under PURPA. However, because oil price projections were high and because utilities were planning expensive nuclear plants, these renewable contracts turned out to be expensive relative to the low fossil fuel prices of the 1990s.

Nevertheless, under PURPA over 12,000 megawatts of non-hydro renewable generation capacity came on line. This development enabled renewable technologies to develop commercially. Wind turbine costs, for example, decreased by more than 80 percent.

Over the last five years, renewable energy growth has been modest, averaging less than 2 percent per year, primarily because of the low cost of fossil fuels. In addition, the uncertainty around the deregulation of the utility industry largely froze investment in renewable, as utilities avoided new long-term investments. (Tator CH, Duncan EG, Edmonds VE, Lapczak LI, Andrews DF. 1993)

Current levels of renewable development represent only a tiny fraction of what could be...