Abstract: Coal, gas and oil will not be the three kings of the energy world for ever. It is no longer folly to look up to the sun and wind, down into the sea's waves.

ONCE it was the province of mad scientists and dreamers. Renewable energy, they said, was the coming miracle. Anyone willing to listen would be told rapturous tales about the benefits of sun power, wind power and sea power. These things would free countries from their dependence on a handful of dodgy Middle Eastern regimes; they would blow away smog and dismiss the fear that evil fumes might be changing the globe's climate. And how bountiful the prospect is, the dreamers would exclaim: each year the earth gets from the sun alone 10,000 times the energy it needs to use.

Until recently, the dreamers would then be woken up to reality by economists shouting "Costs!". For renewable energy has long been hopelessly more expensive than energy produced by the fossil fuels-coal, oil and gas. Without subsidies, not a joule of renewable energy would have been generated.

No longer. Little noticed, the costs of many renewables have recently been tumbling. Fossil fuels are still almost always cheaper. But a battle has begun on the fringes of the mighty $l-trillion-a-year fossil fuel industry that could force it into retreat early in the coming century.

At first sight, the fossil-fuel empire looks impregnable. The bosses of oil, gas and coal businesses in Tokyo for the World Energy Congress starting on October 8th are in no mood for retreat. Fossil fuels supply over three-quarters of the world's energy needs. Much of the remaining quarter is met by poor-world fuels such as wood, crop residues and dung. As poor countries grow richer, these primitive fuels will not suffice; oil, gas and coal will push them aside.

In the energy needed to move transport, oil is still king, supplying 97% of the fuel used. Only in the production of electricity have the alternatives to fossil fuels yet made any sort of impact. Nuclear power provides 17% of the world's electricity, and hydroelectric power 18%. But both are relatively old, and both are controversial. Truly modern renewables, such as solar and wind power, provide less than 1% of world electricity.

So what could loosen the grip of fossil fuels? Not, let it be made clear, any possibility that there will soon not be enough of the stuff around the place. During the oil shocks of the 1970s, many people confused supply restrictions imposed by OPEC, the oil cartel, with the false idea that the world was running out of oil. in fact, the potential supply of oil has increased since the 1970s.

Proven reserves of oil are now enough to supply the world for 43 years at current rates of production, compared with less than 35 years during the 1970s, according to BP, one of the oil giants. Proven reserves of natural gas now stand at 66 years' worth of current production, up from 44 years in 1970. Coal reserves will stubbornly last for 235 years of production at current levels.

Of course, rates of production will not stay unchanged. The world's demand for energy could more than double by 2025, as populations soar and poor countries industrialise. But, even given the growth in demand, the proven reserve figures probably underestimate the longevity of fossil fuels. "I don't believe we will be out of oil in 40 years," says Sean O'Dell, chief economist of the International Energy Agency (IEA).

The phrase "proven reserves" merely refers to already known reserves of oil that energy firms reckon they can extract without losing money. Who knows how much more oil will be discovered in the future? The new technology of oil exploration allows firms to see three-dimensional seismic images of oil fields and to drill into them horizontally. Since the 1970s the OPEC countries of the Middle East have discovered that they sit on far more oil than they had realised. The prospects elsewhere may grow too.

And who can predict the future economics of fossil-fuel extraction? Any sign that known reserves of oil, gas or coal are running out will push up their prices. But that in turn will bring on to the market reserves that had previously been rejected as too dear to exploit-oil in the deepest waters of the ocean, coal in the remotest parts of Siberia. Such "ultimately recoverable" fossil-fuel reserves, the World Bank says, may contain over 600 years' worth of current production.

There are reasons to be nervous

So fossil fuels are not about to be exhausted. Even so, three things may soon undermine their dominance of the energy world: the market's fear that fossil-fuel costs may rocket; worry about the environment; and the falling cost of alternatives. Take the three in turn.

"Energy insecurity" is another legacy of the 1970s' oil shocks. But, unlike the fear that fossil fuels are running out, this one has some basis. The price of a fossil fuel can go up quite a lot if demand grows faster than supply, even though eventually the price rise encourages producers to increase output. It is not much good finding a new gas field, for instance, if it takes ages to build a new pipeline to carry the gas to the market. And in the oil market, in particular, there is the daunting factor of oligopoly power.

OPEC has tried to raise the oil price in recent years by restricting its output to around 25m barrels a day. So far its efforts have failed. The recent rise in world demand for oil (around 2% since 1991) has been met by surging output from non-OPEC countries. Even worse for OPEC, the oil price could tumble if Saddam Hussein behaves well enough for the UN to decide that it can let Iraq resume its oil exports.

But in the longer run OPEC may regain the power to push up the oil price. Even though the cartel today supplies only 40% of the world's oil, it sits on over 75% of the world's proven reserves. Unless the non-OPEC countries discover large new supplies-and make sure they can get them to the market swiftly and inexpensively-they will one day not be able to meet their share of the expected growth in demand. Then OPEC could be a troublemaker again.

A sustained rise in the price of oil would make consumers look around desperately for alternatives. Since the 1970s, the mere possibility of another oil shock has led many countries to invest heavily in electricity generation from non-fossil sources, particularly nuclear power and hydro power. Over the past 20 years, oil's share of the world's electricity market has fallen from around 20% to about 10%. Alas, it has been harder to take precautions against a new oil shock in the field where oil is most necessary. This is transport.

Oil continues to power almost all of the 600m vehicles on the planet. About half of the world's oil supply is consumed in the transport sector of the economy. The IEA predicts that by 2010 the proportion could rise to more than 60%. This is where another leap in the price of oil could hit hardest.

Next comes the green argument against continued reliance on fossil fuels. in many cities, these fuels still cause unsightly and unhealthy smogs. And many scientists, despite the hazards of trying to predict complex weather- systems, say with increasing vehemence that the use of fossil fuels could change the world's climate. The carbon dioxide emitted by the burning of these fuels, they argue, may overheat the globe, with disastrous results. At the 1992 "Earth Summit" in Rio de Janeiro, the rich countries agreed to make sure their emissions of greenhouse gases by 2000 were no greater than they were in 1990.

To be sure, switching to non-fossil fuels is not the only way to deal with the problem. Gas, itself a fossil fuel, is relatively clean. To use it in place of oil and coal would reduce carbon dioxide emissions dramatically. And, since elderly motor cars are among the worst polluters, one way for governments to reduce urban smog might be to buy dirty old bangers from their owners, to help them buy more virtuous newer cars.

But green concerns may one day bring a big switch away from fossil fuels. If they do, what would be the environmentally best alternatives? Nuclear power and hydroelectricity are both dubious options. The operation of nuclear reactors in some countries -remember Chernobyl- poses a large danger of nuclear accidents. In other countries, including Iran and North Korea, a supposedly innocent nuclear power programme may be linked to the production of nuclear weapons. Although nuclear plants in the rich world are much safer, there are still legitimate worries, not least about how to dispose of waste that can remain radioactive for centuries ahead.

Hydro power also has its disadvantages. Dams uproot people and animals. China's Three Gorges dam -a gargantuan project costing, according to one estimate, $26 billion-will displace more than 1m people. And hydro power may also be climatically dangerous. Green activists in Canada and Brazil have recently argued that rotting vegetation in dam reservoirs gives off substantial amounts of greenhouse gases.

No source of energy is squeaky-clean. In California and Wales giant wind turbines have killed birds. Wave machines can disrupt marine habitats. Yet wind, sun and wave power seem on the whole far more green than their rivals. Unlike nuclear power, they pose no risk of environmental catastrophe. And, unlike hydro schemes, they do not need much space. According to World Bank calculations, solar power could, in theory, supply between five and ten times the present electricity demand of all the developing countries while covering less land than today's hydro schemes.

The lights that failed

If, that is, the price is right. However strong the fear of another oil shock or a green catastrophe, people will hesitate to invest in renewables if the energy these produce will cost more than that from fossil fuels. And, though the price of some renewables has been tumbling, the fall has been concentrated in the electricity sector. In transport -the fastest-growing portion of world energy demand- only the boffins have yet become really excited about alternatives.

Transport needs oil products for three reasons: they are cheap, they do not weigh too much, and they do not take up too much space. The other ways of keeping transport moving have repeatedly failed one or more of these tests. Many car scientists, for example, look with longing at the hydrogen fuel cell -a silent energy source that emits only steam and water. But hydrogen fuel cells; still expensive, heavy and bulky. Fuels based on vegetable oils are recommended by subsidy-hungry farmers, but they are far more expensive than petrol or diesel.

The largest and most foolhardy attempt to reduce transport's dependency on oil was Brazil's alcohol programme, begun in the late 1970s. By 1983, as a result of hefty subsidies, 90% of all new cars were built to be fuelled by alcohol. By 1990 that was down to 5%. The scheme withered partly because it proved hugely expensive; to make alcohol competitive in the 1980s, oil's price would have had to almost double, to $45 a barrel.

Undeterred, California is conducting its own experiment in oil-free cars. From 1998, an increasing proportion of new cars must be "zero emission vehicles". In practice, this means electric cars. Unlike Brazil, which was trying to reduce its dependency on oil imports, California wants to cause less pollution. Yet its experiment too could prove expensive. An electric car needs a battery, Today's batteries are large and heavy, and need regular and time-consuming recharging. A car that can run for several hundred miles on one tankful of petrol could not, today, manage even 100 miles on a single recharge. Zealous research has so far failed to solve the problem. So far as one can see, electric cars may be no more than useful second vehicles for families that make regular short trips to nearby shops or schools.

Turn to electricity production, though, and renewables look a much better prospect. The cost of solar thermal electricity, in which sunlight is used to heat air or water, has fallen. So has that of bio-mass power, in which plant matter is burnt to make energy. But the most enticing technologies are photovoltaic (PV) cells and wind power (see charts 2 and 3).

PV cells (semiconductor devices that generate electricity directly from sunlight) were first used in the 1950s to power space stations. They now bring power to tens of thousands of homes in rural areas of poor countries such as Kenya, South Africa and Brazil, often without a subsidy. A combination of better science and economics of scale has cut the cost of PV modules (clusters of the cells) to a fiftieth of what it was in the 1970s.

Where the land is brighter

A unit of electricity generated from photovoltaics is still far clearer than a unit generated in a fossil-fuel power station (3040 cents per kwh, compared with 3-6 cents, according to estimates by ERM, an environmental consultancy). Yet PVS are often competitive because their distribution costs are so much smaller. Extending electricity grids from fossil-fuel plants to new consumers can be hugely expensive. PV modules can be simply stuck on homes. In Kenya, as a result of a thriving (and unsubsidised) trade in PV modules since the mid-1980s, more households now get their electricity from the sun than from the national grid.

Now look at wind power. Even ignoring distribution costs, wind power is within nudging distance of price equality with fossil fuels. over the past 20 years its price has fallen from around 30 cents per kwh to 5-6 cents in the best sites. Wind turbines have become larger; blades have been designed so as to catch the wind more efficiently.

Wind power used to rely on subsidies, especially in California, which has more than half the world's grid-connected wind-turbine capacity. Yet the best wind plants are now competitive, says Roger Booth, head of renewable energy at Shell International Petroleum Company, part of Royal Dutch-Shell, a big oil company. According to one scenario developed by Shell, new renewables such as wind and sun power could be satisfying around half of the world's energy demand by 2060.

The World Bank is looking around China and India for suitable sites for PV and wind plants which, it hopes, will require no subsidies. Its economists expect the costs of many renewables to fall much further as technology goes on improving and the economies of scale get even more vigorously to work.

Wind power and photovoltaics have their risks. The sun does not always shine, nor the wind always blow. But this need not be fatal, according to a recent article by Christopher Flavin of the Worldwatch Institute in Washington, DC. If supplies of energy that fluctuate for these reasons are connected to a grid, and if they are a relatively small part (less than 20%, say) of total power generation, utilities can manage fluctuating supply just as readily as for decades they have managed wild hourly swings in demand.

There are also ways of storing energy that smooth out changes in supply. Some utilities, for example, use any excess in the supply of electricity to pump water into high reservoirs. They can then, by a hydroelectric process, release this energy when it is needed. Scientists are developing other storage technologies, such as hot rocks and mechanical flywheels, costly though they are.

Renewables are not perfect; but they may soon provide a dramatically larger share of power, particularly in the poorer parts of the world. Two billion people, almost 40% of the world's population, still have no access to electricity. Most of them live in tropical or subtropical regions, with solar energy levels often double those in the rich world. Such places are also good prospects for renewables such as photovoltaics, which depend for their competitive advantage on the absence of an electricity grid.

Speed of construction is on the renewables' side. Wind plants, for instance, can take less than a year to build; nuclear plants often need a decade or more. Size is another bonus. Renewable generating plants tend to come in small units (their capacity is usually less than 200MW, compared with around 1,000MW for a typical nuclear plant). Smallness can be an advantage, because patterns of electricity demand are hard to predict and big projects often overrun their costs. "The electricity system of the future is going to be much less lumpy," says Walter Patterson of London's Royal Institute of International Affairs.

Despite all this, the world's attempt to cut down its use of fossil fuels is still based chiefly on two established technologies, nuclear power and hydro power. According to IEA figures, governments in rich countries spend over half of their $8-billion-a-year energy research budgets on nuclear programmes. Renewables get less than 10%. Poor countries (excluding the former communist block) already generate almost 5% of their electricity from nuclear energy or hydro power, but only 0.3% from renewables; and yet they are building dozens of new nuclear and hydroelectric plants.

Are nuclear and hydro really the best alternatives to fossil fuels? it is not only on environmental grounds that many people reject them. Their economic lead may also be slipping away. Admittedly, the best hydroelectric plants turn out splendidly cheap electricity. But others have proved hugely expensive: politicians too often indulge their taste for grandiosity in plans for giant dams that take budget-busting ages to build.

Nuclear power is uncompetitive almost everywhere. Although the cost of nuclear power varies from country to country, most recent studies show that the electricity it generates is more expensive than that generated from fossil fuels. Environmental regulations on nuclear power have become tougher. Economists at the World Bank argue that nuclear power cannot compete with fossil fuels once the costs of decommissioning old reactors and dealing with spent fuel are included. Worries about cost, as well as safety, have led many rich countries to abandon their nuclear programmes.

When governments wake up

Nuclear power and big hydroelectric dams are wrong for many poor countries for the same reasons that make renewables right They come in capital-intensive lumps; they are slow to construct; and they need to be attached to a grid system.

So long as the price of fossil fuels stay roughly where it is now, they will continue to provide the largest part of the world's energy. On the flanks of the battle-front, though, matters are different. As the arguments for giant hydro and nuclear plants grow weaker, the case for renewables get, stronger. The policy of governments has yet to catch up with the changes produced by science, says Dennis Anderson, an energy adviser at the World Bank. it is no longer reasonable to snigger at the dreams of those mad renewable-energy scientists.

??