The price of oil is expected to increase more than 100% in the next three years, to a peak price of $200 per barrel in 2013 from under $100 today.
The price of wind is expected to remain the same over the next 2, 3 and even 10 years, to a peak of zero from zero today. Ditto with the price of the sun's rays.
Now if China builds hundreds of gigawatts of coal-fired and diesel-fired power plants over the next 10 years, and we build hundreds of gigawatts of wind and solar farms in the same time period, we will pay more for our energy infrastructure in the short term. But they will be stuck with ever-increasing and ongoing costs to fuel their coal-fired and diesel-fired power plants, while we will enjoy zero fuel costs for our wind and solar farms. We will have a very significant competitive advantage in energy costs, which will allow us to hire more people and pay them more.
Ten years from now, China's leaders might look back and say, "We kept buying US Treasury bonds, thereby lending money to the Americans so they could build wind and solar farms that are more efficient and less expensive than our coal-fired plants? Now the Americans have a competitive energy advantage courtesy of our low-cost financing? What were we thinking?"
Or we could look back and say, "We borrowed billions from China by issuing Treasury bonds, and we wasted all that money on traditional fossil fuel power plants that now require us to pay ever-increasing prices for coal and oil? What were we thinking?"
What about the intermittent nature of wind and solar? How can we rely on energy sources that are as fickle as the wind and the sun?
First, let's understand that our use of energy is also intermittent. For example, we use more air-conditioning on hot days when the sun is shining, which is also when solar panels produce the most electricity. Second, let's understand that we can address some of the concerns by bulding a smarter grid (which we need anyway; the current one is based on technology that is 100 years old) and by driving more plug-in electric vehicles (which can serve as a distributed storage system; charging car batteries when electricity supply is plentiful).
Most of all, let's understand that no one is suggesting that wind and solar can meet all of our energy needs. Renewables can supply 20% of our energy needs in the next 10 years. Combine that with a 20% increase in energy efficiency, and we will have reduced our reliance of fossil fuels by 40%.
A 40% reduction in fossil fuel reliance would give us a distinct competitive advantage in the world economy. Not to mention less need to drill for oil in sensitive environmental areas, less concern about whether undemocratic states will use the money we pay for oil to fund terrorists, etc. Plus, we have plenty of coal that we can ship to China at ever increasing prices, thereby reducing the trade deficit.
So, do we want to pay now for wind and solar farms that will give us a competitive energy advantage? Or do we want to pay later with higher fuel prices and an uncompetitive economy?