Will gas crowd out wind and solar?

Daniel Yergin, author of the new bestseller The Quest: Energy, Security, and the Remaking of the Modern World, is one of the planet’s foremost thinkers about energy and its implications. He received a Pulitzer Prize for his previous book, The Prize: The Epic Quest for Oil, Money, and Power. Yergin is chairman and founder of IHS Cambridge Energy Research Associates, is on the U.S. Secretary of Energy advisory board, and chaired the U.S. Department of Energy’s Task Force on Strategic Energy Research and Development. He talked recently with Brian Dumaine about the role natural gas will play in America’s energy future.

Fracking technology has given the U.S. a 100-year supply of cheap natural gas. What’s its impact on coal, nuclear, wind, and solar power?

Inexpensive natural gas is transforming the competitive economics of electric power generation in the U.S. Coal plants today generate more than 40% of our electricity. Yet coal plant construction is grinding to a halt: first, because of environmental reasons and second, because the economics of natural gas are so compelling. It is being championed by many environmentalists as a good substitute for coal because it is cleaner and emits about 50% less carbon dioxide.

Nuclear power now generates 20% of our electricity, but the plants are getting old and will need to be replaced. What will replace them?

Only a few nuclear plants are being built in the U.S. right now. The economics of building nuclear are challenging — it’s much more expensive than natural gas.

Isn’t the worry now that cheap natural gas might also crowd out wind and solar?

Yes. The debate is over whether natural gas is a bridge fuel to buy time while renewables develop or whether it will itself be a permanent, major source of electricity.

What do you think?

Over the past year the debate has moved beyond the idea of gas as a bridge fuel to what gas means to U.S. manufacturing and job creation and how it will make the U.S. more globally competitive as an energy exporter. The President’s State of the Union speech was remarkable in the way it wrapped the shale gas boom into his economic policies and job creation.

I believe natural gas in the years ahead is going to be the default fuel for new electrical generation. Power demand is going to go up 15% to 20% in the U.S. over this decade because of the increasing electrification of our society — everything from iPads to electric Nissan Leafs. Utilities will need a predictable source of fuel in volume to meet that demand, and natural gas best fits that description.

And that won’t make the environmental community happy?

Well, natural gas may be a relatively clean hydrocarbon, but it’s still a hydrocarbon.

So wind and solar will have a hard time competing?

Remember that wind and solar account for only 3% of our electric power, whereas natural gas is 23%, and its share will go up fast. Most of that 3% is wind. Natural gas has a new role as the partner of renewables, providing power when the wind is not blowing and the sun is not shining.

Will solar scale?

Solar is still under 1% of U.S. electric generation, and even though its costs have come down dramatically, they must come down a lot more. Solar is generally much more expensive than coal and natural gas.

You have to remember that energy is a huge, capital-intensive business, and it takes a very long time for new technologies to scale. The euphoria that comes out of Silicon Valley when you see how quickly a Twitter or a YouTube can emerge doesn’t apply to the energy industry.

Globally solar and wind investments have been growing about 30% a year. What could slow the adoption of wind and solar?

Well, there’s policy uncertainty. In the U.S., tax credits for wind expire at the end of this year, and it is unclear whether they will be renewed. Also, the current economic austerity in the developed nations will also slow adoption. Spain and Italy, which were early adopters in renewables, got hit by the eurozone crisis and have cut back.

Hasn’t the Fukushima disaster made some countries rethink nuclear? That’s good news for renewables, right?

Germany has decided to mothball its nuclear power plants and is making a big bet on its entire economy on how fast renewables, in particular offshore wind, can develop. In Japan, 53 of its 54 nuclear reactors are shut down, and the nation is debating the feasibility of renewables.

The good news is that the basic starting point for the electric power industry is diversification. You don’t know what the future will hold, what prices will change, what policies will change, so the smart thing is to have a diversified portfolio that includes wind and solar. Some in the U.S. are skeptical about natural gas because historically we’ve seen wild price swings. Many experts think it’s different this time, but those of us who have lived through volatile price cycles know prices will change.

The growing power needs of developing nations like China and India will give a boost to renewables. China needs as much power as it can get. In the past five years China has in effect created a second China — it has doubled its power infrastructure. It’s unheard-of. State Grid, the country’s main utility, is investing $50 billion a year. China needs coal, nuclear, solar, and wind. China truly has an all-of-the-above strategy, because energy is so crucial to its growth.

So you’re cautiously optimistic about renewables?

Yes. Though their share is small, renewables have over the last decade turned into a big global business, and it will be much bigger by decade’s end.

This story is from the April 30, 2012 issue of Fortune.