Renewables to Boom or Bust?

February 18th, 2008 by Michelle Bennett

Timothy Hurst recently wrote an article about U.S. Investors and renewable energy. This post is designed as a complement to that news story.

Renewable energy has attracted a lot of attention lately as the world looks for cleaner ways to power our world. Wind and solar stand as the most recognizable clean, green dynamos, but they still struggle to compete with traditional and entrenched power producers. True to conventional economic values, competition is everything. Yet, in the U.S.A. these technologies have survived in the dog-eat-dog industry for decades mostly without the aid of government subsidies (unlike coal and oil), and many claim that renewables could take off with just a little help from Uncle Sam. What are the obstacles? Are government subsidies the only saving grace for renewables? This post hopes to shed some light on the topic and burn through the conflicting noise that surrounds this fundamental and controversial industry.

It seems like I’m always reading articles about improvements, investments, and the promise of renewable energy. For a more practical perspective, I recently asked a successful businessman, who sometimes works with solar panels, for his opinion. Did he think that solar was going to boom in the next few years? His opinion was that the industry would need more government subsidies to really take off. Even with high oil prices, it was still simply too expensive to invest on a small scale. You might regain your initial investment in 15+ years in ideal conditions. Even in states with incentives to support renewable energy, it’s expensive. His view echoed my cousin’s frustration. Yet despite the initial cost, renewables are still an attractive option. As expensive as it may be to buy and install solar panels, it’s also very expensive ($1.8-billion and rising) to build a new coal-fired power plant with “clean coal” technologies. Hidden costs also plague coal power plants: the cost to clean up mercury emissions, the water required to operate, and in some places, the cost of carbon credits. Finally, the bottom line: how much does it cost to generate each kilowatt hour? Compare two graphs, one for coal and one for solar, and you may be surprised.

But what about the cry for “subsidies!”? I’ll state right out that I don’t intend to offer an analysis, or interpretation of U.S. energy subsidies. There is enough information out there to fill a multitude of posts, and books have already been published on the issue. Boiled down, the federal government tends to support traditional oil and coal over renewables like solar and wind. Ethanol has received a lot of attention and support from the Bush administration, but studies show that it poses its own problems. There is a new proposal to extend renewable energy subsidies after similar measures were shot down in the last energy bill. There’s increasing pressure for Uncle Sam and other international governments to lend a hand or even tax carbon. Subsidies could help make renewables not just competitive, but accessible and profitable – much in the same way subsidies currently reduce the price of gasoline for consumers. But are subsidies the one and only answer? How long can we afford to wait for the government to draft and pass complicated and contentious legislation?

Enter Google. This year Google announced that it would invest millions in renewable energies to support R&D and building facilities. The idea seemed so attractive that it started a craze: this week, “U.S. institutional investors… pledged $10 billion dollars over two years in renewable energy technologies and project development, energy efficiency, green building and clean technologies” (my emphasis). These are investors we’re talking about – people who assess risk and intend to make a profit. With a multi-billion dollar injection into the industry, maybe some of the new advances I get so excited over will leap off the drawing board and into our lives. But we need not wait for new technology to save us. I agree with Peter A. Darbee, Chairman, CEO and President of PG&E Corporation when he says the technology is already available.

“In conversations with other business leaders, I have heard more times than I can count that it’s impossible or impractical to make much headway on greenhouse gases until we have better technology,” Darbee said. “That is not the case. It’s a red herring…. The biggest obstacle right now is a lack of will — not invention.”

In case you don’t know, PG&E stands for Pacific Gas & Electric company. They are a major energy provider that supports renewable energy. Looking at all of this information, I admit that I feel a little overwhelmed. I’m not an economist but I’ve come away with the strong sense that renewables are valuable for more than their guilt-free eco-friendly qualities. Right now, they stand firmly on the cusp of competitiveness with other forms of electricity generation, and constant improvements in technology will push them into the forefront of the industry even if legislation and subsidies do not. This fact is proved by commitments of large international corporations to invest not millions, but billions of dollars into the development and implementation of renewable technologies. Even if we cannot agree on the politics of renewables, I think we can agree that investments on this scale signal an economic shift. Renewable technologies have already been around for decades, but now it seems certain that they’ll move into the spotlight of our energy generation as the promise of their benefit comes to outweigh crumbling economic obstacles.

Admittedly this article is limited as it has focused on comparing solar to oil and coal. I had difficulty finding the statistics and numbers I wanted for wind power. Other options of energy production, such as non-food ethanol, plasma gasification, hydrogen, wave or tidal power, and other technologies are either controversial, still under development, or both. They may play a larger role in the future, but I wanted to limit my scope for the sake of simplicity and brevity.

Do you have any ideas, opinions, links, or comments?

Resources:

Solar Buzz

Earth Track: for detailed info on subsidies.

Images provided courtesy of Smart Planet and the Roosevelt Institution









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