Renewable Energy Meets Economic Reality
In a perfect world, everyone would use renewable energy.
A source, or sources, of cheap, reliable and renewable energy would usher in a period of economic growth like none before. Climate change arguments would cease. Carbon footprints would be a thing of the past. And trees would grow to the sky.
That’s because it is. As much as I’d like to buy into the dream myself, the truth is, reliable and cheap renewable energy is far from becoming a reality… at least for the time being.
In fact, if it weren’t for government subsidies, it wouldn’t be even remotely viable. It’s simply not competitive with fossil fuels like coal, oil and natural gas. Not even close.
So governments worldwide have been plowing billions of dollars into the alternative energy industry just to keep it alive. And what’s worse is, these billions don’t go into research, but rather to consumers who are determined to use renewables even if it makes no economic sense.
The last time I priced solar energy for my home, it resulted in a fat “no thanks.” Even with the subsidies, it would have taken more than 20 years before I gained any significant savings.
I used to wonder what would happen to renewable energy companies if tough times hit and governments were forced to slash their subsidies. Well, it didn’t take long for the answers to surface. This past economic crisis has led to worldwide government cutbacks, and even the elimination of subsidies. And during times of personal economic hardship, consumers have rebelled against the higher cost of renewables, as well.
The pain has been most acute in Europe.
Places like Spain, which led the charge for solar and wind subsidies, have cut back, sending residents back to fossil fuels, which are much cheaper. In Bulgaria, the prime minister recently resigned after mass protests stemming from higher energy bills, which renewable subsidies helped to create. Even Germany has cut back on solar subsidies.
Meanwhile, in the United States, the Solyndra debacle was really nothing more than a political sideshow – one that did no justice to the massive amount of money being thrown away on renewable fuels.
Remember, Solyndra cost the government some $500 million, which is a drop in the bucket compared to the almost $40 billion in subsidies and “interventions” the government spent on energy-related items last year.
If you think those numbers are big, you’re right.
What you probably don’t know is that renewable energy subsidies far outstrip those made to the conventional fuel industry by a factor of several times.
For example, in 2010, the oil and gas industry received $2.8 billion, while the wind power industry received more than $5 billion.
Per megawatt hour, natural gas, oil and coal received $0.64, hydropower $0.82, nuclear $3.14, wind $56.29 and solar a whopping $775.64.
So for every tax dollar that goes to coal, oil and natural gas, wind gets $88 and solar gets $1,212.
That’s the real reason solar and wind are a long way from becoming conventional energy sources.
Bottom line: Using renewable energy has a “feel good” factor. And someday, the advances in solar technology may allow it to be somewhat competitive. But that day is a long way off. So investors’ time and money would be better spent on conventional energy plays.
And “the chase” continues,