The Economics of Transitioning to Renewables

With a massive cultural and technological shift on the horizon, economic concerns are a fundamental part of the conversation.. A careful approach is necessary to avoid potential negative economic impacts. In this section, we’ll explore the economics involved with transitioning to renewable energy sources — whether it will be good or bad for the economy and the communities it might affect.

What Are the Economics of Using Renewable Energy Resources?

The economics of renewable energy technology are complex. A transition to renewable energy sources will be a cultural and economic shift, sure to have complicated effects on the economy. This inevitably puts a strain on utilities. There is an industry-wide need to improve the knowledge of operators, executives and developers.  Evaluating and predicting these possible effects is an important step in the process. It’s vital to consider all conceivable possibilities and long-term impacts. Developing a complex renewable energy program requires an investment to manage the short and long-term impacts. 

Do Renewable Energy Sources Rely on Subsidies?

In addition to job opportunities, another vital economic question is whether or not renewable energy markets can thrive without government intervention. Some argue renewable energy industries are only seeing success thanks to government incentive programs such as tax breaks and subsidies. They feel the lost tax revenue is not worth the benefits renewables could offer.

Others point out that subsidies have helped with the development and cost reduction of renewable energy sources. Even without subsidies, solar and wind power have become less expensive than electricity from coal, natural gas and nuclear power. While the government’s financial investment may be necessary during early development stages, existing technologies seem to do well without it.

Even as political landscapes change, alternative energy technology sources will continue to grow. With or without government incentives, renewables are a booming industry with high projected growth. Renewables will not rely on subsidies for growth and success, as some posit. However, government programs can make renewable energy projects more financially viable, mitigating project costs for individuals.

What Economic Impacts Will Renewable Energy Have?

With an energy revolution underway, it’s essential to understand the economics of the transition through a historical lens — massive-scale energy transitions have been a normal part of human society for thousands of years. Society has not always relied on the same source of energy. Popular energy sources have shifted many times throughout history as technology has advanced. Electric utility providers and industrial civilization at large have experienced energy transitions before — from biomass energy to hydropower to coal to oil and natural gas.

When early human ancestors first discovered the powers of fire, they used biomass sources for energy in the form of wood and animal products. Many years later, people often relied on hydropower, using running water to enable grain processing and other agricultural activities. The industrial revolution saw the first widespread use of coal for energy. Today, society relies mostly on oil and natural gas, though coal, hydropower and biomass remain significant energy sources in various parts of the world.

Approaching renewable energy through this historical lens helps provide insight into the changes to come. A transition to renewables will have economic impacts on an individual, community and national scale. Electric utilities looking towards the future find it’s helpful to consider the implications at each scope.

Is Renewable Energy Economically Sustainable

Renewable energy is economically sustainable. Each year, the costs of renewable energy decrease with technological improvements — at rates sharper than experts predict. Continued research, along with increasing infrastructure, are making renewable energy more and more economically viable. Decreasing costs, along with ongoing incentive programs, make renewable energy sustainable from an economic perspective. This reduction over time should make both energy providers and project developers optimistic for the future.

How to Compare Costs Across Resources

The cost of the transition to renewables will depend on many factors. While renewable energy costs are lower than ever, some projects will be less expensive than others. For example, projects requiring offshore components present logistical challenges and can be costly. Contesting with the ocean is no simple feat. For that reason, offshore wind projects tend to be more expensive than onshore wind projects.

In addition, solar photovoltaic projects tend to cost less than solar thermal projects, as the technology is more prevalent and better developed. Among renewable energy sources, hydroelectric is generally the least expensive. However, its availability varies from one location to the next.

The costs of two renewable energy projects are seldom the same. Costs depend on factors such as geography, local policies and site-specific complications or restrictions. They also vary based on the newness of the technology at hand, as newer solutions tend to be the most expensive.

Learn More About the Economics of Renewable Energy

Renewable energy efforts result in complicated economic situations. While not every individual, company, town and nation will see immediate benefits from the shift, the overall implications are positive. Emerging technology continues to drive down renewable energy costs. Now is an ideal time for utilities to invest in alternative energy as the field advances and expands. 
Learn more about the economic impacts of a widespread renewable energy shift.