From this week's Economist:
Renewable energy has regulatory, commercial and technological trends on its side, all of which are working to close the cost gap with conventional sources. Taken together, they promise a far more sustainable, market-driven basis for investment in renewables than yesterday's faith in high oil prices—and suggest that renewable energy's cheerleaders could be on to something after all.
Click in the figure to see the costs of renewable energy sources compared to traditional power sources.
More from the Economist...
Business's growing interest in greenery is partly public relations, but there's solider economic self-interest involved, too. Companies are investing in renewables because the gap in cost between them—solar and wind power in particular—and conventional energy sources is shrinking. And it's not just small companies run by idealistic greenies that are betting on environmentally-friendly technology. GE, the world's largest energy-equipment supplier, is convinced that there's money to be made from technologies such as clean coal.
The more companies such as GE invest in green technology, the greater the chances that their customers, such as electricity utilities, will buy the stuff and thus cut their emissions. But the two main determinants of whether or not this will happen are oil prices and governments.
High oil prices are certainly doing their bit for greenery now, but they cannot be relied on to constrain hydrocarbon consumption. Although they are partly the result of higher demand, especially from China, other factors influence them too. An increase in supply, for instance, as a result of new investment and new finds, could push prices down again.
I'm not sure I agree that higher oil prices "...cannot be relied on to constrain hydrocarbon consumption." In fact I'm pretty sure I disagree. Yes, regulation and technological improvements can hasten the shrinking of the gap between the costs of renewable and traditional sources of power, but in the long-run, prices of traditional fuels will rise and help to smooth the transition. Sure there will be short-run fluctuations in oil prices due to new discoveries and better drilling technologies but the long run trend will be higher prices for traditional fuels and lower prices for renewables. Unless, of course, the powers-that-be regulate gas prices.
