Posted in Energy, Sustainability

Market barriers, price of fossil fuels and renewable energy, affordability of solar, energy efficiency and conservation are better than renewable energy

Someone made this comment to one of my posts that was shared on Facebook: “I wonder what a graph showing the historical and relative drop in price of renewable energy to coal/petrol/LPG (non-renewables) might look like? My guess is that with current improvements in cost of production there will very soon come a time when renewables are cheaper to produce than non-renewables. Then the free market will take care of it and people will naturally buy the cheaper products and non-renewables will decline till they are no longer items of consumption in the free world. Up until then I urge everyone to buy renewable energy even if it is more expensive as it will drive the move to renewables by giving more funds for expansion of renewables. People power will work.”

Here is my reply:

“the levelised cost of electricity of a solar system is already lower than the cost of grid electricity in Australia (and in many other countries), which is sourced predominantly (90%) from fossil fuels. The LCOE is the sum of all the cashflow over the life of a solar system, divided by the total amount of energy generated over its lifetime.

“Additionally, be careful about making statements like “the market will take care of it” because that is often not true, and in this case isn’t. There are market barriers to deploying sustainable energy other than the cost. Barriers include, but are not necessarily limited to, ignorance, inertia, lack of expertise, perverse incentives (e.g. too many subsidies for fossil fuels and not enough for renewables–it would be better to do life cycle costing and have policies to accurately reflect that life cycle cost), and others.

“I will reiterate that going solar is better than continuing with the status quo (paying more and more for electricity). It is better to pay the upfront cost if it is affordable, however most companies now have financing options to make it more affordable. Some even have financing options with no upfront cost, and where the cost of monthly financing is similar to the cost of the solar system. There are some financing options with no interest, but if there is interest then the net present value reduces, although the rate of return on investment will increase.

“More important than renewable energy is energy conservation and energy efficiency. I often I recommend taking as many actions in these two areas first before going with renewable energy such as going solar. Why? Energy conservation costs nothing, and saves energy and money. Energy efficiency may cost a little, but will save far more, and the payback on investment will typically be faster than solar.”

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