Investment in renewable energy
November 14, 2008 11:30 PM Filed in: Energy
One of the big questions of the current times is the influence of energy prices on the investment in renewable energy. We have seen crude oil prices fluctuate between $147 and $57 in the last few months. The high energy prices naturally encourage investments in renewables. But the fear among many when the oil prices dropped below $70 last month was whether such investments will stop altogether if the oil prices were to drop below $60. A couple of weeks later both Brent and WTI crude oil were trading below $60.
I saw in the summer that the high crude oil prices in the second quarter did change the driving habits and the gasoline demand in the US. Because of the falling demand, the falling consumer spending, the credit crunch and the general state of the financial system, it is not just energy prices that have dropped. The cost of steel, heavy equipment, contract labor, shipping and other infrastructure related items are also down by as much as 15%. My thinking has always been that energy prices is one of several factors and probably not the most influential factor that will affect investment in renewables. It is also going a take a tremendous amount of political will from the new administration and the public. In my opinion the biggest constraint to investment in renewables will come from the availability of capital in the current financial situation and credit crunch.
I came across an article by the Chairman of the Cambridge Energy Research Associates, Daniel Yergin, published on Monday on the Financial Times. Daniel Yergin validates some of my thinking to date and provides additional perspective that I paraphrase here with my own color added: For government incentives for such programs to work, the government itself needs to reduce costs and increase revenue. On the cost side, the obvious places to look are the current wars and the bail out packages. [While the bailout of the banks is highly debatable, the bailout of the auto industry makes no sense; unfortunately the new administration may be supporting this. —comment mine] New revenue sources may come not just from taxes but from ideas like carbon permits that the Europeans have already started. This has the added benefit of "taxing" greenhouse gas emissions.
Here is a link to Daniel Yergin's article on the Financial Times.
Here is a vision from Al Gore on the New York Times last week. I will comment more on a vision in a future article.
Here is an interesting article by Peter Fusaro. Peter makes some good points, but his timeline is not as ambitious as Al Gore's. Peter talks about 20% renewables by 2020.
Here and here are two articles about this issue on Ken Snyder's blog and my comments.
I saw in the summer that the high crude oil prices in the second quarter did change the driving habits and the gasoline demand in the US. Because of the falling demand, the falling consumer spending, the credit crunch and the general state of the financial system, it is not just energy prices that have dropped. The cost of steel, heavy equipment, contract labor, shipping and other infrastructure related items are also down by as much as 15%. My thinking has always been that energy prices is one of several factors and probably not the most influential factor that will affect investment in renewables. It is also going a take a tremendous amount of political will from the new administration and the public. In my opinion the biggest constraint to investment in renewables will come from the availability of capital in the current financial situation and credit crunch.
I came across an article by the Chairman of the Cambridge Energy Research Associates, Daniel Yergin, published on Monday on the Financial Times. Daniel Yergin validates some of my thinking to date and provides additional perspective that I paraphrase here with my own color added: For government incentives for such programs to work, the government itself needs to reduce costs and increase revenue. On the cost side, the obvious places to look are the current wars and the bail out packages. [While the bailout of the banks is highly debatable, the bailout of the auto industry makes no sense; unfortunately the new administration may be supporting this. —comment mine] New revenue sources may come not just from taxes but from ideas like carbon permits that the Europeans have already started. This has the added benefit of "taxing" greenhouse gas emissions.
Here is a link to Daniel Yergin's article on the Financial Times.
Here is a vision from Al Gore on the New York Times last week. I will comment more on a vision in a future article.
Here is an interesting article by Peter Fusaro. Peter makes some good points, but his timeline is not as ambitious as Al Gore's. Peter talks about 20% renewables by 2020.
Here and here are two articles about this issue on Ken Snyder's blog and my comments.