Monday, January 12, 2009

Renewable Energy and Economic Stimulus

I have previously reported that renewable energy has been compared to the computer industry in the early 1980s. It is an inexact comparison.
At the time it wasn't clear that every household would eventually want or need a computer. As it turned out, businesses grew to fill the opportunity presented by the presence of growing computer power on every desk and every student's backpack. As for the Internet, in the early 1980s it linked a few government funded computer labs. But because of the inability to predict the growth of a new industry, it was hard to estimate its size within an order of magnitude.
Predicting the future size of the energy industry is a different matter. It is, in terms of scale, a mature business. We know the average energy use per household within a decimal place. The Energy Information Administration (EIA) puts out a survey that tells us the residential use per household, per resident and per square foot. The EIA does the same for commercial, manufacturing and transportation.
The predictability of demand is one reason why making renewable energy a component of the stimulus strategy makes sense. We know we're going to need energy, just as we know we're going to need roads, rail lines and potable water.
Another reason for inclusion in a stimulus strategy is that renewable energy is a growth industry. There is little reason to invest in declining businesses, as Bush and Cheney sought to do with fossil fuels. Consider the tax credit for renewable energy, which was given a one year extension last fall. The wind power industry is projected to grow 50 percent a year, if it can find the capital. Capital expenses make up most of the cost of renewable energy projects, which is why 100 megawatts of wind power cost more up front than 100 megawatts of a natural gas power plant. The difference is that you don't need to buy fuel for a wind power project, which makes it a valuable asset. If we're going into debt to stimulate the economy, it sure makes sense to have some productive assets to show for it. I should add that most of the work for building energy projects can't be outsourced, even if some components like wind turbine are imported.
Further, renewable energy facilities can be built for less than even a year ago. Commodity prices have dropped dramatically since last summer, which means that energy projects can be built more cheaply.
So the cost to build is lower than a year ago, but the long term demand is there. The industry is growing 50 percent a year, if it can finding the financing. It will put people to work here in the U.S. It sure looks like a sound investment to me.


Anonymous Edmund Dohnert said...

All across the world large energy capital projects, both conventional and alternative, are being delayed, scaled back, or outright canceled.

The Bluewater Wind project for Delaware is certainly not immune to the effects of the collapsing global economy. As alternative energy systems are generally more capital-intensive than fossil fuel systems of the same output, they may be even more vulnerable to difficulties in obtaining financing.

Let's hope things turn around before too, too long. It would be quite ironic if what Delmarva couldn't kill politically, it could just watch die on the vine as the result of economic conditions.

11:33 AM, January 12, 2009  
Anonymous Anonymous said...

If we could stop the $Billions in subsidies to the failed nuclear industry there would be planty of money for clean renewable power

9:31 AM, January 16, 2009  

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