The Economist

Renewable Energy’s Growing Pains

(3BL Media/Justmeans) — A recent article in The Economist, called A World Turned Upside Down, portrayed a rather gloomy outlook for renewable energy. This was not because of shifting political winds, as some might expect, or the oft-repeated fact that the sun does not shine at night. Instead, the authors pointed to two discrete facts. First, building out the infrastructure required to reach critical mass for renewables will be enormously expensive. Second, the economics around the receipt and delivery of electricity are changing dramatically, largely due to the impact of renewables. While the two facts themselves are indisputable, the conclusions drawn from them are less so.

The story goes on to point out how utility revenues are falling. Renewables cost much less to operate, which brings prices down. Plus, when people put solar panels on their roofs, they no longer need to buy power from utilities, at least not during the peak sunshine hours. However, they still expect the utility to provide power to them when the sun goes down. That requires a lot of resources on the part of the utility that someone needs to pay for.

In many ways, the issue is analogous to—though slightly ahead of—what will soon be playing out on the highways. Money to maintain the roads is largely collected from state and federal taxes on gasoline. As more people shift to efficient hybrids or fully electric cars, less money is collected for road repairs, while the amount of driving remains roughly the same. This is an issue you can expect to hear more about in the future and it will likely cause some consternation, though I don’t expect to see getting rid of EV’s widely supported as the solution.

It’s also important to note where the analogy falls apart. Roads are maintained largely by the government as public infrastructure and paid for through taxes. Most of the electric grid is owned and maintained by private interests that are expected to show a profit each quarter. This difference is the current point of pain.

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