Thursday, February 12, 2015

Renewable's Predictable Pricing Trumps Volatile Oil

Renewable energy offers the kind of pricing predictability that is in everyone’s interest. While the price of oil has fluctuated, generally increasing over time, the price of renewable energy has shown fairly steady and consistent declines.

A new report released by the International Renewable Energy Agency (IRENA) indicates the costs of renewables will fall by almost 40 percent in the next two years, and solar energy should reach grid parity in 80 percent of its market by 2017.

Oil's price volatility is an economic nightmare while the relative stability of renewable energy makes it far easy to plan capital allocation. Wild swings in the price of oil have deleterious impacts across the entire economy. Even renewable energy continues to suffer from volatility in oil markets. Price uncertainty makes it harder to raise capital to finance a wide range of renewable energy projects.

Unlike fossil fuels, renewable sources of energy have shown themselves to be stable and predictable. They certainly have not been subject to the wild increases that we have seen in fossil fuel pricing. Predictable pricing benefits everyone from small businesses to national economies. Everyone is better able to make long range plans with an energy infrastructure that has predictable pricing.

What makes renewables predictable is the fact that they are a technology and not a commodity. Technologies tend to see declining costs over time while commodities tend to increase in price. Commodities like oil are finite and they become consistently more scarce whereas enewables are limitless and always subject to improvements in efficiency which drives down their costs.

Price volatility combined with their emissions profile make fossil fuels an unworkable source of energy. Conversely renewables offer a predictable source of abundant energy.

Related
Renewable Energy Can Replace Fossil Fuels
Renewables will Save us from the Scourge of Fossil Fuels
Time to Reduce the Subsidy Gap Between Fossil Fuels and Renewables
The Growth of US Renewables are Outpacing Fossil Fuels
Renewables Gaining on Fossil Fuels Despite Reports to the Contrary
Energy Economics: Cheap Oil Will Not Stop Renewables
Low Oil Prices will Slow Renewable Energy

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