According to “The Economics of Renewable Energy”, “the history of industrial civilization is a history of energy transitions”. In less developed, agrarian economies, people’s basic need for food calories is provided through simple forms of agriculture, which is essentially a method of capturing solar energy for human use. Solar energy stored in firewood or other biomass energy meets other basic needs for home heating and cooking. As economies develop, its energy needs increase exponentially. “Historically, as supplies of firewood and other biomass energy proved insufficient to support growing economies in Europe and the United States, people turned to hydropower (also a form of stored solar energy), then to coal during the nineteenth century, and then to oil and natural gas during the twentieth century”. Currently, fossil fuels (coal, oil, and natural gas) are by far the dominant energy source in industrial economies as well as in developing economies (82% of global energy consumption). However, the next great transition in energy sources is upon us: from fossil fuels towards renewable energy sources. Leading factors for this transition include concerns about environmental impacts, technological change, and limits on fossil fuel supplies. Much of the capital stock and infrastructure of modern economic systems are centered on fossil-fuel energy use, and thus any transition away from fossil-fuel dependence will require massive restructuring and investment.
Commonly utilized renewable energy sources include biomass, hydropower, wind power, direct solar energy, and geothermal energy. There are pros and cons to each of these energy sources.
Biomass is any fuel derived from plant matter, such as wood, crops, crop residues, and animal waste. There is, however, a negative externality of biomass use: air pollutants, as biomass is generally burned in some way. For biomass in all its forms, it is true that it requires large amounts of land to generate a significant amount of energy. Therefore, the economics of biomass are, to a large extent, land economics. This constitutes an opportunity cost, as the same land could be used to produce food or fiber. Due to these land constraints as well as the fact that the total quantity of biomass energy is relatively small in relation to current energy consumption, biomass can at most provide a small portion of total energy needs.
Hydropower is the world’s largest source of renewable energy, generating about 16% of global electricity as of 2008. It can also be inexpensive where conditions are favorable. “ The total energy available from hydropower depends on the volume of water available (flow), and its
vertical drop (head). Head and flow are substitutes for producing hydropower: a given amount of power can be obtained with relatively low flow and high head, or with high flow and low head”. The best sites for hydropower have both high head and high flow (like Niagra Falls). However, many of these best sites have already been developed, and additional development would come at a higher cost. The U.S. Department of Energy released a report that indicated developing electrical generation facilities at existing dams could significantly increase hydropower potential. There are environmental externalities to consider as well. For example, in New England, the native salmon and shad populations were “reduced in part by dams blocking migration routes that fish used during spawning”. Tidal power, although related to hydropower, often has rather low average tidal head, implying higher costs. It also has a greater potential for environmental externalities in a marine environment.
Wind power, like hydropower, faces issues of location. The difference between wind power cost on the best sites versus on less suitable sites is notable. Another drawback of wind power is that the amount of power available at any particular moment also varies greatly with wind speed. However, on the best sites, the electricity production from wind is very close to cost parity with sources like coal and nuclear power. Environmental externalities of wind power includes the aesthetic impact, noise from the wind in the turbine blades, as well as bird mortality from collisions with turbine blades.
Solar energy comes in three basic forms: low temperature solar thermal, solar electric or photovoltaic (PV), and high temperature solar thermal. Low temperature solar applications include solar water/space heating. This method retains heat from the sun and uses it to heat air or water. The main issue with this source is that the greatest demand is in winter, when there is the least supply of sun. PV cells employ semiconductor material to generate a flow of electricity when struck by sunlight. The biggest issue of photovoltaics is that, though the technology is now well developed and reliable, it is also expensive compared to current energy sources. However, the costs of solar PV have fallen and are projected to continue that trend, so it is only a question of when these prices will become competitive in the energy market.
Getting more into the economics of renewable energy, the world currently gets about 80% of its energy supplies from fossil fuels because these sources generally provide energy at the lowest cost. Be that as it may, the cost advantage fossil fuels hold over renewable energy sources has been and will continue to decrease as the supply of fossil fuels drops and renewable energy becomes more efficient and less expensive. At this point in time, it is not a matter of if, but when, the world will make the shift to renewable energy sources. It is important to make haste, as while we may yet still have a supply of nonrenewables, the impact they have on our environment may be too much for it to handle.
Works Cited
Timmons, David, et al. The Economics of Renewable Energy. Global Development and Environment Institute, 2014.