Public support
The public at large and product manufacturers have been positively embracing energy efficiency to contain or reduce energy consumption in general. Manufacturers produce more and more energy efficient products. And on the other side of the coin, the public are driving the demand for such energy efficient products. Many innovations in this area have generated new revenues for businesses and saved money for energy users. But reducing energy consumption alone is not enough.
At the time of writing, energy consumption is mainly fired up with fossil-based energy sources (e.g. oil, natural gas, coal) which are non-renewable. Theoretically, it is projected that oil, currently the most dominant energy source, will deplete completely at some time in the future and it is conceivable that other fossil-based sources can deplete completely also. This creates a compelling reason to seriously look into building renewable energy infrastructure in anticipation of dwindling supply for non-renewable energy sources.
Simultaneously, the rise and fall of energy price is directly related to supply and demand in the global market. This price fluctuation affects public sentiment in support of renewable energy. When energy price is high, people's bank accounts are negatively affected and therefore they fervently support initiatives to build renewable energy infrastructure. But when energy price is low, the support circle becomes smaller and gets minimal media coverage. Many people would reason that if energy price is low, there is no need to throw money at renewable energy infrastructure yet, because the return on investment is less than when energy price is high. This reasoning is short term oriented.
The long view
Energy price fluctuation ought not be the driver for when to build renewable energy infrastructure. To build impactful energy infrastructure takes time and can outlast several cycles of energy price fluctuations.
- There can be no guarantee that energy price cannot spike high and fast, as history has shown more than once. And there is no guarantee that it cannot go even higher when it is already high.
- Building renewable energy infrastructure requires energy consumption, which at present is still mainly powered by non-renewable energy sources. Therefore, building a new infrastructure when energy price is low means lower start up cost than when energy price is high.
- Diversification is useful not just in investment portfolio planning, but also in long-range energy planning. Over-reliance on one energy source, particularly when they are largely imported, has implications to policy and economic decisions. Diversification of energy sources balances out political and economic influences.
Building energy infrastructure costs a lot of money and not all energy sources are equal. Of the various renewable energy sources, not all are equally effective for all uses. And some applications are still better served, at present technologies, by fossil-based energy only. Therefore renewable energy infrastructure cannot be built up blindly; it needs to be focused on applications where it makes sense.
When viewed from the perspective of long range strategic planning, the competitive availability of renewable energy (in applications where it is good at) as an alternative to fossil-based energy is profitable for various stakeholders.
- For the renewable energy industry, it is obvious that as long as they can be price-competitive against fossil-based energy, there will always be revenue growth potential due to the world's increasing appetite for energy.
- For the fossil-based energy industry, when energy users partially switch to renewable energy, this cuts into their growth potential. This is obvious in the short term. In the long term, however, this implies that their non-renewable raw materials will not be depleted as fast as currently forecasted. And the upside is that non-renewable energy businesses will continue to be viable for a while longer to produce revenues for generations to come.
- For the energy users, having renewable energy as a real option means two things: increased competition among energy suppliers and diversification to reduce potential geopolitically-induced supply interruptions.
Addressing supply and demand
To stimulate renewable energy supply, first there needs to be a coordinated effort to assess which renewable energy makes sense for which geographic area and for what purpose(s). Then a long term plan needs to be laid out to incentivise competitions among renewable energy companies to, first and foremost, achieve reliable and effective energy diversification. Secondarily but obviously important, once the supply capacity is in place, there needs to be a clear timetable to transparently achieve price efficiency, if this is not immediately achievable from the start.
To stimulate renewable energy demand, first there needs to be a comprehensive communication and education effort towards energy users, i.e. corporate customers as well as individual households. Energy users must be made aware on practical terms whether they have the option to consume energy from renewable or non-renewable sources and what the price is for each energy option. Subsequently, energy users can make informed decisions for prioritising how and which energy they should purchase for which purpose.
Where an option is not yet available, energy users must be made aware of the supply side assessment and plan above. They can then help voice out support for the build up of renewable energy infrastructure. This can be done by way of publicly supporting the communication campaigns. Another powerful support is by way of committing their long term energy purchasing plan to renewable energy sources that fit their needs. There is no better incentive for renewable energy companies than in knowing that demand is lining up as soon as they can build up the supply.
- -August 2009