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Renewable energy is profitable

Renewable energy is not just a fashionable catch-phrase based on moral or environmental grounds. Renewable energy makes good long term business sense regardless of oil price fluctuations. The key is to plan strategically and holistically.

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.

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.

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.

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August 2009

Topic: Technology Investment