Renewable energy not a toy

Renewable energy not a toy

Global investment in renewable energy, chiefly wind and solar power, rose by a sixth in 2014, to $270 billion. This was partly because of subsidies in the rich world, such as America’s 30% federal tax credit for solar projects. Under a system known as “net metering”, consumers with small solar installations can sell surplus power to the grid at the same price as they pay for power flowing in. But even if the tax credit is cut, as expected, solar electricity could displace 9.7% of American retail electricity sales by 2019, reckons Bernstein, a research firm—over 30 times the share today.

Since big solar installations are more cost-efficient than small ones, that makes little economic sense. But the days when renewables were largely a sop to rich-world consumers’ consciences are clearly over. Nearly half of last year’s investment was in developing countries, notably China, whose energy concerns have more to do with the near term than with future global warming. It worries about energy security, and it wants to clean up its cities’ air, made filthy partly by coal-burning power plants.

The 2014 figure is slightly less than the previous peak, in 2011 (see chart). But investors today get more energy for their buck. The cost of battery storage, a vital part of a solar-powered future, has fallen by 60% since 2005, and the overall cost of a solar-power system is down by 75% since 2000. IHS, a consultancy, reckons the cumulative fall will be 90% by 2025.

Source: The Economist

Date: April 2015

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