Renewable Energy Shock

The green house effect and climate change led us to look at cleaner alternatives to Coal and oil. The drive to save our planet has slowly gathered momentum over the last few years and has resulted in all sorts of incentive schemes to encourage us to adopt greener alternatives. The main culprits; we were assured, were our dependance on coal fired power and polluting cars running on fossil fuels.

What were we to do?  The obvious solutions were renewable energy alternatives. Electric cars “That will never work, battery technology lags too far behind." Solar power and Wind turbines are expensive and unreliable because the wind does not always blow and the sun is only up during the day, and the day may be overcast. Besides, these solutions to the problem are all hellishly expensive because the volumes are small and the alternatives, are cheap.

Governments introduced incentives to encourage the uptake of solar hot water or grid tied solar. Unfortunately the same effort was not put into electric cars. Fortunately, the Toyota Prius sales have produced a strong showing each year since it was first introduced. Some electricity utilities have spent money on large scale wind farms. Every ‘green’ move has been aimed at reducing our dependance on fossil fuels and to keep the captured carbon in the ground.

It appears that the initiatives are having a positive effect. The uptake in solar is encouraging in Australia, with demand for solar remaining despite the government withdrawing rebates. As Mike Sandiford wrote: “At an annual decline of 3.5%, it would take just 20 years to halve emissions.”

The tesla electric car by South African born billionaire Elon Musk, is also making inroads into the car market. Being a true electric car, not a hybrid, the non green element is incredibly small. Tesla can claim zero emissions. Obviously the manufacture still contributes to the overall carbon footprint. But this a small price to pay for a car that can be refueled for a fraction of the cost of a tank of petrol.

You do not need to be an economist to understand that if the market was 100% fossil fuel based in the past, that these ‘green’ alternatives must cut into that market share when introduced. To believe anything else would require an astounding naiveté.

It appears that the green alternatives are bruising the seething giants of coal and oil. Electric cars are a reality, hybrid cars are mainstream, and very fuel efficient cars are available from the East. This has made life a little tougher for car manufacturers like GM. The ripples that this has caused has prompted General Motors to sit up and take notice even putting together a posse to keep an eye on the upstart.  Apparently the Volt is not enough to bolster the ailing giant. Having relied on government bail outs and a protected trade in the past they have not made any effort to make their business or cars more efficient. When Toyota and Subaru opted for energy efficiency and hybrid technologies, GM and Ford relied on a loyal customer base. The folly of this attitude has hit hard with Detroit filing for bankruptcy on the 18th July 2013.

The Australian electricity producers are also crying foul, as roof top solar bites deeply into their profits. The state owned power companies are seeking to simply increase the fixed portion of the electricity bill to ensure their operations remain profitable. Daniel Mercer wrote in ‘The West Australian’; “It is not known whether the Government would consider a cut in consumption charges to offset any fixed-price move or opt for a straight-out levy on householders with solar panels.” This is effectively charging the consumer for using less electricity.

This is a shocking state of affairs as the unprecedented increases in electricity costs were sold to the consumer under the guise of “Necessary to upgrade infrastructure.” As this article shows, the infrastructure should be sufficient to handle demand for many years to come because of the impact of roof-top grid tied Solar. Peak demand is down to levels last seen more than a decade ago. As the uptake of solar continues in Australia the cost of maintaining the network rather than upgrading the network should be the norm. What happened to all the money the utilities have received for upgrades?

As the market shifts, Industry; Mining, Motor and Electricity need to focus on making themselves more efficient and profitable. With big pushes for Solar in China and elsewhere, the miners may find less demand for their coal too. Increasing the cost to the customer is only going to ensure that you drive them further away becasue you will become less competitive. They need to become innovators and stop being rent seekers.

Let me know what you think. I look forward to seeing your comments.