Congress can’t get the alternative energy credits renewed and on the books for the (I’ve lost count) time. By itself the missing tax credits will be a problem. But the price of coal, oil and natural gas will still be their own undoing as primary fuel sources.

It’s about the money. Alternatives such as solar thermal have high investment costs, but zero fueling expenses. The comparison between building coal and solar thermal for example eventually closes the rate of return gap when the fuel cost is factored in. And coal prices are going up too, as what was thought to valid projections just last winter is now missed assumptions that shift the payout picture. Added to that is the risks of carbon dioxide schemes that will force more investment that doesn’t earn revenue.

What started all of this was some and then many states mandated that percentages of power be generated by renewable or other terms that mean the usual fuel source is displaced. As wind turbines and solar facilities get ordered they have or will experience rising prices too, so driving up the cost of installations. The rush of money to electrical generation is quite interesting – not only is demand pushing oil prices and coal prices but now it pushes component prices for wind turbines and soon thermal solar parts too. In some states, California as an early example where 20% of electrical power is due to come from renewables by 2010 or only 16 months out which becomes only 28 months stretched to the end of 2010. What is striking is that California is a very big economy by itself that imports a large portion of its generated power.

It looks like the California utilities will get to 20% sometime in 2011.

Renewable power generation has offered itself as a way to power a modern economy and it looks to be a carrot taken and swallowed with a whip for the competition in return. The truth from the facts is that companies aren’t going to stop claiming that market based solutions will change the power mix. But the history building now makes clear that something as simple as mandate from a state sized government spread over many such states can make major difference. It is working, expensive for now, but working.

That will change the political dynamic. Recalcitrant politicians who won’t vote for renewable incentives may believe they are doing some special interest a favor, but the power formula is changing. And the environmental crowd knows it. As a small piece in Discover Magazine put it, “Coercion is green.”

The table of energy and fuel policy will have to make more room and a bigger place for renewables to share in the political debate. Renewable electrical power generation is closing in on a share equal to nuclear fission, 40% of coal, and deserves a chair. The points they can offer, no fuel cost, no CO2 emissions are strong positions to pull political compromise their way.

Many say that government is in the thrall of big oil. Maybe that is a small truth, oil was, is and will be important. But by no means is alone anymore. Nuclear had an opportunity and science has given them incredible opportunities to come. A renaissance is under way and uranium can get awful close to being a “renewable” with the latest technology and thorium is in the background offering some solutions to uranium’s native problems.

We’re witnessing a power shift of historical note and huge economic consequences right now.

What is happening to electrical power generation needs close observation and citizen participation. Do not make the mistake of thinking that occupants of the chairs at the table are looking out for citizens, voters and consumers. Little is said about driving down costs, reducing regulations, increasing management, oversight, public safety and consumer impacts.

The good news is that renewables can participate and will do more over time. The bad news is we are not freed from having to think about it. The fight is on in earnest, even if the press isn’t looking. It will affect your life. It’s also just about as interesting of an economic story as we’ve seen since kerosene pushed whale oil off the market.

Three questions come to mind:

  1. Can coal stay in the game, for how long if at all, if the carbon capture issue becomes mandatory. Will the pricing of coal against the income from electricity and any value from captured CO2 even be competitive?
  2. Will the nuclear business find the technology and skills to build confidence such that they can go further into the technology and gain market share? The big issue is the up front costs, and political matters, public safety and other investment costs that drive a high electric rate cost. Will they make the case that their industry has a place at the table that deserves public support?
  3. Can the renewables industry get to a situation where they are driving down consumer prices, have solutions that make the intermittent or overnight powering down problems a non issue and come up with answers for grid connection and long distance transmission?

I suspect all three have positive answers, but who is first with the cheapest is what will make or break individual industries. As a matter for today everyone is looking for more money and political favors. This can’t last, but the favors won, and the effort to reduce consumer prices will in the end make a winner.

The carrot stage is over – the whips will come out and slash in every direction. It will be interesting indeed.


4 Comments so far

  1. sheldon robidoux on April 27, 2011 6:35 PM

    We keep hearing from the pro-nuclear side that OUR safety systems work to prevent the worst kind of disasters and so we’re safe. But if you periodically have to scrap a reactor or two, what does that do to the math? Certainly the execs aren’t going to absorb that. It will increase the cost of a KWH or the burden will be put back on the shoulders of the taxpayer. What did TMI cost the public? Do we even know? And TVA?
    As far as mandatory carbon capture, the not-so-subtle effort is to dismantle, or at least de-fang, the EPA. If successful, that may tilt the playing field the wrong way. I guess what I am saying is that the people who look at nuclear through rose glasses have a pretty large base and they desperately need alternative sources to look impractical. And if the global warming deniers think we need to burn coal to compete with China, that’s where they will try to steer things. I hope you are right and the alternatives win out, but it will be a protracted battle I think.

  2. Adrian Falvo on May 27, 2011 9:21 AM

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  3. Evan Precht on September 1, 2011 9:24 PM

    This post makes a lot of sense !

  4. Dave Bertagna on September 8, 2011 6:18 PM

    Awesome post. I so good to see someone taking the time to share this information

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