Economics of Renewables and Efficiency

Jan. 10, 2014
The economic comparison between renewables and energy efficiency is startling. Simple paybacks on energy efficiency work can be measured in days, weeks or months. Returns on renewables are measured in years including government and utility subsidies. Here’s why…

Vince Marshall, Cherokee Energy Management & Construction

Recently, my wife and I made a cross country trip from Norfolk Virginia to San Diego. Passing through Texas just west of Amarillo, there were large beautiful wind turbines as far as the eye could see. This majestic sight prompted a conversation regarding the benefits and challenges of renewables, both solar and wind as compared to energy efficiency.

The economic comparison between renewables and energy efficiency is startling. Simple paybacks on energy efficiency work can be measured in days, weeks or months. Returns on renewables are measured in years including government and utility subsidies. Here’s why…

Consider the typical American family automobile as an example. It serves as transportation to work, children to school, soccer/band practice, grocery shopping and everything else that goes with it. The family has to be reliable and available most of the time other than regular maintenance intervals and the rare breakdown. It serves the family well stays within their budget.

Now enter into the picture an expensive sports car. A snazzy convertible that is the envy of all the neighbors. You rationalize this purchase to the family because it will, “Help with the family driving chores.” It sounds good on the surface until a few months goes by and it’s discovered that the new sports car is not very reliable.

If you bought a blue sports car, that model runs one day out of every five, on average. It runs best in the spring and fall, but not so well during summer and winter. If you bought a red sports car, it doesn’t run well if cloudy or rainy and definitely won’t run at night.

To reduce the likelihood of being stranded, you now have to buy a trailer so when the sports car stops running, your reliable family car can drive to its location, load it up and tow it back home. Bottom line is you have increased your family budget a LOT, made your life more complex and you still have to have the same reliable family car you have always had as a 100% backup. In the sports car’s defense, when it runs, it gets very good gas mileage.

Perhaps this sounds simplistic, however it is a fairly accurate assessment of the renewables wind and solar. We use capacity factors of around 22% for wind (Blue Sports car) and 15% for solar installs (Red Sports car). Of course this depends on your location. Off shore wind capacity factors have reached 50%, but those are pretty rare.  http://docs.wind-watch.org/Boccard-Capacity-Factor-Of-Wind.pdf

Renewables can make sense for isolated areas where diesel fuel has to be brought in by truck or barge. Hawaii, Alaska, Puerto Rico etc. Electricity costs in these areas are around $0.35- $0.40/kWh so the high cost for renewable power is not too far away from conventional generation and renewables in these markets compete fairly well.

Energy efficiency reduces the amount of total energy required which helps reduce the sizing of renewables needed for just about any operation. This combination can offer a more attractive project than renewables alone.

About the Author

Kevin Normandeau | Publisher

Kevin is a veteran of the publishing industry having worked for brands like PC World, AOL, Network World, Data Center Knowledge and other business to business sites. He focuses on industry trends in the energy efficiency industry.

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