Can Renewables Hold Their Price as Fossil Fuels Get Expensive?

Image credit: Good Energy

On Tuesday I posted on the fact that more Brits die from cold than Siberians, and George Monbiot's assertion that government and utilities were to blame. One UK company, however, is taking a different path—declaring a winter price freeze as the big utilities jack up their rates. The best part? These guys are 100% renewable. The question is whether or not renewable energy providers can continue to keep their prices low as fossil fuels inevitably get more expensive. This relates to an issue I have always been confused by—when I lived in the UK, and subscribed to a renewable energy provider for my electricity, I was always disappointed when their rates rose alongside those of the major utilities. If energy prices were linked to constraints in fossil fuel supplies and/or costs of new regulations on CO2 emissions (the reasons usually cited), then why the heck wouldn't renewables be able to keep their costs down and thus compete for a larger share of the market? The trouble is, as far as I understand it, that as fossil fuels get more expensive, the demand for renewables from all providers goes up—thus pushing up prices for the folks who have been 100% renewable all along.

I've seen similar issues since moving the States and joining a biodiesel coop. As gas prices rose, we all started salivating at the prospect of renewable, made-from-waste biofuels that were cheaper than dyno-diesel. Unfortunately, as soon as the price did drop below the average forecourt price, the co-op was immediately inundated with new bargain hunting members and the pumps were drained dry. When prices switched back, the cheap fuel lovers disappeared. The result, unfortunately, was a policy to peg the co-op's prices as always being just above those of regular diesel.

But all this does not mean that renewables must always remain more expensive than so-called conventional energy. As demand rises, supply is constrained, but that should lead to more investment in more supply. As production capacity increases accordingly, we should then see economiesof scale ensuring cheaper and cheaper renewables, even as gas and coal prices keep going up.

Some folks are arguing, for example, that solar could reach grid parity as soon as 2015. (Others are arguing that focusing on grid parity is entirely the wrong question.)

That's why the announcement from Good Energy—the 100% renewable energy provider that was previously in a public row with wind pioneers Ecotricity—that they would maintain a winter price freeze as other utilities hike their rates had me pricking my ears:

"The move to hold prices down demonstrates Good Energy's commitment to ensure that green energy is more accessible. The 100% renewable electricity supplier hopes this will encourage consumers to switch to greener energy as the price differential with many fossil-fuel-based suppliers is reduced, especially since three of the Big 6 have recently announced price hikes."

Whether or not this price freeze represents a permanent narrowing of the gap between conventional electricity and newer, less polluting sources—or whether it is a clever, but temporary, marketing move to grab more customers and harness the outrage at price rises—remains to be seen. But anything that helps drive customers, and investment, into the development of wind, solar and tidal energy can only be a good thing in my book. I'm just hoping those customers stick around if prices rise again in the future.

In the meantime, here's a little video from the folks at Good Energy about why clean, distributed energy production makes sense.

More on Renewables, Grid Parity and the Cost of Energy
Rising Oil Prices Make Wind Cost-Competitive
Is Asking When Solar Will Reach Grid Parity the Right Question?
Solar Power System in Nevada Desert Reaches Grid Parity
Solar to Reach Grid Parity by 2015
When Biodiesel is Cheaper than Regular Diesel: Lyle Estill on the Tipping Point
UK Wind Energy Controversy Continues

Tags: Economics | Renewable Energy | United Kingdom | Wind Power


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