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As anyone who took Economics 101 knows, supply and demand are the primary factors that set prices in global marketplaces. Alternative energy sources cost money to develop. Once they are in common production, however, economy of scale can lower the price of alternative energy. For example, the prices of solar panels and battery packs for residential and small commercial rooftop installation are still higher than the cost savings over traditional electricity or gas water heating. But this is changing, and soon the tipping point will be reached where it makes economic sense to place solar panels and other renewable energy catching devices on more and more rooftops.

There are a number of factors effecting movement towards alternative energy. Prices of oil, natural gas, and coal based energies are going up. Increased global demand, geopolitical instabilities, and caps on carbon emissions are factors in rising costs of the traditional energy sources the world relies on. Looming over the whole question is the knowledge that there is a fixed amount of petroleum, natural gas, and coal available. We don’t know when we will run out of these as of yet plentiful resources, but we know we will at some point.

Although we have been aware of the downsides of traditional energy sources for some time, the movement towards alternative and more renewable energy has been slow. There are a number of reasons for this, but the most powerful is pure economics. Cheap and plentiful oil and natural gas made it very difficult for other energy methods, such as solar, wind, geothermal, etc, to be economically competitive. The companies providing products for these new energy methods had startup cost, research and development costs, and equipment and raw materials costs that made it not possible to offer an economically competitive choice in the market. Those companies and individuals who were willing to pay more upfront for ethical, environmental, and philosophical reasons did so; however the payback on savings would take years to be realized.

This is where governments come in. Through funding research and development and providing tax incentives to companies and individuals, governments can mitigate the start up costs of changing over to newer and more renewable energy sources.

Rising energy costs and government tax incentives to companies and individuals who choose green energy choices change this equation. Like a stack of dominoes, many factors are now in place to change the economic balance between traditional and alternative energy sources. The combination of rising prices for petroleum and tax incentives for green purchases swing the cost benefit analysis of purchasing decisions towards greener choices. When sales of alternative energy products and technologies increase the companies providing these services can take advantage of their higher sales to be able to set lower prices. As sales improve, newer companies will form and create competition in the marketplace, lowering prices as well. Finally, as sales of alternative energy technologies increase technological advances will ensue. Newer more efficient technology will not only lower costs of wind, solar, geothermal, and other energy sources, they also will increase efficiency. More efficient systems make money by saving money. When there is less cost to create the same measure of energy, increasing global demand can be met.

When the economic equation of alternative energy sources makes it worthwhile from a strictly economic perspective to pursue newer energy generation methods, new markets are opened up. Prosperous new green marketplaces are not only good for the Earth, but also the economy, and that is something we all can agree is beneficial.



Marianne Case
on behalf of the
BascoTec Internet Limited
Technologie Park 13
33100 Paderborn
Germany

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