The impacts of climatic change have caused threat to the survival of human kind in all corners of the world. Climatic change has resulted from global warming that has increased due to continued use of fossil fuels that emit carbon into the atmosphere. “Whether or not global warming is just but skepticism, it is time to reestablish nuclear energy,” (Easton, 2006). The recently held Copenhagen Climate Change towards the end of last year was geared toward addressing the climatic condition at the global sphere. A number of countries represented at the talks made commitments to invest in renewable energy sources other than the use of fossil fuel. Such commitments require well laid strategies that must trickle down from the global level to regional, and finally to the micro/local level.
We have to face the daunting task of meeting the challenge above by adopting the use of renewable energy sources as a strategy. This creates an investment opportunity at the micro level that will eventually be reflected at the macro level. The greatest challenge lies with the commercial and industrial sector at the micro/local level of energy investment. The quest to use renewable energy sources has necessitated an increase in investment in hydroelectric energy, solar, wind and nuclear energy. This paper takes a comprehensive analysis of renewable energy source as an opportunity to invest on and further examines the issue of pricing and the emerging trends in the investment in clean and renewable energy. It is upon company managers to make recommendations that will allow the adoption of use of renewable energy strategy to the board members. To succinctly analyze the investment trends in renewable energy, it is prudent to examine some of the renewable source of energy such as wind energy.
Wind power is generated from converting wind energy to other forms of energy that can be used more appropriately; for instance, electricity. Conversion of wind to other forms of energy is done via use of turbines whereas to convert wind to electric energy, electrical generators are used. For quite sometime wind energy has been used for agricultural and rural uses by the help of wind mills. In the modern time however, wind energy is finding its use in production of electricity given the challenges posed by use of fossil fuels. Spain, Germany, Denmark, and The US among other nations have embraced the use of wind energy and today it is the widely used form of green energy in the world over. This technology is appropriate in places with 10mph wind speed.
Wind energy is beneficial to us due to its renewability and availability. Wind energy is evenly distributed in the world, it is cheap, and more importantly is that it is non-toxic; hence reduced toxic gas emission into the atmosphere. The cost of producing wind energy keeps getting cheaper as a result of new technologies that are being developed. It is forecasted that wind energy production will soon become the cheapest mode of energy creation in large scale. It is not only the cost factor that gives wind energy popularity but also the fact that it is curbing environmental degradation because it diminishes greenhouse gas emission.
In the contrary, wind energy has been faulted due to some aspects of its production that dampens its popularity. Though the cost of producing wind energy is cheap, meaningful generation of wind power require use of turbines. “Though wind power is non-polluting, the turbines may create a lot of noise, which indirectly contributes to noise pollution,” (D’Silva, 2010). Also, environmental factors determine availability of wind power and at some instances, wind source from where plant is set may be far away from where it is being utilized. This may pose economical challenges in regard to cost of setting up substations and rolling out transmission lines.
Renewable Energy Sources Trend
Global environmental conservation and green cities strategies have precipitated the need to adopt new energy investments strategies that not only help to conserve the environment but are also considerably less costly. Towards this objective, governments and all energy stakeholders have been putting a lot of emphasis in wind, solar, nuclear, hydroelectric, biomass among other forms clean renewable energy sources. Renewable energy investment initiative is carried out in micro level that ultimately translates to global level upon implementation.
The debate on the price of renewable energy continues to draw reactions from all stakeholders. According to Mims (2009) “Geothermal energy is cheaper than coal.” Renewable energy sources are under priced because they continue to attract government subsidies in their power generation. Government administrations continue to pump fund allocation for the strategy with considerable allocation also set for research and development in the sector. However, when the generation of renewable will pick and competition sets in, it is likely that the subsidies will be withdrawn as organizations will have to compete for opportunities. Also, renewable energy is clean energy with no carbon emission.
Investment Opportunities in the use of Renewable Energy Sources
The renewable energy sources mentioned above in addition to use of Hydro Electric Power generation, aid in the production of electricity. Given the convenience in consumption of electricity, the renewable sources of energy have to be converted to electricity and this presents investment opportunities. Firms with intention to invest in the energy sector are therefore obliged with building power plants that utilize renewable energy sources. The debate on effective energy use has been the focus on nationwide debate since the energy crisis of the 1970s. In UK, the total energy consumption used in buildings constitutes 45% of national primary energy. The demand for electricity continues to rise so as to keep pace with development agendas of the modern society. 32% of this value is as a result of room heating, auxiliary power, and hot water, (Curwell, 1990). All these figures call for adoption of alternative energy sources of which renewable energy become basic.
“The newest report, from international investment bank Credit Suisse, says geothermal power costs 3.6 cents per kilowatt-hour, versus 5.5 cents per kilowatt-hour for coal,” (Mims, 2009). This demonstrates a good investment opportunity in renewable energy sources as compared to non-renewable energy (coal). The table below gives comparisons of trends in pricing of various energy sources:
|LCOE Scenario Analysis||High case||Base case||Low case||Min.||Diff.|
|Solar PV (Crystalline)||$210||$153||$119||$119||$82|
|Solar PV (Thin Film)||$180||$140||$110||$110||$71|
|Fuel Cell DG||$117||$90||$72||$72||$46|
|Natural Gas (CCGT)||$64||$52||$40||$40||$25|
Adopted from: Credit Suisse
Working with case of production of solar energy from water pond, concentration slope and capacity of water in the pond must be maintained to achieve meaningful results. “Approximately 4000 ha of solar ponds (40 ponds of 100 ha) and a set of evaporation ponds that cover a combined 1200 ha are needed for the production of 1 billion kWh of electricity needed by 100,000 people annually,” (David et al., 1994). Assuming as average sale of 15¢/kWh annually, total earning becomes:
- 15¢ * 1,000,000,000 = 15,000,000,000¢ per year
This is equivalent to $1,802,047,781earning in a year.
Further assuming the following costs;
- Cost of land in Oregon = $61,714/ha
- For 1200ha, cost of land = $74,056,800
- Equipment = $520,000,000
- Labor = $120,000,000 p.a
- Miscellaneous = $20,000,000
- Total cost of investment therefore = $734,056,800
- Return on Investment = ($1,802,047,781 – $734,056,800) per annum.
The initial investment is quite costly due to the required fixed asset such as land and solar equipment. However, in the long run the return on investment is bound to increase and this present good investment opportunity in the renewable energy sector.
The use of renewable energy sources forms a fundamental part of doing business for a sustainable period of time. The sustainability comes in two folds: environmental sustainability and a sustainable business operation period. The two aspects can be utilized by business leaders in a way that can bring investment opportunities for business organizations.
Curwell, S., 1990. Buildings and health – the Rosehaugh. Guide to the design, construction, use and management of buildings. London: Rosehaugh
David et al.,1994 Renewable Energy: Economic and Environmental Issues. Web.
D’Silva, R. The advantages and disadvantages of wind energy. 2010. Web.
Easton, T.A., 2006. “Taking sides: clashing views on environmental issues.” Taking sides: clashing views on controversial environmental issues. 12th Ed. London: McGraw Hill Contemporary Learning Series
Mims, C., 2009.Can Geothermal Power Compete with Coal on Prices? Web.