Renewables — What Are the Economic Realities?
In response to my white paper on The Tough Realities of Marketing and Sales, a reader points out a few of the economic realities that, in his mind, supersede the points I make in the report. In particular, he notes that there is currently no true market economy for things like biofuels:
All Sustainable businesses have a particular feature: they are always evaluated on a payback or IRR basis. We are in an oil based economy and not on a Sustainable Economy. Biofuels and energy are not marketable by any company but the utilities or distribution companies in each case. You can get biofuels from many technologies, but at the gas station you buy oil, not biofuels. Probably if you look, you will find a huge law on biofuels and how they can be marketed that is everything but compelling for biofuels to be used. Taxes alone make the business tough and customers are wary about using biofuels even in low percentages … Either taxes are on the side of biofuels or they always need incentives and subsidies to be competitive.
The reader goes on to point out that the same lack of liquidity exists for electricity:
Electricity is not easily sold … it is injected onto the grid or locally used. Waste to energy is not competitive with fossil fuel based electricity, so no one will buy it, among the utilities. You can use it for yourself, but that is not the purpose of waste to energy plants and moreover no one is interesting in using it because the grid electricity is cheaper. Again without incentives or subsidies, we go nowhere.
Getting to my first point: everything that is sustainable must compete with non-sustainable solutions. People will be buying non-sustainable until it is cheaper to buy sustainable. To change or curb this behaviour, incentives and subsidies have to be available. So in the waste to energy deal the most important thing to know is: who buys energy and at what price: utilities. Secondly, does the RPS mandate waste to energy or not? Third: how is the business viable: energy or waste? Waste collection fees or energy production? So to engage into lobbying to change regulations is a lengthy task and not available for every company out there.
He’s made some terrific points – but none of them is absolute, and none is written in stone. In the US market, at least, we have ever-changing sets of incentives at the local, state, and federal levels – not only towards sustainable fuels, but away from unsustainable practices (like ignoring the dangers of leaving 2 trillion tons of animal manure untreated each year).
What makes this a dynamic arena is the mandates that voters give their elected leaders. I note that (US Vice President) Joe Biden is parading around a report explicating the enormous value that the taxpayer has received for the stimulus money that has been invested in clean energy and electric transportation. This, of course, is just the beginning of the posturing that will precede our mid-term elections in November.
Our state and federal Congresses will be enacting hundreds of laws that will affect the economics that drive consumer purchase of biofuels, electric vehicles, solar arrays, etc. And those laws are drafted in response to consumer demand and concern for the issues at stake. Are we, as a citizenry, sincerely concerned about long-term ecological damage? About the national security issues of oil dependence? I guess we’ll see in November.
But before I close, let me point out that the answer is really a function of how the corporate-owned media cover the issues. Our beliefs are a product of the news sources we access, what concerns me most is that I don’t see an awful lot of thoughtful and honest discussion happening here.
