If We Want Cost Effective Renewable Energy, Let’s Invest More In R&D Adopting immature technologies is only about politics, not about good economics

WASHINGTON – It is very sad that the renewable energy debate is now mostly about politics and ideological bias, and not about economics. 

Renewable energy is virtuous

Simply stated, many of those who extol the benefits of renewable energy do so because renewable energy, in their minds, is “virtuous”, while fossil fuels are “evil”. From this standpoint, any renewable energy solution has to be better than using coal, gas or oil. And nuclear energy is also bad, because we have yet to find a final answer to the problem of nuclear waste disposal.

Cost is not an issue

Following the same line of argument, renewable energy solutions, no matter how cost-effective, have to be implemented now, so that we can get rid of carbon based energy as soon as possible. As we all know, the use of carbon will soon destroy life on earth. If wind and solar cost too much, no problem. Governments will help with subsidies, tax credits, and what not. In other words, the issue here is not higher efficiency. The issue is to get rid of the environmental calamity represented by fossil fuels. The established green orthodoxy explains that fossil fuels are inherently bad because they are at the root of global warming and of its most nefarious consequence: climate change.

No consensus

Of course, if the entire world had reached the conclusion that the use of fossil fuels is indeed the main cause of what will inevitably become the destruction of our habitat, then by all means let’s get rid of them, as soon as possible. When our very survival as human  species is at stake, forget about the cost of alternatives. Get rid of this poison. But, without trying to revisit here the highly politicized global warming debate, as of today the world has yet to reach the unanimous conclusion that burning fossil fuels is madness. May be the world is blind to the evidence. But, for the time being, we simply do not have this consensus.

Political mandates will not work

Which is to say that today mandating the adoption of renewable energy solutions will not work. We cannot ditch oil and gas,  regardless of the technological maturity and cost effectiveness of the renewables, purely on the basis of a moral imperative based on “science” that is not 100% agreed upon. This may work in countries where there is already a quasi-unanimity about the need to switch to wind and solar, (Germany, for example). But it will not be acceptable elsewhere. Indeed, despite vigorous attempts here and there, this approach is not working in the US. In fact, here in America hydraulic fracturing and horizontal drilling have actually created a new “oil and gas revolution”, reinforcing all the argument in favor of fossil fuels.


Well, if we do not accept the “oil will lead us to catastrophe” argument favoring renewables, then what can sustain our interest in these evolving technologies? Very simple. It has to be about cost-effectiveness.

If and when wind, solar or anything else will prove to be better than carbon in terms of upfront cost of capital investments, operations and maintenance, and ultimately lower cost of the electricity or other power produced, you can bet that coal, oil and gas will be abandoned in a matter of seconds.

Today, the world is not using oil and gas as a matter of ideological conviction, or because of a peculiar taste preference. It is using them because they are the best, or among the best, sources of affordable energy. That’s about it.

The Oil Age will end

We may recall that years ago Ahmed Zaki Yamani, the former Saudi Oil Minister, correctly pointed out that oil did not and will not have a perennial primary place in the energy universe. “Just as the Stone Age did not end for lack of stones, –said Yamani– the Oil Age will not end for lack of oil”. In simple language, this means that the dominance of oil will end when something better will come into the market, irrespective of how many billions of barrels of oil we have left.

Invest in R&D

Renewable energy solutions hold the promise to power the world without causing any pollution, or other unwanted effects. But, as of today, in most instances they cannot compete head to head with carbon. This does not mean that solar, wind and/or other technologies will not get better. They are getting better. Assuming continued and hopefully more robust investments in R&D, I expect that sooner or later renewable energy technologies will become truly competitive, and eventually cheaper than carbon. At that time, the dominance of coal, oil and gas will simply end.

Therefore, let’s invest in basic science and let’s explore all promising renewable energy solutions. But let’s not force the adoption of still imperfect and non cost-effective technologies, simply because our politics demand an immediate alternative to carbon.

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