Will Renewable Energy Pay For Itself?

Renewable energy sources like solar, wind, hydroelectric, geothermal and biomass offer significant economic benefits that allow them to pay for themselves over time. The upfront costs of building renewable energy projects can be high, but the ongoing costs are very low, which provides cost savings over the long term. Additionally, renewable energy provides other economic benefits like stimulating job growth, reducing health costs from fossil fuel pollution, increasing energy independence and security, and providing consistent returns over decades of operation. This article will analyze the various factors that allow renewable energy to provide a positive economic return on investment over time.

Upfront Costs

Renewable energy sources like solar and wind power often have high upfront costs associated with purchasing equipment and installing the systems. According to Cost Of Renewable Vs Non-Renewable Energy, the upfront investment for solar PV or wind turbines is estimated to be around $2,000 per kW of capacity. In comparison, the upfront costs for fossil fuel power plants are much lower at around $1,000 per kW. This initial investment gap is one of the biggest barriers to adopting renewable energy, especially for residential consumers and small businesses.

However, there are ways to reduce the upfront costs through government incentives like tax credits as well as innovative financing models like power purchase agreements. But broadly speaking, renewable energy sources currently require greater upfront capital expenditure compared to conventional power generation.

Ongoing Costs

While renewable energy systems like solar and wind require significant upfront investments, their ongoing costs are typically much lower than fossil fuel plants. Once installed, the “fuel” of solar panels and wind turbines is free and unlimited. According to Solar91, renewable energy systems have minimal maintenance costs since they have few mechanical components. This leads to lower long-term operating expenses compared to traditional power plants.

A July 2021 report from the IEA found that solar PV and onshore wind have become the cheapest sources of new electricity generation across many countries, undercutting even the operating costs alone of existing coal plants. The extremely low operating costs of renewables gives them a competitive advantage as they can reliably produce electricity at lower ongoing expenses than alternatives.

Cost Declines

The costs of renewable energy technologies like solar panels and wind turbines have declined dramatically over the past decade. According to a 2022 report from Columbia University, “The costs of solar and wind power continue to fall precipitously year after year.”

A key driver of these cost declines is economies of scale. As more solar panels and wind turbines are manufactured and installed around the world, companies gain experience and expertise that drives down costs through improvements in efficiency and technology. The International Renewable Energy Agency (IRENA) predicts that the global weighted average costs of electricity from new solar PV and onshore wind power projects commissioned in 2025 could fall within the range of $0.04-0.06/kWh and $0.03-0.05/kWh respectively.

In addition, technology improvements like larger and more efficient wind turbine blades have reduced costs. Innovations in solar panel materials and manufacturing techniques have also brought down costs dramatically. The Department of Energy reports that since 2009, utility-scale solar costs have dropped 88% and wind costs have dropped 69%.

These declining renewable energy costs make them increasingly competitive with fossil fuels like coal and natural gas. According to a report from Net Zero Climate, “If the transition to renewables is timely, declining costs of renewable energy and improvements in efficiency could save the world as much as $12 trillion through 2050.”

Health and Environmental Savings

Renewable energy sources provide significant health and environmental benefits compared to fossil fuels. According to the University of Nevada [1], solar and wind energy do not emit air or water pollution, greenhouse gases, or hazardous wastes that are associated with electricity production from fossil fuels. By avoiding these emissions and pollutants, renewable energy helps reduce illnesses, health care costs and premature deaths caused by pollution exposure. Research estimates that air pollution from fossil fuel electricity generation in the US causes over 52,000 premature deaths per year, costing society an estimated $600 billion annually [2]. Switching to renewable energy can greatly mitigate these health care and environmental costs on society.

In addition, renewable energy produces negligible amounts of greenhouse gases that contribute to climate change. The environmental costs of climate change impacts such as sea level rise, more severe storms, droughts and wildfires are projected to cost the US hundreds of billions of dollars by 2090 [3]. By avoiding these greenhouse gas emissions, renewable energy helps mitigate the costs and damages from climate change. Investing in renewable energy now will pay off by helping avoid enormous health and environmental costs in the future.

[1] https://extension.unr.edu/publication.aspx?PubID=4833
[2] https://www.hsph.harvard.edu/c-change/news/fossil-fuel-air-pollution-responsible-for-1-in-5-deaths-worldwide/
[3] https://www.epa.gov/cira/social-cost-carbon

Grid Resilience

Transitioning to renewable energy can actually improve the resilience and reliability of the electrical grid. By decentralizing energy production through distributed solar, wind, and storage resources, the grid becomes less vulnerable to major disruptions from extreme weather events or cyber attacks that could take out large centralized power plants.

A 2021 report from Hitachi ABB Power Grids discusses how their technology will support grid resilience and renewable energy growth in Italy. Grid-enhancing solutions like synchronous condensers and STATCOMs will stabilize the grid as more renewables come online. https://www.hitachienergy.com/us/en/news/press-releases/2021/09/hitachi-abb-power-grids-to-support-grid-resilience-and-renewable-energy-growth-in-italy

In 2022, a group of U.S. Senators and Representatives announced legislation to upgrade the nation’s electrical grid to enhance resilience and integrate more renewable energy. The bill would invest over $30 billion in modernizing the grid. https://www.markey.senate.gov/news/press-releases/sen-markey-and-reps-ocasio-cortez-casar-announce-sweeping-legislation-to-build-green-21st-century-electric-grid

Job Creation

The renewable energy industry has been a major driver of job creation in recent years. According to the International Labour Organization (ILO), the global renewable energy sector added 13.7 million jobs in 2022. ILO Director-General Guy Ryder highlighted the importance of inclusive policies and strategies to support renewable energy job creation (Global renewable energy sector added 13.7 million jobs in 2022). In the US, the number of jobs in clean energy outnumbered fossil fuel jobs nearly 3-to-1 in 2019, with over 3.3 million Americans working in clean energy (Renewable Energy Job Boom Creates Economic Opportunity As Coal Industry Slumps). Solar energy in particular is poised for massive job growth, as it becomes cost-competitive across most of the country by 2025.

The renewable energy transition promises to be a major job creator going forward. Embracing sustainable energy not only benefits the environment, but provides economic opportunities through an abundance of green jobs.

Energy Independence

Renewable energy can help reduce reliance on imported fossil fuels such as petroleum, natural gas, and coal (Solar Panels and Off-Grid Living Self-Sufficiency through Renewable Energy, 2023). The United States imports a substantial portion of its energy needs, with net imports accounting for about 40% of petroleum, 10% of natural gas, and 7% of coal consumption as of 2021 (EIA, 2022). Developing domestic renewable energy sources like solar, wind, hydroelectric, geothermal, and biofuels can decrease the need for imported fuels and increase energy independence.

Since the 1970s, there have been numerous legislative efforts focused on energy independence like the Energy Policy Act of 2005 which aimed to promote energy efficiency and the use of renewable energy (Key Federal Legislation, 2022). Renewable energy is key for energy independence because the resources are often available domestically, reducing the need for imports. The growth of renewable energy has already contributed to reductions in net energy imports over the last decade. Continued expansion of renewables can further enhance energy independence.

Consistent Returns

Renewable energy sources like solar and wind can provide consistent returns over time due to their lower operating costs compared to fossil fuels. Once the initial investment in renewable energy infrastructure is made, the “fuel” sources like sunlight and wind are free. This results in lower ongoing electricity generation costs than fossil fuels which require continual purchases of coal, oil or natural gas.

A 2021 sustainability report by Duke Energy found that renewable energy projects provide “positive returns on investment” for the utility company. Once installed, the operating costs are minimal – just maintenance and repairs over decades of use. This leads to steady profits over the project lifetime. Similarly, a 2020 analysis by Going Solar found that despite the high upfront investment of solar panels, homeowners see returns through decades of lowered electricity bills. Overall, renewable energy provides reliable returns through lower long-term operating costs.

Sources:

https://d1mw4a807t1lxh.cloudfront.net/sustainability/2021/2021_ESG_Our_Nature_Report.pdf

https://goingsolar.com/how-expensive-are-solar-panels-the-cost-of-home-solar/

Conclusion

In conclusion, the evidence shows that renewable energy does pay for itself over time through various economic benefits. While upfront costs can be higher, ongoing costs are lower as renewable energy has zero fuel costs. Costs of renewables like solar and wind have declined dramatically in recent years as well. There are also significant health and environmental savings by avoiding fossil fuel pollution, which reduces healthcare costs and environmental damage. Renewables create more jobs per unit of energy than fossil fuels, providing employment opportunities. Energy independence improves through utilizing domestic renewable resources versus importing foreign oil and gas. Despite higher initial capital costs, renewable energy consistently provides economic returns over its operating lifetime. For all these reasons – cost savings, health benefits, jobs created, energy independence and other economic factors – renewable energy delivers a positive economic return on investment.