This post examines the case against subsidies for renewable energies recently made in the WSJ, which opined that renewable energy should focus on the small niche off grid market currently largely served by diesel generators where renewable energy has a clear advantage.
by Joel West, professor of innovation and entrepreneurship at San José State University’s College of Business. Connect with Joel on Linkedin.
In Wednesday’s WSJ, engineering consultant Josh Prueher argues that the way to promote renewable energy is to encourage adoption in self-funding niches rather than proffering government subsidies to help spur adoption in mass markets.
Prueher points to the inherent problem with any subsidies:
Prueher points to the inherent problem with any subsidies:
To read about some of the financing and perception challenges that the renewable energy sectors need to meet in order to compete with the much better organized and currently profitable fossil energy sectors, see our related post: “What Renewable Energy Companies Need to Do to Compete – A Tale of Two Conferences“.
The PV entrepreneurs and managers say that subsidies are a necessary evil in the short term but they look forward to when they are no longer necessary. Some seem more sincere than others.
Instead of these subsidies, Prueher notes that we already have a fully functioning unsubsidized market where RE has a cost advantage: the off-grid market. This market — whether rural US or military outposts — is typically served by diesel generators.
The logistics cost of supplying fuel to these generators — whether on an offshore platform or the military front lines — are “staggering”:
From this, we already know what an unsubsidized RE market looks like:
While he’s right in principle, in practice I don’t see how we get from here to there. The venture-funded SV PV companies and the Chinese-funded Big Five are addicted to purchase subsidies, whether as taxpayer rebates or (as in feed-in tariffs or RPS standards) mandated wealth transfers from electricity users.
If I were doing a bootstrap startup, I’d make a self-funded startup that targeted a cost-effective niche. But the nature of venture-funded startups is that their founders/owners have to bet it all on double-zero — to swing for the fences — because it’s better (at least for venture investors) to have a small chance of huge success rather than a good chance of a modest success.
See our relatedpost: “DOE SunShot Initiative Aims for Cost Competitive Solar Energy by 2020“, to read on the road map to cheaper Solar power that is envisioned by the DOE SunShot program that seeks to spur innovations and rationalizations that will together slash the total system cost of solar photovoltaic systems.
