Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
The debate about renewable energy has been raging for years, and with nuances and unknowns that are very difficult to quantify, there's no doubt it will continue for years to come. What value is there in less pollution? Are we willing to pay more or change behavior for renewable sources of energy? And maybe more importantly, what will fossil fuels cost in the future?
In a series of articles this week, fellow Fool Alex Planes covered the "real costs of alternative energy," asked if alternative energy would go mainstream, and contemplated the future of alternative energy.
Since we Fools often have different opinions, I thought I would share a few things I disagree with.
But first, let's cover what Alex and I agree on completely. The biggest is that biofuels are a pipe dream that will never become reality. I also agree that alternative energy (and I'm talking about solar, with a tip of the hat to wind) is not a one-size-fits-all short-term solution for our energy problems.
Nuclear is not the answer
I love hearing that nuclear power could be our answer, as people dismiss the outsized risks it involves. Nuclear backers will say natural disasters are rare or that meltdowns were the fault of human error. But those are the things that cause problems with risky technology. Eventually, Homer Simpson is going to be left alone at the controls, and something terrible is going to happen.
People also fail to mention that nuclear has the biggest government subsidy of all, limiting liability in the case of a disaster. Without this subsidy, not a single power generator would consider building a nuclear plant.
Another thing nuclear backers don't want to admit is that nuclear is becoming more costly by the day. NRG Energy (NYSE: NRG ) and a group of backers recently gave up on a planned nuclear expansion in Texas, largely because costs had soared during planning. The Energy Information Administration recently updated estimates for building new nuclear plants at $5.34 per watt, a 37% increase from 2010. Estimates put new nuclear power at $0.25 to $0.30 per kWhr. A California Energy Commission study estimated that new nuclear generation would cost between $0.17 per kWhr and $0.34 per kWhr by the time a plant could be constructed. All of those estimates are above recent utility solar costs.
Nuclear IS NOT the future.
Not all subsidies are equal
As commenter idiotprogrammer pointed out, the EIA even admitted that its subsidy comparisons are flawed against solar and wind. Is it really fair to compare the subsidies given to a natural gas plant in 1950 to subsidies given to solar today?
The subsidy and cost trajectory also need to be considered when making an argument for any energy source. Subsidies are being cut dramatically around the world for solar -- just ask struggling manufacturers LDK Solar (NYSE: LDK ) and JA Solar (Nasdaq: JASO ) , both of which have seen sales tumble. Within a few years, the subsidies will evaporate -- something that has yet to happen for coal, oil, or natural gas. And I haven't even covered fossil fuel externalities.
No, we don't have all the answers, but we don't need them yet
Revolutions take time; this is something that most energy analysts fail to appreciate. It was only in the late 1880s that Thomas Edison demonstrated a power grid that could light a neighborhood, and the country wouldn't be connected for decades.
Today, some talk about renewable energy as if it needs to replace oil, coal, and natural gas by the end of the decade. But today, wind accounts for only 1% of domestic electricity production and solar accounts for about 0.1%. Even after a decade of installing solar power at lightning speed, even Germany gets only 3% of electricity from solar power.
It's preposterous to think that a technology like solar, which has only become attainable in cost and scale in the last few years, could make the leap to somehow stretching the grid to breaking in the next few years because of its intermittency. Patience, my friends, patience. The electric grid wasn't built overnight, and neither will solar power. At this rate we have 10, 20, maybe even 50 years to solve the energy storage problem.
A123 Systems (Nasdaq: AONE ) is working on grid scale storage, but until the grid becomes filled with enough wind and solar to warrant the economic expense of developing and installing energy storage, the problem will not be solved. That's not the way technology works. Technologies aren't developed in the hope that a market will form. A market forms, and a technology is invented to fill the gap.
Look at energy technologies like turbine engines, shale drilling, and ultra-deepwater drilling. These didn't develop just in case they would become economical; an economic need arose as oil prices rose, which combined with lower costs for the new technology, and existing problems could be solved.
Sprawling on useless land
As for the "energy sprawl" argument that renewable energy uses more land than fossil fuels, just take a look at an analysis I did on the subject back in May. Using SunPower (Nasdaq: SPWR ) modules, we could generate 264.8% of the U.S. electricity demand from the Mojave Desert alone. Just to put "energy sprawl" into perspective.
Are you really going to complain about sprawl on useless desert land?
The bottom line
All of this boils down to a couple of key points from an investment standpoint. First, renewable energy -- solar in particular -- is becoming more economical by the day and, in a broad sense, provides a great place for investors to find growth. Second, energy sources like nuclear, biofuels, and slowly coal are a thing of the past. Sorry, but it's true.
Last, but not least, I like and invest in solar power not because I'm a tree hugger, but because the facts and trends tell me this is energy's future. Disagree? Discuss in the comments section below.