Renewable power in the United States is still just a small piece of the overall power pie, making up around 5% (excluding hydro power) of the electricity produced in 2013. In Europe, that figure was about 12%. But European energy costs, on average, more than twice as much as power in the States. And that gap has been widening for years. Maybe the tortoise is winning this race after all.
The cost of power
There's a huge rift between the U.S. and European power markets. On the surface, it looks like that rift is all about a commitment to renewable power. That's a fair assessment since Europe gets more than twice as much power from renewables as we do in the States. However, look past that to the customer, and another trend emerges -- the cost of power is changing even more dramatically.
In Europe, the average cost of electricity in 2013 was roughly $0.26 per kilowatt hour, according to the U.S. Energy Information Administration (EIA). That compares to an average of around $0.12 in the United States. A quick analysis of this tells you that Europeans pay over twice as much for their power.
However, there's an even more insidious trend going on. Since 2005, power costs in Europe have increased a massive 43% as the old world has invested heavily to be at the leading edge of the renewable power shift. U.S. power prices, meanwhile, have increased just 17% over the same span. And, as the graphic above shows, the gap between U.S. power costs and European power costs has been widening.
Slow and steady wins the race?
Europe is even less a homogenous power market than the relatively fragemented United States. But it's telling that in Germany, a country that has sworn off nuclear power and is trying to shift away from coal, "taxes and levies account for about half of retail electricity prices" because "transmission system operators charge residential consumers a renewable energy levy that is used to subsidize certain renewable generation facilities," according to the EIA.
Germany is among the highest-cost power markets in Europe, with costs as high as Hawaii in the States. Germany's residents have paid dearly for the switch to renewable power. But Hawaii's power costs so much because the island state has historically had no choice but to import fuel to generate electricity. That's meant a reliance on expensive oil for the bulk of its power, a trend that's only now starting to change as solar power's costs have fallen along with its technological advances.
Which points out a big difference between Germany and Hawaii. Hawaiian Electric Industries' (NYSE:HE) plan to increase the amount of solar power used in the state isn't expected to increase costs -- it's expected to lower them. NextEra Energy Inc, which is buying Hawaiian Electric's power business, is committed to Hawaiian Electric's goal of a 20% cost reduction over the next 15 years -- from the same renewable shift that's cost German customers so much money!
Faster than it looks...
And it's not like the United States hasn't been investing in renewable power. Europe's non-hydro renewable power generation has roughly doubled since 2005, going from 6% to 12% of the total power pie last year. While the United States is clearly lagging behind, with renewable power at 5% last year, that number has roughly doubled from 2.5% in 2005.
So, the United States has been less aggressive on renewable power when looked at from the percentage of the whole, but it has been just as aggressive on expanding its renewable power footprint on a growth basis. But it's done it at a lower costs to rate paying customers. This is roughly akin to what took place in the telephone industry, with developing countries simply skipping the high-cost old technology of copper wires and building out cellular services at lower cost.
So, while the United States may appear to be a laggard on renewable power, that's saving you money, and in the end, it could lead this tortoise to the pole position as renewable power technology advances.
Reuben Brewer has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.