A recent article in the New York Times highlights one critical problem with renewable alternative energies: they’re expensive. The article states that “Electricity generated from wind or sun still generally costs more — and sometimes a lot more — than the power squeezed from coal or natural gas. Prices for fossil fuels have dropped in part because the recession has reduced demand. In the case of natural gas, newer drilling techniques have opened the possibility of vast new supplies for years to come.” Despite environmental benefits, alternative energies will have a difficult time assimilating into American life because their costs are high.
Yet there is something illogical about the high price of wind and solar. In my microeconomics class, I learned that resources become more valuable when there is less to spread around. Thus the more you have of something, the cheaper it usually is. Yet in the case of energy, this is reversed. We will never run out of solar and wind sources of energy. However fossil fuels, which are of limited supply, remain cheaper, and this is largely to do with the energy-capturing technologies available.
The federal government has tried to spur investment through tax credits and other monetary incentives. However, considering that solar power counts for less than 1% of energy use in the United States, the market is incredibly small. The fact the solar and wind are more expensive as well just creates a double whammy for investors. The United States needs to counter this by creating a market for investment. Yet this isn’t to say that the federal government has done nothing. The article highlights its efforts “relied on a combination of state renewable energy mandates and federal tax credits to encourage greater reliance on energy from renewable sources.” But lawmakers need to go one step further if they want to commit to renewable energy.
How can they do this? The New York Times references that Europe, which has guaranteed prices for many renewable markets, is on track to meet its 20 percent of energy from renewable sources by 2020. That is just one possibility, but there are a plethora of others that the U.S. can model from others or create for itself.
In my microeconomics class, I learned that government action has the potential to affect entire markets. This is proven true with government subsidies. The billions of dollars for corn subsidies has changed the entire industry, even on a global scale. Knowing this, the potential for the U.S. government to create market demand for renewable energy is substantial. It just needs to act.