Letter: Shift to renewable energy sources makes sense

One resident believes a shift to renewable energy sources makes sense

On the demand side, nobody wants to admit there is a permanent structural shift that will affect the automobile industry and demand for oil, attributable to a permanent generational paradigm shift.

Even with cheap oil, many Millennials see car commuting as a chore that keeps them away from being connected electronically.

It’s an issue of elasticity of demand and substitution. The Millennials have technological replacements we did not have to automobile travel a generation ago. There is a very strong trend among young people away from automobiles.

On the supply side, by analogy, it is not just OPEC flooding and in-fighting, but the decreasing costs of alternative energy sources.

In 1980, when IBM considered the growth of the personal computer to be peripheral to the mainframe computer industry, the company made the biggest blunder in its history.

It continued to direct investments to mainframe technology because it missed the fact that the market was shifting to a distributed model. Today, in retrospect, it’s easy to see the company’s error in judgment.

In the energy arena, are we repeating IBM’s mistake on a global scale? We need only look at the data to see the shifts taking place. The cost curves of alternative sources are falling quicker than those of gas and coal.

Looking out 10 years, the economics of alternative are poised to be on the winning side. According to Deutsche Bank, the ratio of coal-based, wholesale electricity to unsubsidized solar electricity cost was 7:1 four years ago. This ratio is now less than 2:1 and could likely approach 1:1 over the next 12 to 18 months.

Already, more than 50 per cent of all new global power capacity is from renewables (solar, wind, hydropower, nuclear). In the United States more than 78 per cent was from renewables in the first half of 2015. This is in spite of lower costs, due to technological advances, even in fracking technologies.

More specifically, the rate of decrease in the costs for alternative sources of energy exceeds those in the oil sector.

Avi Ickovich

Langford

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