In face of the crisis in energy security, environmental contamination, climate change, energy saving and carbon emission reduction have become the top concerns of the whole human world. To address those concerns, renewable energy and energy efficiency are the two fields that are currently being tackled closely by many countries all over the world. Currently, large numbers of energy and environmental policies are targeting at technology innovation improvement and market cultivation as they are both critical in the development of renewable energy and energy efficiency. Therefore, understanding the economics and policy complications in renewable energy and energy efficiency fields is crucial in tackling the challenging energy problems (Meng, 2014).
Renewable energy according to Ellabban et al (2014) is the energy collected from renewable resources which are naturally replenished on a human time scale, such as sunlight, wind, rain, tides, waves, and geothermal heat. Renewable energy is often used in four important areas in energy generation that is; electricity generation, transportation, air and water heating or cooling and rural(off-grid) energy services.
With current spread of knowledge on the advantages of renewable energy, there has still be massive barriers and blockades preventing the spread of these energy sources around. These barriers can be overcome if deployment strategy of renewable energy in the context of environmental, social and economic effects are taken explicitly into account when making future plans.
First of all there is the issue of Cost and Pricing. This is one of the critical barriers restricting the widespread of renewable energy, this problem is not limited to countries with low economic statuses but even in developed countries the cost and pricing of renewable energy is still high. Cost driven decisions are made whenever there is the need to choose between the traditional energy sources and renewable energy due to this factor policy makers will rather select. The average cost in 2017 to install solar systems ranged from a little over $2,000 per kilowatt (kilowatts are a measure of power capacity) for large-scale systems to almost $3,700 for residential systems. A new natural gas plant might have costs around $1,000/kW. Wind comes in around $1,200 to $1,700/kw.(UCSUSA, 2014)
Fossil fuel has a lot of advantage when it comes to cost and pricing due to the subsidies provided by governing bodies and policy makers. Organizations such as the World Bank and the International Energy Agency put global annual subsidies for fossil fuel in the range of $100 billion to $200 billion, although such figures are difficult to compare (for comparison the world spends some $1 trillion annually on fossil fuel purchases) (Coady et al, 2019). Due to public subsidy systems such as direct budgetary transfer, tax incentives, leases, liability insurance and guarantees to mitigate project financing and fuel price risk there is significant reduction in fuel prices which in turn causes serious competition between fossil fuel and renewable energy, which at this rate fossil fuel is winning since renewable energy does not enjoy the same level of subsidies.
New energy technologies start-ups face even larger barriers. They compete with major market players like coal and gas, and with proven, low-cost solar and wind technologies. To prove their worth, they must demonstrate scale: most investors want large quantities of energy, ideally at times when wind and solar aren’t available. That’s difficult to accomplish, and a major reason why new technologies suffer high rates of failure.
For decades fossil fuel has gradually gained influence in every day activity from industrial to domestic usage, renewable energy on the other hand is just a new player in the energy scene and people still feel comfortable in their old methods. When it comes to fossil fuel there is knowledge about the good and bad side plus the economical inputs and output in connection to employment and financial gains, renewable energy has little to no information on what it holds for the future for investors and users. This would be because of the knowledge not being spread properly to policy makers, investors and consumers, these individual know the harm fossil fuel brings from climate change to global warming but they have been introduced to the knowledge of using limited fossil fuel energy by industry leaders who go ahead to sponsor climate disinformation campaigns, aimed at sewing doubt about climate change and renewable energy.
Market functions best when everyone has access to low cost information and requisite skills, but currently at the moment the number of people with the required skill set to install, operate and maintain renewable energy structures and systems are low and cannot support the needs of the total world population if there is the need to switch from fossil fuel to renewable energy.
Consumer information has been restricted to urban areas whereas the rural areas has little or no information about renewable energy making it difficult for renewable energy industry leaders and stake holders to breakthrough to community leaders and convince them to replace their old fossil fuel usage and switch to renewable option. Renewable energy at this point in global energy crisis is the perfect replacement for fossil fuel but it’s still a long way from becoming the main source of energy due to several barriers and restrictions. Environmental experts, scientist and general stakeholders can only hope that the change becomes quicker than expected.