Renewable energy boom
It was broadcasted today, at The Week an article talking about the rise in energy generated from renewable sources, especially on the United States. Here is the link.
I liked it very much, especially because it goes together if the discussions on renewable and nonrenewable energy sources we’ve had this past few days.
Nonrenewable energy sources tend to be more energetically dense, but it is limited, which makes its market highly susceptible to price and product supply oscillation. Renewable energy sources, on the other hand, work based on natural processes, but they still demand high R&D investments to improve storing conditions and decrease prices. Nevertheless, the price and costs of solar power for example has significantly decreased, as you can see on the graph below.
The cost decrease means a definite gain to the people and consumers. This effect for suppliers isn’t as clear. The high cost assures a market entry difficulty, meaning the market is more likely to be concentrated, creating conditions for economic profit and market power.
On the other hand, as time passes and investments are made, cost will decrease, allowing better margins at first, but at the same time increasing the number of market players. The power of each player within the market deacreases as the number of players increase.
Since supply for renewable sources is unlimited, the government is less likely to interfere, guaranteeing the features of a free market. Return of Equity tends to be lower.