Powering up

There is no denying that the world is running out of fossil fuels. If we continue to use crude oil at our current rate of four billion tonnes per year, in combination with our current population trajectory, known crude oil supplies will run dry by 2052, according to the CIA. Even if gas is used to fill the crude oil gap, it is likely to buy only another eight years of energy consumption. In September, the US government’s push for energy independence saw its oil production through hydraulic fracking jump to its highest levels since 1989, drastically cutting its consumption of foreign fuels. But in reality, all supplies are finite and the ticking clock on diminishing supplies indicates something needs to change – and fast. Could renewable energy really be the answer?

Experts argue that renewable energy is by no means a simple solution and is one that is costing billions of dollars a year in research and development; however, there is hope on the horizon. Recently, US scientists have succeeded in experiments with nuclear fusion – the process that powers the sun – with the aim of producing a self-sustaining power supply.

In other words, the creation of power plants that create more energy than they consume, and possibly the future of the world’s main power source.

For the foreseeable future, however, current renewable energy sources – including sunlight, wind, rain, tide, wave and geothermal heat – are the available options; each source coming with its own risks, making it still largely unfeasible for majority use by businesses and governments. Technological risks include the inability to properly harness, store and utilise produced energy, while financial risks involve making the cost of sourcing and using renewable energy essentially unprofitable for businesses and consumers without heavy and costly government subsidies. Efficiency and efficacy of the energy itself in terms of where it is located and how it is sourced and used feeds into a definite political risk and power struggle, meaning renewable energy’s lustre is starting to wane for many businesses.

Risk managers and business leaders say the first step to properly utilising renewable energy for business is to reduce operational and management costs of the energy source itself. Renewable energy development firm RES chief economist David Handley says improvements in technology are already reducing costs. “We are seeing more renewable technology being built onsite so we can now work with individual companies to fi nd the best, most cost-effective renewable energy source available to them. A reduction in costs of particular technologies has brought it down to a much more manageable level.” Handley adds, however, that it is still only a cost-effective, viable business option for large industrial companies at the moment.

Slow uptake for renewables

Independent risk consultant Marcel Steward agrees slow uptake of renewable energy resources by business is primarily due to prohibitive costs, but believes the recession helped push forward renewables as an alternative for businesses looking to cut energy overheads. “If businesses can reduce their overheads and their power costs that means they’ve got a better chance of survival. It also means they can leverage everything they possibly can to meet fierce competition in their main operations, for example, if a company is in manufacturing from the Far East.”

Steward also says that slow uptake is a result of confusing government subsidies or subsidy terms over time. “It’s very cost orientated and cost sensitive because it is a changing field from the point of view of the government subsidy and the government strategy. There’s been this question of ‘I’m not sure there is going to be a 10-year payback or it’s going to be a 20-year payback or can I afford it now? I don’t know how much I’m going to get next month in the subsidy’. That’s why we’ve got this relatively slow take-up in the West.”

Such heavy reliance on government subsidies means renewable energy firms are also struggling to sell renewables as a viable business option.