In the 1970s investment in renewable energy was killed dead by the realization that the Saudi's could drop the cost of oil to zero making any capital investment in wind and solar foolish, that and the relatively high cost of wind and solar at the time made it certain that the cost curve for renewables would not reach that of oil and coal within the investment horizon.
Fossil fuel energy sources have relatively low capital costs and high (cost of fuel) running costs. Today, no one has any idea of what the price of oil will be next month, let alone next year or the next decade. Having seen a close to $(US)100/bbl swing within a year, planning is not possible.
The extraction cost of coal is low, but again, anybunny investing in fossil coal plants has to worry about pollution control costs and costs imposed in the future to pay for other externalities such as putting the top back on mountains and disposing of the ash and overburden.
Renewables are the reverse, high up front capital cost and low running costs with large recent cost drops driven by improved manufacturing. With over half a decade of low interest rates behind us and no indication of any inflation at all in the developed world, capital costs todaydo not carry high interest, and investment in renewables looks attractive to any organization, even the ones in Texas.
Tom Dart in the Guardian reports that Georgetown, a town of 50,000 in Texas, is planning to go 100% wind and solar.
When its staff examined their options last year, they discovered something that seemed remarkable, especially in Texas: renewable energy was cheaper than non-renewable. And so last month city officials finalised a deal with SunEdison, a giant multinational solar energy company. It means that by January 2017, all electricity within the city’s service area will come from wind and solar power.This is a 25 year deal. Especially in Texas, wind and solar have strong advantages, guaranteed (and low) pricing amongst them
The region bordering New Mexico is one of the prime solar resource sites in the US and the wind whistles across the plains to such an extent that, as Scientific American pointed out last year, the state is America’s largest wind power producer – as well as leading the nation in the production of crude oil and the emission of greenhouse gases.
Renewable energy also uses much less water than traditional power generation – a bonus in a state where half the land and more than nine million people are affected by drought conditions, though Briggs said that for Georgetown, water conservation was only a “side benefit”.Today relatively expensive W. Texas crude is at more risk from Saudi petro-politics than wind and solar. Indeed, many commentators thought that the Saudi's dropping the price of oil was directly aimed at killing off the frackers and further expansion of oil drilling in the oceans rather than renewables.