Renewable energy and resistance to change

A country like Australia has boundless renewable energy resources in the form of wind, solar, geothermal and tidal to exploit and could easily be powered completely by renewable energy. We have a substantial hydroelectric dam system in the Snowy Mountains Hydro scheme which was a massive nation building exercise that has served us well over the years. So why aren’t we harnessing all of this wonderful energy?

We also have a large amount of easily accessible coal and natural gas which can also be used in electricity production and has been used for decades. The resistance to changing from an economy powered by these fossil fuels to one that surges forward with renewable energy providing our electricity is strong and really comes down to one main factor: money.

Market valuations of companies is related to their potential. It is a reflection of how the company will perform in the future.The valuation of companies that make money from digging up and exploiting fossil fuels is tied to the reserves of the fossil fuels under their control. The stuff they still have in the ground that will give them future profits is all taken into account. If overnight the value of these fossil fuels disappeared and there was no demand for them then the market value of these companies drops to basically nothing.

Now think about everyone who has investments in these companies – whether they be significant shareholders, or through superannuation and retirement schemes that invest broadly in the stock market. Nobody wants this scenario tohappen. At the same time, those who stand to profit from increasing value of these companies (and the profits they generate in the meantime) don’t want to see a gradual decline and phase out of our use of these fossil fuels either. This generates a massive resistance to change. Those who want to see the status quo remain can use their financial resources to fund campaigns against the use of renewable energy, lobby politicians and put forward all the positive aspects of maintaining the use of fossil fuel and decry the evil that is ‘free’ energy.

There has been a surge in growth in renewable energy electricity production in Australia in recent years thanks to targets such as the RET. This has come about because the government set a clear target of producing 20% of our electricity from renewable sources by the year 2020. Without this catalyst for change the status quo would have remained. I don’t have a lot of faith that it is going to exist for much longer, let’s just hope that the market forces behind renewable energy are now strong enough to keep the momentum going.