Hello and welcome back to class.

Our focus for this video,

Criticisms of Renewable Energy and a few responses to those criticisms.

The first is that renewable energy is too expensive.

No doubt, renewable energy certainly has been more

expensive than conventional energy options historically,

and that shouldn't be a surprise.

It's a relatively new industry competing against a very

well established, very well-funded industry.

This slide and the next slide use data from Lazard

in their levelized cost of energy or levelized cost of electricity analysis.

The first slide shows alternative energy.

The next slide shows conventional energy.

The units on the y-axis are dollars per megawatt-hour.

And what this LCOE comparison does,

essentially it takes all of the capital cost,

all of the operating cost over the life of the project,

and divides that by the total power produced, total megawatt-hours produced,

to arrive at a dollars per megawatt-hour number and therefore to allow

apples-to-apples comparison across many different forms of energy.

I want you to pay attention to the red box with the dotted line which basically

covers the cost of large-scale solar power and large-scale wind power.

Note that the green shows the unsubsidized cost of that power,

a little higher than the beige color,

the subsidized cost for that power.

We'll get to subsidies in a future slide.

So again, pay attention to where the red box is.

Now, again, same red rectangle and you'll note that, in this case,

the research shows that large-scale solar,

large-scale wind are far,

far cheaper than diesel reciprocating engines.

Think about, kind of, island and/or backup power, cheaper than nuclear,

cheaper than coal, and frequently cheaper than a natural gas combined cycle.

By the way, all forms of power receive some form of subsidy,

at least that's true in the U.S. Again,

we'll have more data on that in a future slide.

Another criticism is that renewable energy is these systems are ugly.

Right? And I suppose that you need to pick your ugly,

if you will, that, it's all in the eye of the beholder.

You can contrast what a solar farm or wind farm may look

like with a coal-fired power plant looks like here in this image.

My vote is with solar and wind.

Not to mention the fact that if you include the

"ugly" that could be attributed to things like mining

for coal or extracting oil

and/or natural gas in the field as part of the broader core supply chain,

a lot more negative visual impacts, for sure.

Ah, subsidies, my favorite topic to talk about.

This is a frequent concern – I understand the concern.

But before you look at this graphic here,

just note that the International Energy Agency and

the International Monetary Fund both note that

the fossil fuel or conventional power industry receives far more subsidies,

a 10 to 20x more subsidies than the renewable energy sector.

Now just looking at this figure for a second,

this is the average annual energy subsidies for

different types of energy in the U.S.

essentially over the life of that type of of energy.

O&G there, oil and gas,

being the largest, nuclear being the second largest,

biofuels third, and then renewables,

that tiny green slice there in the top.

So, does renewable energy get more subsidy on a per-unit basis today than other power?

Sure, but it's a new industry and it offers lots of benefits the others

do not offer and so governments have decided it's time to help jumpstart this sector.

But this is the fairest way we think to look at this.

This research comes from the DBL Partners of a venture capital fund in California.

Another complaint about renewable energy is excessive policy risk.

Now frequently what is highlighted is the unfortunate decision in Spain years ago to make

retroactive changes to tariff structures for

renewable energy projects which certainly

did hurt the financial returns for many investors.

However, that is an anomaly and it is tended to be that

such extreme policy risks do not characterize renewables, broadly speaking.

Do they face policy risk?

For sure.

Wind power in the US is,

you know, a particular,

you know, victim of that with what's called the PTC,

the production tax credit,

kind of coming and going,

and you can watch the rollercoaster to some degree of installations in the U.S.

However, many industries face policy risk,

and more broadly, in the energy world, you know,

oil and gas investors also face a geopolitical risk,

which can be much more severe, and commodity risk.

This is a graph showing the price for oil and gas.

Just thinking about oil for a second,

roughly $20 versus $140 per barrel,

so quite a swing and plenty of risk there as well.

Few sectors face zero policy risk or in

this case commodity or geopolitical risk for conventional energy.

Another concern that is absolutely

real is that renewable energy power production is intermittent.

It is not consistent because when there's no wind,

when there's no sun, there is no power production.

I get it and that is a very real concern.

However, it's worth noting that many studies suggest that the current grid can

tolerate much higher penetration of renewables than many utilities fear.

Furthermore, the energy storage market,

so certainly, you know,

batteries as a way to create more dispatchable renewable energy,

to store it when there is excess, and then to, you know,

put that stored solar power,

stored sort of wind power back on the grid when there is no sun or wind.

That market is projected to grow 100x between 2013 and 2022,

and it'll become a $250 billion market by 2040,

according to IHS and Bloomberg.

So, a solution is on the way.

Some other real concerns are that renewable energy projects and products

also have environmental and human health impacts that often go ignored.

Not sure I would say ignored, but certainly,

perhaps less focused on.

Here, one example to highlight are birds killed by wind farms each year.

These are real numbers, no doubt.

Nothing to be happy about, for sure.

It's my understanding that buildings caused many,

many more death, not to mention cell towers and other infrastructure.

I do know that there are efforts underway by

the wind industry to limit these negative impacts.

If you look at solar, there are concerns with cadmium and some of the thin-film panels,

cadmium being a metal with toxicity concerns.

Now, the reality is that at the very closed-loop system,

it is not very bioavailable, that is,

to be a concern to humans or the environment,

and those panels will likely be taken back at the end of

their lifecycle for recycling and hopefully reused.

Still hard to predict the future, for sure.

Another potential negative environmental impact would be to

endangered species on large solar farms,

you know, in areas where large solar farms are to be built.

Ditto for wind. So look,

these are certainly concerns not to be ignored.

This concern here is that renewable energy offers below market financial returns.

That is, you must sacrifice your return on

investment in order to do the right thing when it comes to power generation.

That can be the case;

increasingly, it is not the case.

I've got logos here from Goldman Sachs,

KKR, Citi, and Bank of America,

four of the largest financial institutions in the U.S. which in aggregate have

committed roughly $500 billion

to investments in low-carbon projects and infrastructure, etc, by 2025.

They are not doing this for brand reasons.

They're economic drivers to this,

not a sacrifice in returns.

Do real energy projects and products suffer from too much technology risk?

Before I get into this,

this figure, a favorite of mine.

You can think back to companies like Solyndra and others that were big failures,

unfortunately, in the renewable energy sector.

You can think about other venture-capital-type technologies which also did not make it.

However, it's important to be aware that

venture capital / technology investments make up a tiny,

tiny fraction of the roughly $300 billion invested in this sector each year.

The reality is that most capital invested in renewable energy is in

real assets or infrastructure or projects or to the asset finance, right?

Now lets get to this,

to this figure here coming from the National Renewable Energy Laboratory in the U.S.

It shows in different colors different types

of solar panel technology and how the efficiency,

at least at the research level,

has changed from 1975 through to, roughly, present day.

Now this could suggest technology risk, in reality,

is solar becoming a real industry really is dominated by

just a couple of those technologies,

the royal blue and the dark green there, that is,

the crystal and silicon cells and the thin-film cells,

and really not much, I mean,

the thin-film has improved but the technology has not changed dramatically over the last,

you know, five to 10 years of this industry becoming a real industry.

Instead, cost have fallen,

warranties have gotten better,

and balance sheets typically stronger,

though certainly when those depend on public equities,

a little irrationality, for sure.

But most importantly, there is not the same level of technology risk in

the field as it is perceived sometimes by

investors who think just about venture-capital-level investment.

Now, if you want that risk,

its there for sure in early-stage companies where the upside could also be very large,

but the vast majority of capital is going to fund infrastructure.

Key conclusions.

There is no silver bullet or perfect solution for energy,

let alone most other things in life.

Even renewable energy has its challenges but most are over-stated.

Second, some investors and business executives want to believe

in a free market and letting companies compete on even ground.

However, this kind of equal playing ground does not really exist, that is to say,

most industries receive some level of

policy influence and conventional energy certainly

has its share of financial government incentives as well.

Lastly, the renewable energy sector is changing so quickly that most stakeholders need

some education and new data before they can let

go of outdated perceptions about the industry.

Finally, questions for you,

so get your pen and paper.

Number one, which criticisms do you hear or read about most often and from whom?

Number two, which statistics, big corporate proponents,

or case studies can you keep in mind to help educate

those who have lingering misperceptions or concerns,

real concerns, about the renewable energy industry?

Lastly, which of these criticisms do you understand the least?

How can you get smarter about them?

Who could you talk to? What could you read?

And what are some trusted websites to go to?

Again, the readings for this module are a good starting place.

With that, we'll see you in the next video.

Inside Entrepreneurship: Criticisms of Renewable Energy

Renewable Energy and Green Building Entrepreneurship

Meet the Instructors